In Re Southern California Plastics, Inc.

208 B.R. 178, 1997 WL 251748
CourtUnited States Bankruptcy Appellate Panel for the Ninth Circuit
DecidedApril 25, 1997
DocketBAP No. CC-96-1647-MCMEJ, Bankruptcy No. SV 92-40592-AG
StatusPublished
Cited by8 cases

This text of 208 B.R. 178 (In Re Southern California Plastics, Inc.) is published on Counsel Stack Legal Research, covering United States Bankruptcy Appellate Panel for the Ninth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
In Re Southern California Plastics, Inc., 208 B.R. 178, 1997 WL 251748 (bap9 1997).

Opinion

208 B.R. 178 (1997)

In re SOUTHERN CALIFORNIA PLASTICS, INC., Debtor.
Lawrence A. DIAMANT, Chapter 7 Trustee, Appellant,
v.
Vartain KASPARIAN, Appellee.

BAP No. CC-96-1647-MCMEJ, Bankruptcy No. SV 92-40592-AG.

United States Bankruptcy Appellate Panel of the Ninth Circuit.

Argued and Submitted March 19, 1997.
Decided April 25, 1997.

Damon G. Saltzburg, Saltzburg, Ray & Bergman, L.L.P., Los Angeles, CA, for Lawrence A. Diamant, Trustee.

Before: McKEAG[1], MEYERS, and JONES, Bankruptcy Judges.

McKEAG, Bankruptcy Judge:

Lawrence A. Diamant, in his capacity as a Chapter 7 trustee (the "Trustee"), has appealed the bankruptcy court order overruling his objection to a claim filed by creditor Vartan Kasparian ("Kasparian"). The bankruptcy court ruled that Kasparian's claim should be allowed as a secured obligation in a bankruptcy filed by Southern California Plastics, Inc. (the "Debtor"). We affirm.

STATEMENT OF FACTS

In 1991, Kasparian entered into a written contract with the Debtor to purchase certain products and equipment. The Debtor did not deliver the items purchased although Kasparian had paid a portion of the purchase price. On November 22, 1991, Kasparian filed an action in Los Angeles County Superior Court against the Debtor and its principals (the "State Court Action"), based on breach of contract, fraud, and rescission theories.

In the State Court Action, Kasparian sought and obtained a prejudgment writ of attachment against the Debtor, which was issued on February 13, 1992. On February 27, 1992, Kasparian filed a notice of attachment lien (the "Attachment Lien") with the California Secretary of State. The Attachment Lien extends to "any property [of the Debtor] for which a method of levy is provided" and purportedly encumbers proceeds from the Debtor's bank accounts and a sale of its equipment and machinery. After the Debtor filed a voluntary Chapter 7 bankruptcy case on August 7, 1992, the State Court Action was closed.[2]

*180 Kasparian timely filed a proof of claim in the bankruptcy case in the amount of $127,870 for "goods sold" and "services performed" (the "Claim"). The Claim consists of a secured component in the amount of $27,870, based on the Attachment Lien, and an unsecured claim for $100,000. On May 19, 1995, the Trustee filed an objection to the Claim, alleging that it was supported by inadequate documentation. On July 5, 1995, the bankruptcy court entered an order disallowing the Claim in its entirety.

The bankruptcy court granted Kasparian's motion for reconsideration and scheduled an evidentiary hearing on the Trustee's objections to the Claim. In a Joint Pretrial Order, the parties agreed that the only issues before the bankruptcy court were: whether the Debtor owed $127,870 to Kasparian; whether Kasparian was a secured or unsecured creditor; and certain evidentiary/estoppel questions. Prior to trial, Kasparian withdrew his $100,000 claim and the Trustee stipulated to allowance of the Claim in the amount of $27,870, reserving only his objections to Kasparian's claimed security interest. Following the evidentiary hearing, the bankruptcy court concluded that Kasparian's claim was unsecured because the Attachment Lien had expired under California law and Kasparian had not sought relief from the automatic stay to extend it.

Kasparian filed a second motion for reconsideration, asserting that the bankruptcy court had not considered the impact of Bankruptcy Code section 108(c), which extends or suspends certain deadlines. The court granted the motion for reconsideration, ruling that Kasparian's claim is secured. It concluded that section 108(c) tolled the automatic expiration of the Attachment Lien. Therefore, Kasparian's lien had not expired. It also decided that the issue of whether Kasparian should, or even could, proceed with the State Court Action was not relevant to its determination of his secured status. The Trustee appeals from this decision.

ISSUES

1. Whether the automatic expiration of a prejudgment attachment lien pursuant to California Code of Civil Procedure section 488.510 is tolled by 11 U.S.C. § 108(c).

2. Whether a prepetition attachment creditor has a secured claim for purposes of a bankruptcy case.

STANDARD OF REVIEW

The Trustee challenges the bankruptcy court's conclusions of law, which are reviewed de novo. In re United States Trustee (Sousa v. Miguel), 32 F.3d 1370, 1372 (9th Cir.1994). Questions of statutory interpretation are also reviewed de novo. In re Kim, 163 B.R. 157, 159 (9th Cir.BAP1994), aff'd 62 F.3d 1511 (9th Cir.1995).

DISCUSSION

The question is whether Kasparian has a secured claim against assets of the bankruptcy estate by virtue of his prejudgment attachment lien. The answer requires two different inquiries. First, we must decide whether the Attachment Lien automatically expired according to state law, or instead, whether 11 U.S.C. § 108(c) has extended its duration. Second, we must consider what, if anything, Kasparian was required to do to "perfect" his lien in order to have a secured claim in this bankruptcy.

1. The Effect of Bankruptcy Code section 108(c)

California Code of Civil Procedure ("CCP") section 488.510(a) provides that:

[A]ny attachment shall cease to be of any force or effect, and the property levied upon shall be released from the operation of the attachment, at the expiration of three years from the date of issuance of the writ of attachment under which the levy was made.

Section 488.510(b) permits a creditor to renew an attachment lien prior to its expiration. Because Kasparian obtained the Attachment Lien on February 13, 1992 and did *181 not seek a renewal under section 488.510(b), the Attachment Lien expired on February 13, 1995, three years after its issuance, unless the deadline was tolled or otherwise extended.

The bankruptcy court concluded that 11 U.S.C. § 108(c) extended the three-year deadline set forth in CCP § 488.510(a). Section 108(c) provides that:

[I]f applicable nonbankruptcy law . . . fixes a period for commencing or continuing a civil action in a court other than a bankruptcy court on a claim against the debtor, . . . and such period has not expired before the date of the filing of the petition, then such period does not expire until the later of —
(1) the end of such period, including any suspension of such period occurring on or after the commencement of the case; or
(2) 30 days after notice of the termination or expiration of the stay under section 362, 722, 1201, or 1301 of this title, as the case may be, with respect to such claim.

Here, the Debtor's bankruptcy case remains open and the automatic stay is still in effect. See 11 U.S.C. § 362(c). If section 108(c)(2) applies, the three-year deadline to renew the Attachment lien or obtain a judgment has not expired.

The bankruptcy court considered the Ninth Circuit Court of Appeals decision, In re Hunters Run Limited Partnership,

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208 B.R. 178, 1997 WL 251748, Counsel Stack Legal Research, https://law.counselstack.com/opinion/in-re-southern-california-plastics-inc-bap9-1997.