Major Lumber Co., Inc. v. G & B Remodeling, Inc.

• Court: Missouri Court of Appeals
• Writing for the Court: Before TURNAGE; LOWENSTEIN
• Citation: Major Lumber Co., Inc. v. G & B Remodeling, Inc., 817 S.W.2d 474 (Mo. App. 1991)
• Decision Date: 26 February 1991
• Docket Number: No. WD,WD
• Parties: MAJOR LUMBER COMPANY, INC., Plaintiff-Appellant, v. G & B REMODELING, INC., Gilbert Cabinets, Inc., Jean McCaslin, Clay County Collector, Defendants, Northland National Bank, Michael J. Svetlic, Defendants-Respondents. 43280.

Page 474

817 S.W.2d 474

MAJOR LUMBER COMPANY, INC., Plaintiff-Appellant, v. G & B REMODELING, INC., Gilbert Cabinets, Inc., Jean McCaslin, Clay County Collector, Defendants Northland National Bank, Michael J. Svetlic, Defendants-Respondents.

No. WD 43280.

Missouri Court of Appeals Western District.

Feb. 26, 1991.

Motion for Rehearing and/or Transfer to

Suprme Court Denied April 2, 1991.

Application for Transfer Sustained May 3, 1991.

Case Retransferred Oct. 17, 1991.

Court of Appeals Opinion Readopted Oct. 30, 1991.

Steven M. Petry, Kansas City, for plaintiff-appellant.

Michael J. Svetlic, Kansas City, for defendant-respondent Northland Nat. Bank.

Scott B. Haines, Gladstone, for defendant Gilbert Cabinets, Inc.

Before TURNAGE, J., Presiding, and LOWENSTEIN, ULRICH and BRECKENRIDGE, JJ.

LOWENSTEIN, Judge.

The narrow issue posed here concerns a blend of lien and bankruptcy law: When a debtor's petition for relief under Chapter 11 of the U.S. Bankruptcy Code is filed after a creditor's petition to enforce a mechanics lien, does the pendency of the Federal bankruptcy proceeding extend the state's six month statute of limitations for enforcing a mechanic's lien for an equivalent time once the automatic stay is lifted?

Plaintiff-appellant, Major Lumber Co., Inc., ("Major Lumber"), supplied materials to G & B Remodeling, Inc. ("G & B") for the construction of a residence at 6802 Orchard Street in Kansas City. G & B apparently owed Major Lumber for the materials. Major Lumber instituted mechanics lien proceedings against the residence naming as defendants G & B; Northland National Bank; Michael J. Svetlic; Gilbert Cabinets, Inc.; Clay County, Missouri; and the State of Missouri. ¹

The chronology of events, all occurring in 1989, is as follows:

April 24 Major Lumber filed a Notice of Intent to File Mechanics Lien

May 10 Major Lumber filed a Statement of Mechanics Lien; state statute begins to run

May 11 G & B filed for relief under Chapter 11 of the Bankruptcy Code in the U.S. Bankruptcy Court for the Western District of Missouri

August 30 Major Lumber filed a Motion for Relief from Automatic Stay

September 25 The Bankruptcy Court entered an order lifting the automatic stay

November 10 End of six-month limitation period, beginning May 10, to enforce mechanics lien

November 15 Major Lumber filed a Petition for Enforcement of Mechanics Lien

The respondents Northland National Bank and Michael J. Svetlic as trustee, filed a motion to dismiss Major Lumber's petition on grounds that the six-month statute of limitation for enforcing a mechanics lien, as set out in § 429.170 RSMo Supp.1990, ² expired. The applicable federal bankruptcy provisions are now set out by way of footnote. ³ If the question posed at the beginning of the opinion is answered in the negative, then the present lien petition is clearly out of time.

The scope of review for a motion to dismiss based on failure to prosecute or the expiration of the applicable statute of limitation is abuse of discretion. Vonder Haar Concrete Co. v. Edwards-Parker, Inc., 561 S.W.2d 134, 138 (Mo.App.1978). If the trial court does not specify reasons for dismissal, the reviewing court may assume the trial court acted for any one of the reasons stated in defendant's motion. Terre Du Lac, Ass'n v. Terre Du Lac, Inc., 737 S.W.2d 206, 211 (Mo.App.1987). The trial court here did not specify why it granted respondents' motion, so this court must affirm the trial court's dismissal if any ground asserted in defendant's motion is valid. Id.

In their motion to dismiss, respondents argued that the filing of bankruptcy did not toll § 429.170 and, thus, the state's six-month statute of limitations expired before Major Lumber filed its petition to enforce a mechanics lien. The respondent cited two cases in support: In re Hunters Run Ltd. Partnership, 70 B.R. 297 (Bankr.W.D.Wash.1987) and Martin v. Goggin, 107 Cal.App.2d 688, 238 P.2d 84 (1951).

