In re Mark S. Kaplan, Inc.

42 B.R. 288, 1984 Bankr. LEXIS 5031
CourtUnited States Bankruptcy Court, S.D. Ohio
DecidedSeptember 14, 1984
DocketBankruptcy No. 2-83-00263
StatusPublished
Cited by1 cases

This text of 42 B.R. 288 (In re Mark S. Kaplan, Inc.) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, S.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 Mark S. Kaplan, Inc., 42 B.R. 288, 1984 Bankr. LEXIS 5031 (Ohio 1984).

Opinion

ORDER ON SECURED STATUS OF MIDWEST DIAMOND SETTERS

G. L. PETTIGREW, Bankruptcy Judge.

The matter before the Court is the trustee’s objection to the validity and extent of the common law artisan’s lien claimed by Midwest Diamond Setters (Midwest). For the reasons set out below, the Court finds that Midwest is secured by such a lien for $100.00, but that the balance of its claim is unsecured.

Findings of Fact

The debtor in this converted Chapter 7 proceeding was engaged in the jewelry business prior to its financial demise. During its operations, it acquired numerous pieces of jewelry that needed repair in order to be profitably marketed. To fulfill these needs, the debtor on several occasions turned to Midwest. Midwest would repair the jewelry brought to it by the debtor. It often returned the repaired jewelry without being paid, dealing with the debtor on an “open account” basis. During this course of dealing, the debtor built up an indebtedness of approximately $2,700.00 to Midwest before filing its voluntary petition for relief.

At the time of filing, Midwest had several pieces of the debtor’s jewelry in its possession. It completed the repairs needed on these items and retained possession of them. The trustee later had other items sent to Midwest for repair, for which Midwest was paid, pursuant to this Court’s order of July 26, 1984.

On December 14, 1983, this Court -ordered Midwest to turn over to the trustee those items still in Midwest’s possession which were originally brought to Midwest by the debtor. That order provided that any liens that may have attached to those items would attach to the funds generated by their sale.

The items were eventually sold and, as a result of Midwest’s repairs, brought an amount substantially more than the reasonable value of the repairs made on those items, which this Court finds to be $100.00.

Arguments of the Parties

Midwest maintains that it has, by virtue of its repairs and possession of the items in question, a common law artisan’s lien on the funds generated by the sale of those goods. Moreover, it argues that its lien secures the payment of all liability resulting from the repair of any jewelry brought to it by the debtor, in spite of the fact that Midwest voluntarily relinquished possession of the vast majority of such jewelry without being paid.

The trustee, on the other hand, argues that while Midwest may be secured for the reasonable value of repairs to the property it retained, it can obtain no lien for the work done on the jewelry not in its possession at the date of filing, without a separate security agreement. No such security agreements were executed. Hence, the trustee objects to Midwest’s being treated as secured for more than the reasonable value of its repairs to the jewelry in its possession at the time of the debtor’s bankruptcy.

Conclusions of Law

As is obvious from the foregoing, this controversy centers on the validity and extent of the artisan’s lien claimed by Midwest. Such liens have their origin in common law. Metropolitan Securities Co. v. Orlow, 107 Ohio St. 583, 140 N.E. 306 (1923); The Church of Bible Understanding v. Bill Swad Leasing Co., 2 Ohio App.3d 382, 2 O.B.R. 455, 442 N.E.2d 78 (1981); Justice v. Bussard, 65 O.L.A. 461, 114 N.E.2d 305 (Muni.Ct.1953). Until relatively recently, they were not controlled by statute in Ohio. However, in the early 1960s, the Ohio General Assembly enacted what has become § 1333.41 of the Ohio Revised Code. Although this statute recognizes the existence of such liens and sets out procedures for their foreclosure, it “... [290]*290is void of any language concerning the formation and continued existence of such a lien. Therefore, we must turn to the common law development which preceded the adoption....” The Church of Bible Understanding, supra, at 2 O.B.R. 456, 442 N.E.2d 78.

According to the common law of Ohio, an artisan’s lien will arise if four conditions are met. The first is that the lienor must have come into possession of personal property by virtue of the owner’s delivery or entrustment of it to the lienor. Shearer v. Bill Garlic Motors, Inc., 59 Ohio App.2d 320, 324, 394 N.E.2d 1014 (1977) [quoting Northend Auto Park v. Petringa Trucking Co., 337 Mass. 618, 623, 150 N.E.2d 735 (1958) ]. Secondly, the owner must have delivered or entrusted the property for the purpose of its improvement or repair, which must occur by virtue of the lienor’s actions. Shearer, supra; Metropolitan Securities Co., supra. Third, the owner must fail to pay for the repairs or improvements. Bankers Commercial Security Co. v. Coffman, 22 N.P. (ns) 193 (C.P.1919). Finally, the lienor must retain possession of the property. The Church of Bible Understanding, supra; Defiance Production Credit Association v. Hake, 70 Ohio App.2d 185, 187, 435 N.E.2d 692, 694 (1980); American Security Corp. v. Martin, 83 Ohio App. 477, 84 N.E.2d 306 (1948).

Applying the foregoing criteria to the facts of this case, it becomes clear that Midwest did indeed have a lien on the goods it turned over to the trustee pursuant to this Court’s order of December 14, 1983. However, the extent of this lien is not as clear. It appears that the Ohio courts have not yet confronted the question presented by this case.

Counsel for Midwest relies on an annotation found at 25 A.L.R.2d 1038 as authority for the proposition that a possessory artisan’s lien secures not only to the value of the services rendered in regard to retained property, but also secures the other debts owed to the artisan by the owner of the property. While the cases cited in the annotation do stand for such a proposition, this Court does not feel that they are controlling, both because they are distinguishable from the case at bar and because those Ohio cases which have considered the subject of artisans’ liens in general seem to imply that a different result would be reached in Ohio.

The cases cited in the annotation, as well as the case preceding the annotation, each contain fact patterns in which the owner had a single contract with the lienor to work on the encumbered property. The lienors did at least some portion of the work and released some portion of the property to the owner before receiving any payment. The lienors each retained some portion of the owner’s property and sought, as does Midwest, to secure the payment of the entire debt from that portion of the owner’s property which they retained. In all but one of these cases, the courts approved of such practices. However, the courts all noted that such a result occurred because the lienor’s possession of the goods, as well as his right to payment, arose out of a single, entire contract. Other courts have employed a similar analysis, United States v.

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42 B.R. 288, 1984 Bankr. LEXIS 5031, Counsel Stack Legal Research, https://law.counselstack.com/opinion/in-re-mark-s-kaplan-inc-ohsb-1984.