As discussed in an earlier blog (#60), in order to “perfect” a mechanic’s lien in New Hampshire the lienor must institute court action for the purpose of getting an attachment order, Topjian Plumbing Heating, Inc. v. Bruce Topjian, Inc., 129 N.H. 481 (1987). Suppose the owner files for bankruptcy protection before that step is taken. Can the lienor still take it?
Upon the filing of a bankruptcy petition, the “automatic stay” found in Section 362 of the Bankruptcy Code forbids various creditor actions including, per Section 362(a)(4), “any act to create, perfect, or enforce any lien against property of the estate” – but contains an exception in Section 362(b)(3) for any act to perfect an interest in property “to the extent that the trustee’s rights and powers are subject to such perfection under Section 546(b) of this title.” Section 546(b), in turn, subjects the trustee’s powers to “any generally applicable law that permits perfection of an interest in property to be effective against an entity that acquires rights in such property before the date of such perfection.” Our question is whether New Hampshire’s mechanic’s lien statute is such a law.
It is tempting to conclude that such retroactive effect is accomplished by RSA 447:9, which states that mechanic’s liens “shall take precedence of all prior claims except liens on account of taxes.” After all, this type of super-priority is akin to the Massachusetts environmental superlien statute at issue in In re 229 Main Street Limited Partnership, 262 F.3d 1 (1st Cir. 2001), which provided that “Any lien recorded, registered or filed pursuant to this section shall have priority over any encumbrance theretofore recorded, registered or filed with respect to any site . . . described in such statement of claim.” The Court of Appeals held that “[s]uch perfection plainly is effective against entities which already had acquired rights in the property,” id. at 12, and accordingly ruled that postpetition perfection of such a lien “meets the combined requirements of section 362(b)(3) and 546(b)(1)(A) and therefore falls within the exception to the automatic stay carved out by those provisions,” id. at 13.
But one set of prior claims that RSA 447:9 does not give precedence over are claims of “bona fide purchasers of the property for value before the writ of attachment was recorded,” Chagnon Lumber Co. v. Stone Mill Const. Corp., 124 N.H. 820, 824 (1984). A mechanic’s lien that the buyer knew nothing about, perfected by an attachment after her purchase, will not trump her interest – nor, presumably, that of the bankruptcy trustee under Section 546(b) of the Bankruptcy Code, to whom Section 545(2) grants the power to “avoid the fixing of a statutory lien on property of the debtor to the extent that such lien . . . 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. . . .”
Until a bankruptcy case in New Hampshire directly addresses the post-petition perfection of a mechanic’s lien, we won’t know for sure whether the lien can still be perfected. There is certainly reason for caution here. But even if the exception in Section 362(b)(3) protects the lienor’s attachment effort from the ban of the automatic stay, that won’t condone the filing of a collection lawsuit against the debtor as the springboard for filing the motion to attach. Fortunately, lienors are “not statutorily required to institute a suit for damages for breach of contract on the same writ that was used to perfect the materialman's lien . . . The attachment securing the lien serves a narrower purpose than the action for damages . . .” Pine Gravel, Inc. v Cianchette, 128 N.H. 460, 465 (1986). See Norcross v. Fahey, No. 2016-0304 (N.H. Sup. Ct., January 13, 2017) (“although RSA chapter 511-A allows a party to seek a pre-judgment attachment when filing an action on an underlying debt, nothing in the statute requires the party to file the underlying action before perfecting a mechanic’s lien pursuant to RSA 511-A:8.”).
Upon the filing of a bankruptcy petition, the “automatic stay” found in Section 362 of the Bankruptcy Code forbids various creditor actions including, per Section 362(a)(4), “any act to create, perfect, or enforce any lien against property of the estate” – but contains an exception in Section 362(b)(3) for any act to perfect an interest in property “to the extent that the trustee’s rights and powers are subject to such perfection under Section 546(b) of this title.” Section 546(b), in turn, subjects the trustee’s powers to “any generally applicable law that permits perfection of an interest in property to be effective against an entity that acquires rights in such property before the date of such perfection.” Our question is whether New Hampshire’s mechanic’s lien statute is such a law.
It is tempting to conclude that such retroactive effect is accomplished by RSA 447:9, which states that mechanic’s liens “shall take precedence of all prior claims except liens on account of taxes.” After all, this type of super-priority is akin to the Massachusetts environmental superlien statute at issue in In re 229 Main Street Limited Partnership, 262 F.3d 1 (1st Cir. 2001), which provided that “Any lien recorded, registered or filed pursuant to this section shall have priority over any encumbrance theretofore recorded, registered or filed with respect to any site . . . described in such statement of claim.” The Court of Appeals held that “[s]uch perfection plainly is effective against entities which already had acquired rights in the property,” id. at 12, and accordingly ruled that postpetition perfection of such a lien “meets the combined requirements of section 362(b)(3) and 546(b)(1)(A) and therefore falls within the exception to the automatic stay carved out by those provisions,” id. at 13.
But one set of prior claims that RSA 447:9 does not give precedence over are claims of “bona fide purchasers of the property for value before the writ of attachment was recorded,” Chagnon Lumber Co. v. Stone Mill Const. Corp., 124 N.H. 820, 824 (1984). A mechanic’s lien that the buyer knew nothing about, perfected by an attachment after her purchase, will not trump her interest – nor, presumably, that of the bankruptcy trustee under Section 546(b) of the Bankruptcy Code, to whom Section 545(2) grants the power to “avoid the fixing of a statutory lien on property of the debtor to the extent that such lien . . . 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. . . .”
Until a bankruptcy case in New Hampshire directly addresses the post-petition perfection of a mechanic’s lien, we won’t know for sure whether the lien can still be perfected. There is certainly reason for caution here. But even if the exception in Section 362(b)(3) protects the lienor’s attachment effort from the ban of the automatic stay, that won’t condone the filing of a collection lawsuit against the debtor as the springboard for filing the motion to attach. Fortunately, lienors are “not statutorily required to institute a suit for damages for breach of contract on the same writ that was used to perfect the materialman's lien . . . The attachment securing the lien serves a narrower purpose than the action for damages . . .” Pine Gravel, Inc. v Cianchette, 128 N.H. 460, 465 (1986). See Norcross v. Fahey, No. 2016-0304 (N.H. Sup. Ct., January 13, 2017) (“although RSA chapter 511-A allows a party to seek a pre-judgment attachment when filing an action on an underlying debt, nothing in the statute requires the party to file the underlying action before perfecting a mechanic’s lien pursuant to RSA 511-A:8.”).
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