In re Hunters Run stood for the proposition that to preserve its lien after a debtor has filed for bankruptcy, a lien claimant should get relief from the automatic stay and commence the action to enforce the lien before the state statute of limitations expired. In re Hunters Run is factually similar to this case in that the creditor filed its statement of mechanics lien before debtor filed bankruptcy. The respondents failed to note, however, that In re Hunters Run was reversed on appeal on May 26, 1989, some ten months before respondents filed their motion to dismiss. On appeal, the Ninth Circuit held Washington's eight-month statute of limitations for enforcing mechanics liens was tolled during bankruptcy proceedings. ⁴ In re Hunters Run, 875 F.2d 1425, 1429 (9th Cir.1989). ⁵ The court based its decision on the statutory language of 11 U.S.C. §§ 108(c) and 362(a)(4) set out supra, in footnote 3. The respondent's reliance on In re Hunters Run Ltd. Partnership, 70 B.R. 297 (Bankr.W.D.Wash.1987) is misplaced.

Respondents analogize this case to Martin v. Goggin, 107 Cal.App.2d 688, 238 P.2d 84 (1951), which ruled that the creditors could not enforce their lien because they allowed the state statute of limitation to expire. The court held that once the bankruptcy court gives a creditor leave to file an action in state court, the bankruptcy code no longer operates to toll the state statute of limitations. In 1951, the California statute of limitation for enforcing a mechanics lien was 90 days after the lien claim had been filed. § 1190 Cal.Code Civ. Proc. (REPEALED).

The facts of Martin actually support Major Lumber's argument. In Martin, the debtors filed bankruptcy on 10-12-48. On 3-24-50, the bankruptcy court gave the creditors permission to file suit against the debtors' trustee. On 7-28-50, the creditors filed suit to enforce their lien. Citing to Wells v. California Tomato Juice, Inc., 47 Cal.App.2d 634, 118 P.2d 916 (3d Dist.1941), the Martin court stated:

A lien claimant is entitled to the length of time allowed by the statute during which he may lawfully commence an action to foreclose his mechanic's lien, and the running of our statute is tolled during the time in which he is under some statutory or other prohibition which prevents him from bringing the action.

The Martin court then accepted the debtors' argument that the creditors' suit should be dismissed because they did not file it until 94 days after the bankruptcy court gave them permission to do so. Martin, does not support the judgment in this case.

The appellant, Major Lumber, relies on several cases for the proposition that filing bankruptcy tolls a state's statute of limitations for enforcing a mechanic lien. First, Wells v. California Tomato Juice, supra, held that California's statute of limitation for enforcing a mechanics lien was tolled by the debtor's subsequent filing of bankruptcy. Wells, 118 P.2d at 919. The court further found that the state statute was tolled for a period of time equal to the amount of time the plaintiff was precluded from prosecuting his mechanics lien. Id.

Although the issue in In re Houts, 23 B.R. 705 (Bankr.W.D.Mo.1982), differs from that here, the Houts court stated that under 11 U.S.C. § 108(c) the filing of bankruptcy tolls Missouri's statute of limitation for enforcing a mechanics lien. In re Houts, 23 B.R. 705 at 707. Furthermore, the court in Garbe Iron Works, Inc. v. Priester, 99 Ill.2d 84, 75 Ill.Dec. 428, 457 N.E.2d 422 (1983), held that when a party who is necessary in an action to enforce a mechanics lien files bankruptcy, then the amount of time the lien claimant has to file suit is extended by the number of days the automatic stay was in effect. Garbe Iron Works, Inc., 75 Ill.Dec. at 430, 457 N.E.2d at 424.

The Garbe court specifically rejected the debtor's argument that § 108(c)(1) is triggered only when the state has a particular statutory scheme providing for the suspension of a limitation period. Garbe Iron Works, Inc., 75 Ill. Dec. at 431, 457 N.E.2d at 425. The court reasoned that neither Legislative Statements nor Committee Notes indicate that § 108(c)(1) is applicable only to statutes of limitation of states that have special suspension statutes. Id. Thus, based on the Garbe court's reasoning, this court rejects respondents argument that 11 U.S.C. § 108(c)(1) does not toll § 429.170, RSMo because Missouri does not have a special suspension statute.

In re Chemisphere Partners, 90 B.R. 380 (Bankr.N.D.Ill.1988), held that Illinois' two-year statute of limitations for enforcing mechanics liens was tolled by 11 U.S.C. § 108(c). In re Chemisphere, 90 B.R. at 382. The court further held that the state statute of limitations was tolled for all lien claimants whose creditors subsequently filed for bankruptcy and not just for those lien claimants who sought to have the stay modified during the period of time set out in the state statute of limitations. Id. See also In re Coan, 96 B.R. 828, 832 (Bankr.N.D.Ill.1989), holding that 11 U.S.C. § 108(c) tolls Illinois' statute of limitations for enforcing a lien; In re Morton, 866 F.2d 561, 566 (2d Cir.1989), holding that § 108(c) tolls New York's ten-year statute of limitation for renewing judgment liens on real property.

Respondents argue that In re Houts, In re Morton, and In re Hunters Run are distinguishable because the lien claimants did not file motions with the respective courts to have the automatic stays lifted so they could enforce their liens. The court held that the tolling provisions of § 108(c) apply to New York's ten-year statute of limitation governing judgment liens on real property. Based on the holding of In re Chemisphere, supra, that 11 U.S.C. § 108(c) does not have such a narrow application, this court rejects respondents' argument.

Respondents also argue that § 108(c) should not be interpreted to allow the number of days the automatic stay was in effect to be tacked onto the end of the original time limitation. According to respondents'...