California Mechanic’s Liens and Bankruptcy

What you don’t know can hurt you.

California’s Mechanic’s Lien Law (Civil Code section 3082 et seq.) is littered with short deadlines for accomplishing various tasks.

One is the 90 day time limit in which to file a mechanic’s lien foreclosure action after the mechanic’s lien has been recorded. (Civil Code section 3144.)

The recent case of Pioneer Construction, Inc. v. Global Investment Corp. (Dec. 21, 2011) B225685. reminds us that the 90 days does not include the time that the automatic stay is in effect due to a bankruptcy.

It also reminds us that:

1. the 90 days RESUMES running (nor restarts) when the stay is lifted;
2. the stay does NOT prevent the mere recordation of a mechanic’s lien (11 USC sec. 362(b)(3)); and,
3. in addition to recording the mechanic’s lien, the mechanic’s lien claimant MUST file a notice of lien in the bankruptcy (11 USC sec. 546(b)(2)) so that it will not be subject to avoidance by the bankruptcy trustee.

The good news for the mechanic’s lien claimant’s counsel in this case is that, while he had misspoken in the trial court when opposing the defendants’ demurrer, he had presented the facts that showed that he’d filed suit in a timely fashion, thereby preserving his client’s right to the mechanic’s lien. So, he lives to fight another day, as this case did not adjudicate the merits, i.e., whether the lien claimant would actually prevail at trial.