Ryan v. Grayson Service, Inc. (In Re Rincon Island Ltd. Patnership)

253 B.R. 880, 44 Collier Bankr. Cas. 2d 1680, 151 Oil & Gas Rep. 342, 2000 Bankr. LEXIS 1141, 36 Bankr. Ct. Dec. (CRR) 230, 2000 WL 1514338
CourtUnited States Bankruptcy Court, C.D. California
DecidedOctober 10, 2000
DocketBankruptcy No. ND 98-14791 RR, Adversary No. 99-1174 RR
StatusPublished
Cited by6 cases

This text of 253 B.R. 880 (Ryan v. Grayson Service, Inc. (In Re Rincon Island Ltd. Patnership)) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, C.D. California primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Ryan v. Grayson Service, Inc. (In Re Rincon Island Ltd. Patnership), 253 B.R. 880, 44 Collier Bankr. Cas. 2d 1680, 151 Oil & Gas Rep. 342, 2000 Bankr. LEXIS 1141, 36 Bankr. Ct. Dec. (CRR) 230, 2000 WL 1514338 (Cal. 2000).

Opinion

MEMORANDUM OPINION

ROBIN L. RIBLET, Bankruptcy Judge.

The debtor, Rincon Island Limited Partnership (hereinafter “Rincon Island” or “debtor”), an oil and gas exploration and production business, owns and operates oil and gas wells and related offshore interests in the Rincon Island oil field in Ven-tura County, California. Windsor Energy U.S. Corporation (hereinafter “Windsor”) is the general partner of Rincon Island. Windsor’s principal asset is a 99.75% general partnership interest in Rincon Island. Rincon Island and Windsor collectively *883 commenced their chapter 11 bankruptcy-cases on August 20, 1998, in the United States Bankruptcy for the District of Delaware. That Court administratively consolidated these cases and subsequently transferred them to the United States Bankruptcy Court for the Central District of California. This court later deconsoli-dated the cases.

The First Amended Joint Plan of Reorganization was confirmed by this Court on December 21, 1999. In relevant portion, the Plan established a Rincon Litigation Trust. Plaintiff herein is the Litigation Trustee and successor in interest to the Official Committee of Unsecured Creditors of Rincon Island.

Defendant Grayson Service, Inc. (hereinafter “Grayson”) is a well servicing company which performs work on the debtor’s oil wells. On October 23, 1998, 17 days after the commencement of the chapter 11 cases, Grayson recorded its Claim of Oil and Gas lien in the amount of $163,503 with the County of Ventura, California. There is no dispute that Grayson’s lien was recorded within six months after Grayson’s services were furnished, in compliance with the California Oil and Gas Lien Act. Cal.Code of CivProc. §§ 1203.50 - 1203.66. After recordation of Grayson’s lien, the County of Ventura, as mandated by Cal. Gov’t Code § 27297.5, mailed a copy of the recorded lien to the debtor.

Thereafter, on April 21, 1999, approximately six and one-half months post-petition, Grayson filed an action in state court to enforce its lien. It is uncontroverted that Grayson’s lien enforcement action was initiated within 180 days of recording its lien as required under Cal.Code of Civ. Proc. § 1203.61. However, neither the complaint nor the summons was served on the debtor within such statutory period. Grayson provided no written notice to the debtor or to the Court of its intention to enforce its lien prior to the expiration of the period to commence an enforcement action. The instant adversary proceeding ensued seeking determination that Gray-son’s lien was invalid thereby rendering Grayson’s claim unsecured.

In two separate motions for summary judgment previously brought by the Plaintiff, the Plaintiff argued that Grayson’s lien was invalid because Grayson failed to provide timely written notice of its intent to enforce its hen pursuant to 11 U.S.C. § 546(b). 1 The presence of mixed issues of law and fact precluded granting summary judgment based on Grayson’s contention that it provided oral notification to the debtor of Grayson’s intent to enforce its hen.

