Post-Bankruptcy Enforcement of Lien Rights Follow-Up 2

April 01, 2013

As I had posted on and March 20 of 2012, Bankruptcy Judge Doud of the Eastern District of North Carolina ruled that he would not follow the lead of two other Eastern District bankruptcy judges and held that a post-petition filing by a subcontractor of a claim of lien on funds owing to his contractor is a permitted exception to the automatic stay pursuant to section 362(b)(3) of the Bankruptcy Code. On appeal to the District Court, just recently District Court Judge Terrence Boyle affirmed that ruling. The case is Branch Banking and Trust Company v. Hanson Aggregates Southeast, LLC, civil action no. 5:12-CV-533-BO, United States District Court for the Eastern District of North Carolina, decided March 26, 2013. In affirming Bankruptcy Judge Doud’s ruling, the District Court based its affirmance upon the “policy objectives behind lien law, the strong protection of such liens by the North Carolina Constitution, the recognition of such property interests by North Carolina courts, the parallels between the UCC financing statement and the notice of claim of lien upon funds, and the industry standard and practical effect of such liens”. So, for the time being, this issue appears to be settled in the Eastern District.