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Section 108(c) of the Bankruptcy Code Tolls the Expiration of An ORAP Lien

November 1, 2018

In the decision Daff v. Good (In re Swintek), filed on October 22, 2018, a divided panel of the Ninth Circuit Court of Appeals held that the period in which a creditor may execute on an ORAP lien constitutes “commencing or continuing a civil action … on a claim against the debtor” under the bankruptcy code’s  tolling provision of 11 U.S.C. Section 108(c),  and is therefore, tolled during the period that the automatic stay is in effect.

 

An ORAP lien is created by service of an Order for Appearance and Examination and the lien that is created lasts for one year. See Cal. Code Civ. Proc. Section 708.11(d). The majority was influenced by two Ninth Circuit precedents. In Spirtos v. Moreno (In re Spirtos), 221 F.3d 1079 (9th Cir. 2000), the appeals court held that Section 108(c) tolls the period for renewing a judgment. Spirtos in part relied on Miner Corp. v. Hunters Run LP (In re Hunters Run LP), 875 F.2d 1425 (9th Cir. 1989), where the Ninth Circuit held that Section 108(c) tolled the period for enforcing a mechanics’ lien. The majority also found support in Morton v. National Bank of N.Y.C. (In re Morton), 866 F.2d 561 (2d Cir. 1989), where the Second Circuit held that the expiration of a 10-year judgment lien was tolled by Section 108(c).

 

In a dissenting opinion, Judge Wardlow wrote that an ORAP lien is merely a tool used in enforcing a judgment, which by definition has ended the civil action, and thus does not fit within the scope of the plain language of Section 108(c), which applies only to “commencing or continuing a civil action.”

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