Two issues were summarily resolved pretrial in favor of the plaintiff, however. Both issues were raised again by Grayson at the time of trial and warrant addressing here for the purposes of completing the record. The first issue was Grayson’s contention that the County’s mailing of a copy of the recorded hen to the debtor constituted notice under § 546(b). The court finds no merit in this assertion for several reasons.

First, California law requires two distinct steps for the perfection of an oil and gas lien: recordation of the hen pursuant to Cal.Code of Civ.Proc. § 1203.58, and enforcement or perfection of the hen pursuant to Cal.Code of Civ.Proc. § 1203.61. Recordation must occur within six months after the date on which the claimant’s labor was performed or services were provided. Cal.Code of Civ.Proc. § 1203.58. Thereafter, the recorded hen must be enforced or perfected by the filing of a hen enforcement action within 180 days from the time of the recording of the lien. Cal. Code of Civ.Proc. § 1203.61. “Under California law, the filing of a foreclosure suit, an enforcement action, is required to maintain the perfection of a lien: if no suit is *884 timely filed, the lien becomes void.” Village Nurseries v. Gould (In re Baldwin Builders), 232 B.R. 406, 411 (9th Cir. BAP 1999).

In bankruptcy cases if commencement of an action is required to maintain or continue perfection, § 546(b) unambiguously mandates that notice shall be given instead. Id. Section 546(b) specifically refers to the “perfection of such interest.” The County’s mailing of a copy of Gray-son’s recorded lien to the debtor pursuant to Cal. Gov’t Code § 27297.5 was simply part of the recordation process and had no impact upon the perfection process, which in this instance was not attempted until 180 days later.

Additionally, an action complying with § 546(b) notice “must be calculated to notify the holder of the property, be it the debtor or the trustee, that the lienholder intends to enforce its lien.” Id. at 414. While mailing a copy of Grayson’s recorded lien to the debtor advised the debtor of the existence and recordation of the hen, such notice could not conceivably convey an intent to perfect or enforce that lien. Grayson can point to nothing contained in a copy of the recorded lien which indicates any intent to “perfect” or “enforce” Gray-son’s lien.

Lastly, § 546(b) notice must convey the lienholder’s intent. Id. The lienholder here, Grayson, did not mail the copy, and there is no evidence that Grayson enlisted the County to advise the debtor of Gray-son’s intentions. Nor is the County Gray-son’s agent.

Grayson provided no new evidence or authority on this issue at trial. The Court therefore concludes that the County’s mailing of a copy of Grayson’s recorded lien to the debtor did not constitute notice under § 546(b).

The second issue which this court previously resolved in favor of the Plaintiff related to Grayson’s contention that the filing of Grayson’s state court lien enforcement action on April 21, 1999, constituted § 546(b) notice. As explained in Baldwin Builders, post-petition lien foreclosure actions are enforcement actions prohibited by the automatic stay. Baldwin Builders, 232 B.R. at 410-11, citing In re Hunters Run Ltd. Partnership, 875 F.2d 1425, 1427-29 (9th Cir.1989). Actions violating the automatic stay are void. Baldwin Builders, 232 B.R. at 410, citing Schwartz v. United States (In re Schwartz), 954 F.2d 569, 571 (9th Cir.1992). See also Roofing Concepts, Inc. v. Kenyon Industries, Inc. (In re Coated Sales), 147 B.R. 842, 845 (S.D.N.Y.1992). The filing of Grayson’s state court lien enforcement action was void.

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253 B.R. 880, 44 Collier Bankr. Cas. 2d 1680, 151 Oil & Gas Rep. 342, 2000 Bankr. LEXIS 1141, 36 Bankr. Ct. Dec. (CRR) 230, 2000 WL 1514338, Counsel Stack Legal Research, https://law.counselstack.com/opinion/ryan-v-grayson-service-inc-in-re-rincon-island-ltd-patnership-cacb-2000.