Case No.: 1-01-01698
October 16, 2002
Nedric L. Nissly, Esquire, Debra P. Fourlas, Esquire, for the Movant.
Eric L. Brossman, Esquire, Robert J. Bein, Esquire, for the Respondent.
Before me is a Motion for Relief from Stay and a Motion to Compel Payment of Municipal Liens. For the reasons that follow, I will deny both Motions.
Procedural and Factual History
Ashland Regional Medical Center (Debtor) filed a Petition in Chapter 11 on March 29, 2001. At that time, Debtor's assets included certain tracts of real property in Butler Township, PA. The Butler Township Authority (BTA) provided sanitary sewer services for Debtor's property. Fees for those services were set at a flat rate of $10,500.00 per calendar quarter. BTA's practice was to issue its bills at the end of the quarter in which the services were provided.
After Debtor filed its Petition, it paid BTA $350.00, which was the pro-rated amount of the fee for the first quarter of 2001 (which ended on March 31, 2001).
In the instant Motions, BTA seeks to secure payment of the remainder of its first quarter claim. Its primary argument seeks a declaratory judgment that the fees constitute a statutory lien on any properties held by the Debtor on the date of the Petition. Alternatively, it seeks relief from the automatic stay so that it may perfect a lien on the properties.
Part of the Debtor's real property was subdivided and sold post-petition, pursuant to my order. BTA seeks to satisfy its liens through the proceeds of that sale. Debtor responds that BTA's claim is nothing more than a garden variety unsecured claim, not payable from sale proceeds, and that it would be improper to lift the stay to allow BTA to perfect a lien on such a claim.
A hearing was held in this matter and briefs have been filed. The matter is ready for decision. I have jurisdiction pursuant to 28 U.S.C. § 157 and 1334. This matter is core pursuant to 28 U.S.C. § 157(b)(2)(G) and (K).
BTA couches its primary argument in terms of § 362(b), which provides that § 362(a) will not stay "any act to perfect, or to maintain or continue the perfection of, an interest in property to the extent that the trustee's rights and powers are subject to such perfection under § 546(b)."
11 U.S.C. § 362(b)(18) provides that real estate taxes are not subject to the automatic stay under § 362(a), but that such taxes continue to accrue against property of the estate despite the automatic stay. This provision was enacted in response to the decision of the Third Circuit Court of Appeals in Makaroff v. City of Lockport, 916 F.2d 890 (3rd Cir. 1990) in which the court held that the stay did apply to the accrual of such taxes. § 362(b)(18) is silent, however, as to the application of § 362(a) to the accrual of municipal fees.
Section 546(b)(1)(B) permits post-petition maintenance or continuation of perfection of an interest in property if any "generally applicable law" provides for such perfection to be effective against an entity that acquires rights in the property before the date on which action is taken to effect the maintenance or continuation. Collier on Bankruptcy, 15th Ed., § 546.03[b].
The "generally applicable law" on which BTA relies provides as follows:
All municipal claims which may hereafter be lawfully imposed or assessed on any property . . . are hereby declared to be a lien on said property . . . and said liens shall arise when lawfully imposed and assessed and shall have priority to and be fully paid and satisfied out of the proceeds of any judicial sale of said property, before any other obligation . . . [except costs of sale and taxes].
53 P.S. § 7106(a) (italics added).
The italicized language is the key to resolving this case, and it draws the primary issue at bench: When was the lien "lawfully imposed and assessed"? If it was not lawfully imposed and assessed until March 31, 2001, then no lien could arise until that date and, since the stay was in effect before then, no lien attached. If a lien was imposed on any date pre-petition, then the sewer fees were secured up to that date and could have been paid from the proceeds of the sale in accordance with the payment priorities set forth in 53 P.S. § 7106.
The wording of the statute is somewhat awkward. Essentially, it states that the lien arises when the lien is imposed and assessed. It would appear more accurate to say that the lien arises when the fees are imposed or assessed.
BTA argues that the fees were "imposed and assessed" on each day that sewer services were provided, which was, of course, every day of the quarter. Debtor, on the other hand, asserts that the fee was not "imposed and assessed" until the date on which the bill was sent out. Neither party cites cases that address the definitions of either "imposed" or "assessed" under § 7106.
"A statute must be construed if possible to give effect to all of its provisions. . . . It is presumed that every word, sentence or provision of a statute is intended for some purpose and accordingly must be given effect." 1 Pa.C.S.A. § 1921(a); Commonwealth v. Lobiondo, 501 Pa. 599, 603, 462 A.2d 662, 664 (1983) . (citations omitted). No terms are to be interpreted as redundant. "[T]he rules of statutory construction . . . instruct us that the legislature is presumed not to have adopted language which is redundant or surplusage." Habecker v. Nationwide Insurance Co., 445 A.2d 1222 (Pa.Super. 1982); see also, Commonwealth v. Windell, 529 A.2d 1115 (Pa.Super. 1987).
Thus, § 7106 contemplates the fulfilment of two criteria prior to the lien arising: the fee must be both "imposed" and "assessed". Black's Law Dictionary, 6th Edition, defines "impose" as follows: "to levy or exact as by authority; to lay as a burden, tax, duty or charge." Black's further defines "assess" as "to ascertain, fix the value of."
BTA's brief incorrectly quotes the statute as stating "imposed or assessed". Movant's Brief, p. 7.
In the instant case, these fees were "assessed", under the above definitions, when the value of the sewer services was fixed at $10,500.00 per quarter. They were "imposed" when they were "levied or exacted as by authority' which would have been the date of the bill (i.e. at the end of the quarter). Thus, BTA did not have a lien for the sewer services that it provided in the first quarter of 2001 until fees for those services were "levied or exacted" on March 31, 2001. Since BTA did not have a lien which arose pre-petition, its claim is not payable as a secured claim.
The next issue then is whether BTA is entitled to relief from the automatic stay so that it may perfect a lien. BTA argues that it is entitled to such relief because "[w]ithout the ability to recover payment of the lien from the proceeds of the sale of the Medical Center property, [BTA]'s lien will be inadequately protected." Movants Brief, p. 10.
The problem with this argument is that it presupposes that BTA has a lien. As I have discussed above, BTA's right to a lien did not arise until March 31, 2001. BTA's exercising of that right was stayed under § 362(a). It was not preserved by § 362(b) because the lien did not arise until it was imposed, which was not until after the Petition was filed. In short, BTA's claim is not entitled to treatment as anything other than an unsecured claim. BTA cannot be granted relief from the stay to allow it to change the nature of the claim to a secured one.
For these reasons, BTA's motions will be denied. An appropriate Order follows.
AND NOW, this 16th day of October, 2002, the Butler Township Municipal Authority's Motions to Compel Payment of Lien or for Relief from the Automatic Stay are hereby denied.