In re Chambers

264 B.R. 818, 2001 Bankr. LEXIS 921, 2001 WL 855663
United States Bankruptcy Court, N.D. West Virginia·Decided July 12, 2001·No. No. 00-12651·Published·Cited by 2 cases

Opinion

MEMORANDUM OPINION AND ORDER

L. EDWARD FRIEND, II, Bankruptcy Judge.

This matter comes before the Court pursuant to the Debtors’ Motion to Avoid Judicial Lien and the objection of creditor 84 Lumber Co. (“84 Lumber”) thereto.The Debtor is attempting to avoid the perfected mechanic’s lien of 84 Lumber. The Court has jurisdiction pursuant to 28 U.S.C. § 1334. This matter is a core proceeding under 28 U.S.C. § 157.

FACTS

The Debtors, Jason Edgar Chambers and Marcy Diane Chambers (“Debtors”), hired contractor Jerry Loudin (“Loudin”) to construct a house in Taylor County, West Virginia. The Debtors obtained a construction loan from Wesbanco and paid Loudin $94,000. Loudin was to use the $94,000 to pay for all materials, labor, and subcontractors. During the course of construction, the Debtors authorized, for the purpose of obtaining building materials, an account with 84 Lumber.

[820]*820From February 25, 2000 until April 17, 2000, 84 Lumber delivered various building materials to the Debtors. Loudin, however, failed to pay 84 Lumber for these materials. As a result, 84 Lumber filed a $7,639.70 mechanic’s lien against the Debtors’ property with the Clerk of the County Commission of Taylor County on June 23, 2000.

Almost four months later, on October 18, 2000, the Debtors filed a petition for relief under Chapter 7 of the Bankruptcy Code, and the Court entered an order of discharge on January 17, 2001. In their petition, the Debtors list 84 Lumber as a creditor holding an unsecured nonpriority claim of $7,639.70. The Debtors list the value of their house as $110,000,1 with a secured claim against it of $94,500 held by Bank One. The Debtors claim a real estate exemption of $15,500.2

On December 28, 2000, the Debtors filed a motion, under 11 U.S.C. § 522(f), to avoid the judicial lien of 84 Lumber on the grounds that it impaired their exemption. Subsequently, on January 2, 2001, 84 Lumber sent the Debtors a Notice of Right to Cure Default. On January 26, 2001, 84 Lumber filed an objection to the Motion to Avoid Judicial Lien on the grounds that the recordation of the mechanic’s lien created a statutory lien, not a judicial lien, and, therefore, the lien is not avoidable under § 522(f).

On February 27, 2001, a telephonic preliminary hearing was held in the above-styled case to consider the Debtors’ motion to avoid the lien and 84 Lumber’s objection. Counsel for the parties were ordered to submit briefs in support of their respective positions. Having received those documents, the Court took the matter under consideration.

DISCUSSION

The Debtors’ seek to avoid the mechanic’s lien of 84 Lumber under 11 U.S.C. § 522(f). This section provides, inter alia, that “the debtor may avoid' the fixing of a hen on an interest of the debtor in property to the extent that such lien impairs an exemption ... if such lien is ... a judicial lien ...” 11 U.S.C. § 522(f)(1)(A). 84 Lumber correctly objected on the grounds that a mechanic’s lien is a statutory hen, not a judicial hen.

The Bankruptcy Code defines both “statutory lien” and “judicial lien.” The definition of a statutory lien is a “hen arising solely by force of a statute on specified circumstances or conditions, or hen of distress for rent, whether or not statutory,” but does not include a “security interest or judicial hen, whether or not such interest or hen is provided by or is dependent on a statute and whether or not such interest or lien is made fully effective by statute.” 11 U.S.C. § 101(53). A judicial lien is defined as a “hen obtained by judgment, levy, sequestration, or other legal or equitable process or proceeding.” 11 U.S.C. § 101(36).

The legislative history of the Bankruptcy Code indicates that Congress considered mechanics’ hens to be statutory hens.

The definition [of a statutory hen] excludes judicial hens and security interests, whether or not they are provided for or are dependent on a statute, and whether or not they are made fully effective by statute. A statutory lien is only one that arises automatically, and is [821]*821not based on an agreement to give a lien or on judicial action. Mechanics’, mate-rialmens’, and warehousemens’ liens are examples.

S.Rep. No. 95-989 at 27, 95th Cong., 2d Sess. (1978), U.S.Code Cong. & Admin.News 1978, at 5787, 5813, quoted in Concrete Structures, Inc. v. Tidewater Crane and Rigging Co. (In re Concrete Structures, Inc.), 261 B.R. 627, 631-632 (E.D.Va.2001). As a general rule, courts have defined mechanics’ liens as statutory-liens. See, e.g., Concrete Structures, 261 B.R. at 632. However, the issue of whether or not a lien is statutory is a matter of state law. Concrete Structures, 261 B.R. at 632, quoting In re APC Constr. Inc., 132 B.R. 690, 693 (D.Vt.1991).

In West Virginia, the various forms of mechanics’ liens arise under West Virginia Code Chapter 38, Article 2. A material-man’s lien, such as that of 84 Lumber, arises specifically under section 38-2-3. This section provides that:

Every person, firm or corporation which shall furnish to any owner, for use in the erection, construction, alteration, repair or removal of any building or other structure or improvement appurtenant thereto, any materials, machinery or other equipment or supplies necessary to the completion of such building or other structure or improvement, shall have such a lien for his compensation as is mentioned in section one [§ 38-2-1] of this article.

The methods of perfecting and enforcing materialmens’ and other mechanics’ liens are set forth later in Article 38 of the West Virginia Code. Section 38-2-7 states, in part, that

the lien created and authorized by section three [§ 38-2-3] of this article shall be discharged from and after ninety days from the furnishing of the last of the materials, machinery or other supplies and equipment ... unless ... the claimant of any such lien shall have perfected and preserved the same, as hereinafter provided in this article.

Specifically, section 38-2-10 sets forth the requirements for notice and recordation of a materialman’s lien:

For the purpose of perfecting and preserving his lien, every materialman or furnisher of machinery or other necessary equipment, under a contract with the owner, as mentioned in section three [§ 38-2-3] of this article, shall cause to be recorded in the office of the clerk of the county court [county commission] of the county wherein such property is situate, within ninety days from the date when he shall have ceased to furnish material or machinery or other necessary equipment, a notice of such lien, which notice shall be sufficient if in form and effect as that provided in section eight [§ 38-2-8] of this article.

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In re Chambers, 264 B.R. 818, 2001 Bankr. LEXIS 921, 2001 WL 855663 (W. Va. 2001).

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