Turner v. Emmons & Wilson, Inc. (In Re Minton Group, Inc.)

28 B.R. 789, 1983 Bankr. LEXIS 6591
United States Bankruptcy Court, S.D. New York·Decided March 18, 1983·No. 19-22060·Published·Cited by 5 cases

Opinion

*790 HOWARD SCHWARTZBERG, Bankruptcy Judge.

The trustee seeks to avoid as preferential two prepetition attachments entered against the debtor’s property, located in New Canaan, Connecticut. The defendant challenges the trustee’s position, asserting that the two attachments are statutory liens that relate back to the commencement of their state court actions against the debt- or, more than 90 days prior to the filing of the involuntary Chapter 11 petition. Thus, the issue for determination is whether the recording of the attachments against the property constituted preferential transfers of the debtor’s property which are subject to the trustee’s avoiding powers under Bankruptcy Code § 547(b).

FINDINGS OF FACT

1. An involuntary Chapter 11 petition was filed against Minton Group, Inc. on September 28, 1982, pursuant to 11 U.S.C. § 303, and an order for relief was entered against the debtor on October 23, 1982.

2. The plaintiff, Sidney Turner, was appointed trustee pursuant to Bankruptcy Code § 1104 on October 26, 1982.

3. On December 27, 1982, the trustee commenced an adversary proceeding pursuant to Bankruptcy Rule 701 and 11 U.S.C. § 547(b) to avoid two allegedly preferential transfers of the debtor’s property received by the defendant.

4. The debtor purchased property on January 18,1982, known as Units 1 & 2 of a business condominium called Realtech Professional Associates, located at 49 Pine Street, New Canaan, Connecticut.

5. The debtor is the sole general partner of a limited partnership known as 3750 Bronx Boulevard Associates.

6. The defendant caused two prejudgment attachments to be recorded against the debtor’s Pine Street property on September 23, 1982. One was entered in the amount of $2,500; the other for $3,000. Both attachments were filed in connection with two Connecticut state court actions that defendant Emmons & Wilson had commenced against the debtor on June 7, 1982 and June 22, 1982 to secure judgments for certain premiums on insurance policies issued for the debtor’s limited partnership, 3750 Bronx Boulevard Associates.

7. The trustee contends that the entry of these attachments five days prior to the commencement of the debtor’s Chapter 11 case constituted a preference in favor of the defendant which the trustee may avoid pursuant to his powers under Bankruptcy Code § 547(b).

8. The defendant opposes the trustee’s position, contending that the two September 23,1982 attachments aré statutory liens whose effectiveness relates back to the commencement of the two state court actions, more than 90 days prior to the commencement of the Chapter 11 case.

DISCUSSION

Bankruptcy Code § 547(b) 1 authorizes the trustee to avoid transfers of the debt- or’s property under circumstances where the five elements forming the basis of a preference action have been satisfied. One requirement is that the transfer of the *791 debtor’s property must have occurred “on or within 90 days before the date of the petition” [§ 547(b)(4)(A)]. The other four requirements are not disputed and need not be discussed. Notwithstanding that its two attachments were entered against the debt- or’s property on September 23, 1982, five days prior to the filing of the involuntary petition in the Chapter 11 case, the debtor argues that the transfer did not occur within the 90-day period preceding the Chapter 11 case because the attachments are statutory liens whose effectiveness relates back to the commencement of the two state court actions brought against the debtor in June, 1982, beyond the 90-day prepetition period.

If the defendant is correct in its assertion that the attachments are statutory liens, it would be of no significance whether the efficacy of the liens related back to a point beyond the 90-day period prior to the filing of the bankruptcy petition or commenced from some point within the 90-day period. Bankruptcy Code § 547(c)(6) provides that the trustee may not avoid the fixing of any statutory lien that is not avoidable under Code § 545. Therefore, it would have to be determined whether the particular statutory lien would be subject to avoidance under § 545, not whether it arose during the 90-day period prior to the filing of the petition. However, the first issue to be decided is whether the defendant is correct in characterizing its attachments as statutory liens.

Statutory Lien Argument

Bankruptcy Code § 101(38) defines statutory lien as follows:

(38) “statutory lien” means lien arising solely by force of a statute on specified circumstances or conditions, or lien of distress for rent, whether or not statutory, but does not include security interest or judicial lien, whether or not such interest or lien is provided by or is dependent on a statute and whether or not sueh interest or lien is made fully effective by statute; [Emphasis added].

The legislative history explains that a statutory lien is “only one that arises automatically, and is not based on an agreement to give a lien or on judicial action. Mechanics’, materialmen’s, and warehousemen’s liens are examples.” [Emphasis added], Connecticut Gen.Stats. § 49-33 pertaining to mechanics’ liens is an example of a statutory lien that arises automatically in accordance with the statutory language. The statute provides in pertinent part:

§ 49-33. Mechanic’s lien. Precedence. Rights of subcontractors.
(a) If any person has a claim for more than ten dollars for materials furnished or services rendered in the construction, raising, removal or repairs of any building or any of its appurtenances or in the improvement of any lot or in the site development or subdivision of any plot of land ...
(b) The claim is a lien on the land, building and appurtenances or lot ... and the claim takes precedence over any other encumbrance originating after the commencement of the services, or the furnishing of any such materials.... [Emphasis added].

The lien arises automatically from the point in time that materials were furnished or services rendered. See, Waterbury Lumber & Coal Co. v. Asterchinsky, 87 Conn. 316, 87 A. 739 (1913); In re Reardon, 10 B.R. 697, 700 (Bkrtcy.D.Conn.1981).

Connecticut Gen.Stats. § 49-34 provides that the mechanic’s lien must then be recorded in order for the lien to be valid:

§ 49-34. Certificate of lien to be recorded and notice given to owner.
A mechanic’s lien is not valid, unless the person performing the services or furnishing the materials, (1) within sixty days after he has ceased to do so, lodges with the town clerk of the town in which the building, lot or plot of land is situated a certificate in writing, which shall be recorded by the town clerk with deeds of land ...

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Turner v. Emmons & Wilson, Inc. (In Re Minton Group, Inc.), 28 B.R. 789, 1983 Bankr. LEXIS 6591 (N.Y. 1983).

28 B.R. 789 (Turner v. Emmons & Wilson, Inc. (In Re Minton Group, Inc.)) — published by Counsel Stack Legal Research, free access to 12M+ legal documents.

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