OPINION
PROCEDURAL HISTORY AND FACTS
On March 2, 1997, Debtor, A & R Wholesale Distributors, Inc. (“Debtor”), filed voluntary petition pursuant to Chapter 7 of the Bankruptcy Code. (See Docket Record) Debtor was a privately held corporation engaged in the retail/wholesale business. (See Petition) On March 31, 1997, Michael Detzky, Esq. was appointed as the Chapter 7 Trustee (“Trustee”). Thereafter, on August 5, 1997, Jamco Realty in New Jersey, Inc. (“Jamco”) filed a proof of claim in the amount of $158,-276.31. (See Proof of Claim) Jamco characterized its claim as a secured claim because it was based on proceeds of a sale by assignment of the Debtor’s personalty and any personalty remaining on its leasehold premises pursuant to N.J.S.A. 2A:19:31. (Id.) Jamco maintains that its debt was incurred from August 1995 through February 1997 via lease agreement. (Id.) The lease agreement was entered into on November 29, 1991 for a period of five (5) years and nine (9) months commencing on November 1, 1991 and ending on July 31, 1997. (Ex. A to Cert. Opp.) The leased premises consist of a building known as 60 Brunswick Avenue, Edison, New Jersey. (Id.) The monthly base rental rate was $12,632.42. The lease is described as an “absolute net lease,” whereby the rent reserved under said lease is to be paid to the Landlord without any claim on the part of the Tenant for diminution or abatement. (Id.)
Prior to the filing of the petition, the Debtor and Jamco were involved in a state court proceeding involving the subject lease. The Debtor vacated the premises, but left personalty on the site. Jamco asserted a lien against that personalty and arranged for a sale of the goods for the benefit of creditors. Consequently, Jamco asserted a lien against the proceeds of sale pursuant N.J.S.A. 2A:19-31. Thereafter an Order, dated September 20, 1996, was entered by the New Jersey Superior Court, Chancery Division (Probate), Mid-dlesex County, Honorable Alan Rockoff, which order confirmed the sale of Debtor’s assets and authorized and directed payment to the auctioneer and appraiser. (See Ex. C to Cert. Opp.)
Trustee, on October 2, 1998, filed an objection to Jamco’s claim. Trustee argues that Jamco’s secured claim, to the extent it arises from a statutory lien, should be avoided pursuant to 11 U.S.C. § 545(3). (Cert. Supp. of Obj.) In addition, Trustee maintains that there is only $53,-947.81 in the Trustee’s account. (Id.) Accordingly, Trustee urges this Court to avoid Jamco’s lien because, if it were paid, there would be no funds available to pay other creditors or the cost of administration. Trustee cites no case law in support of this argument.
Conversely, Jamco argues that the Trustee does not have the power to avoid its lien because its lien is judicial, rather than statutory.
(See
Cert. Opp. at 2) Specifically, Jamco contends that its lien is judicial because its lien, which is predicated on rents due from the Debtor-Tenant, was preserved and confirmed by Judge Rockoffs Court Order.
(See
Brief Opp. at 3). Although Jamco concedes its rights to the proceeds arose automatically by statute, N.J.S.A. 2A: 19-31, it contends that it did not have an enforceable lien until the judicial foreclosure proceeding was commenced. (citing
Mascenik v. Ryan,
DISCUSSION
A. Jurisdiction
This court must first determine whether it has subject matter jurisdiction over the various claims and parties. Congress has
B. Nature of Lien
The trustee seeks to avoid Jamco’s lien pursuant to 11 U.S.C. § 545 which provides:
The trustee may avoid the fixing of a statutory lien on property of the debtor to the extent that such hen — ... (3) is for rent; or (4) is a lien of distress for rent.
11 U.S.C. §§ 545(3) and (4) (emphasis added).
The parties dispute whether the lien satisfies the requirement of section 545 that the hen be statutory.
