Opinion ID: 1399334
Heading Depth: 1
Heading Rank: 2

Heading: effect of automatic stay in bankruptcy

Text: In its second assignment of error, Thompson asserts that Precast and A & P are barred from enforcing their mechanics' liens because they filed their enforcement actions beyond the six-month filing limitation fixed in Code § 43-17. Precast and A & P respond that their enforcement suits were subject to the automatic stay imposed when Land Works filed its petition in bankruptcy and those actions could not be filed until entry of the bankruptcy court order excluding them from the stay. Thompson rejects this position, arguing that Land Works was not a necessary party to the enforcement actions and, therefore, the bankruptcy stay did not prevent Precast and A & P from pursuing those actions. The dispositive question, however, is not whether Land Works was a necessary party to the enforcement actions, but whether the enforcement actions were subject to the bankruptcy stay. [4] Resolution of this question depends upon a determination of the nature of the estate of the debtor, which is a matter of federal bankruptcy law. The bankruptcy court made no determination whether the enforcement actions of Precast and A & P had been stayed by the bankruptcy action when it entered an order releasing Precast and A & P from the stay. However, the United States Bankruptcy Court for the Western District of Virginia has addressed the issue and concluded that the stay prevents subcontractors in the position of Precast and A & P from filing bills of complaint to enforce their memoranda of mechanics' liens. In re Richardson Builders, Inc., 123 B.R. 736 (Bankr.W.D.Va.1990). In Richardson, the issue before the court was whether the filing of a bankruptcy petition by a general contractor stays a mechanic's lien enforcement action, when the general contractor does not own the property against which the lien has been filed. Id. at 737. The Richardson court determined that one of the purposes of the stay is to protect creditors by insuring equality of distribution by prohibiting any change in the rights and priorities of creditors. Id. at 738. The Richardson court concluded that: [e]ven if a general contractor would not be considered a necessary party under Virginia law, actions brought under the Virginia mechanic's lien statutes necessarily involve or affect property of the estate, or property in the possession of the estate, within the broad scope of section 362(a). It is clear that any sums due from the owner to the general contractor-debtor at the time the bankruptcy petition was filed are the property of the estate. Id. at 740; accord In re R.E. Tull & Sons, Inc., 25 B.R. 709 (Bankr.D.Md.1982); In re Shore Air Conditioning & Refrigeration, Inc., 18 B.R. 643 (Bankr.D.N.J.1982). At the time the petition in bankruptcy was filed, Land Works had an inchoate mechanic's lien against the property based on amounts still owed it by Thompson. Applying the principle defined in Richardson, we hold that this right constituted property of the debtor's estate and, consequently, the stay imposed by the bankruptcy code was implicated when Precast and A & P sought to enforce their liens against the property. Therefore, we will affirm the trial court's holding that A & P and Precast timely filed their suits to enforce their mechanics' liens against the property.