In re Flue Gas Resources, Inc.

77 B.R. 628, 1987 Bankr. LEXIS 1453
CourtUnited States Bankruptcy Court, N.D. Ohio
DecidedAugust 12, 1987
DocketBankruptcy No. 87-00220
StatusPublished
Cited by1 cases

This text of 77 B.R. 628 (In re Flue Gas Resources, Inc.) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, N.D. Ohio primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
In re Flue Gas Resources, Inc., 77 B.R. 628, 1987 Bankr. LEXIS 1453 (Ohio 1987).

Opinion

MEMORANDUM OPINION AND ORDER

RICHARD L. SPEER, Bankruptcy Judge.

This cause comes before the Court on the Objection of Trustee to the Claim of Ther-modyn Corporation. A Hearing was held on this matter, at which time the parties agreed that the issue presented was solely a question of law. Accordingly, counsel filed their arguments on the relevancy and application of O.R.C. § 1333.31 to the instant case. The Court has reviewed the written arguments of counsel, as well as the entire record in this case. Based on that review, and for the following reasons, the Court finds that the Trustee’s Objection should be Denied.

FACTS

The facts in this matter do not appear to be in serious dispute. On February 4, 1987, Flue Gas Resources, Inc. (hereinafter “Flue Gas”) filed a voluntary petition under 11 U.S.C. Chapter 7. Thermodyn Corporation (hereinafter “Thermodyn”) is a creditor of Flue Gas, and filed a proof of claim in this case for Thirty-six Thousand Four Hundred and Fifty Dollars and Sixty-nine Cents ($36,450.69). This debt arose from the fabrication and sale of various molds to Flue Gas, and for the fabrication of parts using the molds. The Debtor owed Thermodyn a balance of at least Twenty-seven Thousand Two Hundred and Twenty-six Dollars and Seventy-nine Cents ($27,226.79) for the fabrication of the rubber parts, and Five Thousand Four Hundred Dollars ($5,400.00) for making the molds.

The molds were manufactured for Flue Gas by Thermodyn between March 21,1985 and August 15, 1986. Subsequent to the filing of the Chapter 7 petition and more [630]*630than sixty (60) days after the last payment was due on the molds, Thermodyn served upon the Trustee a “final notice”. The “final notice” contained a request for payment, along with an itemized statement of the amount due, and a description of the molds involved. Also included was a statement that unless the amount due and the cost of the notification was paid within thirty (30) days, Thermodyn would retain the molds and proceed to enforce its lien rights under O.R.C. § 1333.31. It should be noted that Thermodyn has, at all times, maintained exclusive possession of the molds.

On March 30, 1987, the Trustee Objected to Thermodyn’s claim of a molder’s lien.

LAW

Ohio’s molder’s lien statute is set forth in § 1333.29 through § 1333.31 of the Revised Code. O.R.C. § 1333.31(A) states in pertinent part:

(A)(1) A molder has a lien on a die, mold, pattern, or form that is in his possession and that belongs to a customer, for the following:
(a) The amount due from the customer for plastic, metal, paper, china, ceramic, glass, or rubber fabrication work performed with the die, mold, pattern, or form, or for making or improving the die, mold, patterns, or form;
(b) The cost associated with the notification described in division (B) of this section;

The Trustee does not dispute that, under § 1333.31, Thermodyn has a lien on the molds in its possession for the amounts due for the fabrication of the molds and the work performed with the molds. The Trustee’s position is that the lien was un-perfected at the time of the filing of the petition, and was therefore avoidable under 11 U.S.C. § 545(2) which provides:

The trustee may avoid the fixing of a statutory lien on property of the debtor to the extent that such lien—
(2) is not perfected or enforceable at the time of the commencement of the case against a bona fide purchaser that purchases such property at the time of the commencement of the case, whether or not such a purchaser exists;

Or, as is stated in Collier’s:

Section 545(2) requires perfection of the lien and establishes, essentially, a bona fide purchaser of property subject to the lien, test to determine perfection.
This test states, first of all, that for a statutory lien to be valid against the trustee it must be perfected or enforceable against one acquiring the rights of a bona fide purchaser of property subject to the lien, whether or not such a purchaser actually exists, at the time of the commencement of the case.

4 Collier on Bankruptcy § 545.04[2] at 545-18 (15th ed. 1987). See also, Lincoln Nat. Bank v. Conti, 27 B.R. 175 (Bankr.S.D.Ohio 1982). Alternatively, the Trustee cites § 547(b)(6).

Thermodyn contends that the lien cannot be avoided under § 545(2) because it was perfected by possession. The Trustee asserts that the lien was not perfected, there being additional actions required under the statute prior to enforcement. Specifically, the Trustee argues that the “final notice”, which is to be sent within sixty (60) days of the due date of the final payment, is the act that results in the lien being perfected. It is the Trustee’s position that the statutory requirements should be strictly construed. Further, the Trustee points out that there is no provision in § 1333.31 allowing the “final notice” to relate back to the period prior to the bankruptcy filing.

Therefore, the issue before the Court is whether Thermodyn’s § 1333.31 molder’s lien was unperfected, or perfected by possession. There does not appear to be any Ohio cases construing § 1333.31, nor has any other state construed its molder’s lien statute in a published Opinion. There also appears to be a paucity of legislative history concerning this particular Ohio statute. Thus, the Court must turn to the general rules of construction of lien statutes, and examine the purposes behind the legal concept of perfection.

The molder’s lien statute gives the molder a lien based on possession of the mold. [631]*631To enforce the lien through a sale of the molds, the mold maker must follow certain requirements listed in the statute. In construing § 1333.31, it should be noted that courts have held that a statutory lien exists independent of the various means of enforcement the statute permits. Moses v. Labofish, 132 F.2d 16, 17 (D.C. Cir.1942); 51 Am.Jur.2d, Liens § 39.

In the case at bar, the lien is a “specific lien” because it is for a claim due in relation to that property upon which the lien attaches, rather than for an unrelated general balance. 66 O.Jur.3d, Liens § 3. “Specific Liens” are favored by the law, and should be sustained whenever it is possible to do so without violating positive law. 66 O.Jur.3d, Liens § 4; 52 Am. Jur.2d, Liens § 11.

Further, a statutory lien which is declaratory of a common law lien, and is not in derogation of it, must be given such construction as will give the lien claimant the full limit of the security intended to be provided by the legislature. M & M Hotel Co. v. Nichols 5 Ohio Op. 387, 388-389, 32 N.E.2d 463 (1935); 66 O.Jur.3d, Liens § 28.

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Bluebook (online)
77 B.R. 628, 1987 Bankr. LEXIS 1453, Counsel Stack Legal Research, https://law.counselstack.com/opinion/in-re-flue-gas-resources-inc-ohnb-1987.