1
Thus, this court is called upon to characterize the nature of the hen held by Jamco. The Bankruptcy Code defines a “hen” as a “charge against or interest in property to secure payment of a debt or performance of an obligation.” 11 U.S.C. § 101(37). The Bankruptcy Code envisions three types of hens: judicial hens; statutory hens; and consensual hens (security interests).
Graffen v. City of Philadelphia,
Statutory Liens
The Code defines a statutory hen as a “hen arising solely by force of statute on specified circumstances or conditions, or hen of distress for rent, whether or not statutory, but does not include security interest or judicial hen, whether or not such interest or hen is provided by or is dependent on statute and whether or not such interest or hen is made fully effective by statute.” 11 U.S.C. § 101(53).
In re Thorogood,
In order to constitute a statutory hen, the Third Circuit requires that the hen “arise solely by force of statute.”
Graffen,
The Third Circuit recognizes several kinds of statutory hens for purposes of lien avoidance, including mechanics’ liens, tax liens, rent liens, water/sewer hens, and hens to collect attorney fees.
See Graffen,
Some courts, however, have held that the mere fact that a hen is dependent upon a statute is not determinative of whether such hen is statutory for purposes of the Code.
In re Plumlee,
Judicial Lien
On the other hand, a “judicial hen” is a “hen obtained by judgment, levy, sequestration, or other legal or equitable process” or court-related action. 11 U.S.C. § 101(36). Courts have defined judicial hens as “a charge against or interest in property to secure a payment of a debt.”
In re Ashe,
C. Avoidance of Statutory Liens pursuant to § 545
The above standards deal with the difference between judicial hens and statutory hens under the Code in general. Section 545 2 , however, is a special section which directly invalidates any hen for rent and any hen for distress for rent. Norton Bankruptcy Law and Practice 2d § 55:2. This treatment of rent hens has historical origins. Id. Under the Code:
Landlord hen claims are invalidated by type. Thus, questions of whether the lien has been properly perfected under state law, whether it has validity againstother claimants outside of property distribution, and whether it can be perfected against third party claimants are not germane. Even assuming favorable answers to each of these questions, statutory and common law landlord liens are avoided under Code § 545.
Id. See also 5 Collier on Bankruptcy
at ¶ 545.04 (same);
In re Brittain,
Further, Collier states that a trustee may avoid liens for rent and liens of distress for rent “regardless of whether the lien has been enforced by sale prior to filing the petition.” 5 Collier on Bankruptcy, (15th Rev.Ed.1996), ¶ 545.04 (citing H.R.Rep. No. 95-595, 95th Cong., 1st Sess. 371 (1977)).
Accordingly, the majority of cases interpreting 11 U.S.C. § 545(3) have strictly construed the statute; that is, if the lien is for rent or distress for rent, it is avoidable, regardless of when it is incurred. 3
Trustee, not the debtor or a creditor, is the only party who has standing to exercise § 545 powers to avoid a statutory lien. 5
Collier on Bankruptcy,
(15th Rev. Ed.1996), ¶ 545.01[3]. In the context of a Chapter 11 case, however, a debtor in possession has the standing of a trustee
for
purposes
of exercising
avoiding powers pursuant to § 545 for a statutory lien for rent or distress for rent. Id. at ¶ 545.04 (citing
In re Tape City U.S.A., Inc.,
In this instance, it is clear that Jamco’s lien is a statutory lien grounded upon a landlord’s claim for rent and therefore avoidable pursuant to § 545 of the Code. Specifically, this court recognizes that landlords, such as Jamco, could apply to a state court for a judicial lien granting them the right to sell the tenant’s property. However, as discussed below, the New Jersey Legislature, pursuant to N.J.S.A. 2A:19-31, has granted landlords, who are owed rent from a tenant, the statutory right to sell that tenant’s property left on the premises, without the need of first applying to a court for relief. Jamco availed itself of this statutory remedy. Therefore, the Trustee can rightfully avoid Jamco’s statutory lien for rent under § 545(3) of the Code.
D. Nature of Jamco’s lien under state law
Notwithstanding, the Bankruptcy Code’s strong statutory language in favor of invalidating landlord’s liens, Jamco contends that its lien has been altered from a statutory hen to a judicial lien by virtue of the state court order.
The Code gives “very little guidance for distinguishing a judicial lien from a statutory lien other than the ... less lucid definitions ... provided in the Code or in pertinent legislative history.”
In re Aikens,
In the instant case, Jamco holds its lien by virtue of N.J.S.A. 2A:19-31. N.J.S.A. 2A:19-31, LANDLORD’S lien on assignor’s goods, provides in relevant part:
Where the assignor is a tenant, all of his goods and chattels on the premises, in his possession, shall be subject to a lien for the payment of rent due to the landlord. The claim for rent in favor of the landlord, not exceeding 1 year’s rent, shall be first paid and satisfied by the assignee out of goods and chattels of the tenant, which were on the demised premises at the time of the assignment.
N.J.S.A. 2A: 19-31 (West 1987).
Jamco urges this Court to hold that its lien is judicial. Jamco concedes that its rights did stem from the relevant statute, N.J.S.A. 2A:19-31. It, however, argues that Judge Rockoff s Order, dated 9/20/96, changed the character of the statutory lien to a judicial lien. Specifically, Jamco relies on
Mascenik v. Ryan,
1980 U.S. Dist. Lexis 17050,
This jurisdiction has not addressed this issue. However, at least one other jurisdiction has addressed it. The court in
In re Mac Lure,
This court finds that Jamco’s lien is distinguishable from the liens in Mascenik and Mac Lure, supra. First, Jamco’s lien is not grounded upon a default judgment and court order allowing landlord to sell tenant’s personalty as in Mascenik, supra. Nor is Jamco’s lien pursuant to a writ of execution issued to a third party storage warehouse for the release of tenant’s furniture for costs associated with eviction proceedings as in Mac Lure, supra. To the contrary, N.J.S.A. 2A:19-31, which is the basis for Jamco’s lien, automatically and expressly grants a lien in favor of a landlord for the tenants’ goods and chattels left on the premises, now in the landlord’s possession, for payment of rent due to the landlord. Nowhere in the statute’s language does it state that the landlord must first resort to the judicial process for the sale of tenant’s chattels and goods for nonpayment of rent. Nonetheless, Jamco argues that Judge Rockoffs Order authorized the sale of those chattels, and therefore it was the judicial process, not the statute, which provided Jamco with an enforceable lien. Upon close examination of the Judge Rockoffs Order, however, this court finds that the order merely confirmed the sale of assets, which was previously conducted on September 17, 1996, pursuant to N.J.S.A. 2A:19~31. In addition, the Order granted compensation to the auctioneer and appraiser. Thus the lien fulfills the statutory requirement that it arise solely by force of statute. 11 U.S.C. § 545. Moreover, as indicated by the Third Circuit and District Court for the District of New Jersey, a mere ministerial act of recording the lien, or administrative proceeding does not create the requisite level of legal process or proceeding required to be a judicial lien. See Graffen and In re Fennelly, supra. In fact, there is an even stronger statutory basis for invalidating a landlord’s lien, than the liens in Graffen and In re Fennelly, supra. Those cases did not deal with section 545(3) which specifically deals with the type of landlord’s lien at issue, and directly invalidates it. Therefore, this court holds that Jamco’s lien is a statutory lien, hence subject to avoidance by the Trustee pursuant to § 545 of the Code.
CONCLUSION
Based on the foregoing, this court finds that Jamco holds a statutory hen based on rent or distress of rent. Thus Trustee can rightfully avoid such lien pursuant to § 545(3). Trustee should submit an Order in accordance with this opinion within ten (10) days.
Notes
. The court notes that if the lien were one for distress for rent under 11 U.S.C. § 545(4), it necessarily would not be statutory in nature.
In re Kelco Enterprises,
. The trustee may avoid the fixing of a statutory lien on property of the debtor to the extent that such lien — (3) is for rent; or (4) is a lien of distress for rent.
11 U.S.C. § 545 etseq.
.
Matter of Hilligoss,