Branch Banking & Trust Co. v. Construction Supervision Services, Inc.Branch Banking & Trust Co. v. Construction Supervision Services, Inc.
V.
We conclude that Stanley lacked a reasonable, legitimate expectation of privacy in the wireless signal. While Stanley is neither sheltered by Kyllo nor defeated by Smith, the unauthorized nature of his connection to the Neighbor‘s router eliminates the possibility that society would recognize his privacy expectations as legitimate. Accordingly, we will affirm the judgment of the District Court.
person connecting to another person‘s wireless router does not have an expectation of privacy in that connection, i.e., the private IP address, when it is available to that third person and anyone with whom that person shares the information.“). Just as a home is more than the address assigned to it, a wire-less signal, as discussed above, is more than just its private IP address.
Before KING, SHEDD, and WYNN, Circuit Judges.
Affirmed by published opinion. Judge WYNN wrote the opinion, in which Judge KING and Judge SHEDD joined.
WYNN, Circuit Judge:
Generally, after a debtor files a bankruptcy petition,
At the heart of this appeal is whether construction subcontractors entitled to a lien on funds under North Carolina law had an interest in property when the debtor or contractor filed for bankruptcy, by which time the subcontractors had not yet served notice of, and thereby perfected, their liens. A careful review leads us to conclude that the answer is yes. And because there is no dispute that the other criteria of the applicable bankruptcy stay exception have been met, we hold that the bankruptcy court and district court correctly allowed the subcontractors to serve notice of, and thereby perfect, their liens post-petition.
I.
Debtor Construction Supervision Services (“CSS“), a full-service construction company, filed a Chapter 11 bankruptcy petition in January 2012. CSS, acting as general contractor or as a first tier subcontractor, placed orders with the Creditor Appellee Subcontractors (named in the case caption) (the “Subcontractors“). These first tier and second tier suppliers in turn provided CSS with materials such as stone, concrete, and fuel to run equipment. The Subcontractors delivered the requested materials to CSS on an open account, later invoicing CSS for the amounts owed them.
After CSS‘s January 2012 bankruptcy filing, the Subcontractors sought to serve notice of, and thereby perfect, liens on funds others owed CSS. Specifically, they asked the bankruptcy court to clarify the extent of the stay to determine whether their post-petition notice and perfection would fall within the stay‘s ambit.
Branch Banking & Trust Company (“BB & T“), which had lent CSS over one million dollars, secured by, among other things, CSS‘s accounts and real property, objected to the Subcontractors’ post-petition notice and perfection. BB & T argued that the Subcontractors lacked an interest in property because they had not yet served notice of, and thereby perfected, their liens by the time CSS filed its bankruptcy petition. The Subcontractors maintained that the stay did not block them from noticing and perfecting post-petition because doing so fell under a stay exception for property interests that predate bankruptcy petitions, the post-petition perfection of which
The bankruptcy court acknowledged that there existed opinions from its own district (the Eastern District of North Carolina) in BB & T‘s favor. In re Constr. Supervision Servs., Inc., No. 12-00569-8-RDD, 2012 WL 892217, at *1 (Bankr. E.D.N.C. Mar. 14, 2012). But the bankruptcy court disagreed with those decisions and ruled against BB & T, holding that the Subcontractors had an interest in property upon delivery of the materials and equipment, i.e., before lien notice and perfection. Id. at *2-4. And because all other requirements for the pertinent stay exception were concededly met, the Subcontractors were not stayed from noticing, i.e., perfecting their liens. Id.
BB & T appealed to the district court, which, like the bankruptcy court, held that Creditor Appellees’ post-petition notice and perfection of their statutory claim of lien on funds constituted a permitted exception to the bankruptcy code‘s automatic stay. BB & T further appealed to this Court, which reviews the legal issues at stake here de novo. See, e.g., In re Quigley, 673 F.3d 269, 271 (4th Cir. 2012).
II.
On appeal, BB & T primarily contends that because the Subcontractors failed to notice their liens on funds before CSS filed for bankruptcy, the Subcontractors lacked an interest in property at the time CSS filed its petition. We disagree.
A.
Upon the filing of a Chapter 11 bankruptcy petition, creditors are automatically stayed from attempting to collect on claims against the debtor. In other words, the stay protects the bankruptcy estate from dismemberment via a creditor race to the courthouse in favor of a systematic and equitable asset distribution. See, e.g., Safety-Kleen, Inc. (Pinewood) v. Wyche, 274 F.3d 846, 864 (4th Cir. 2001) (“A chief purpose of the automatic stay is to allow for a systematic, equitable liquidation proceeding by avoiding a chaotic and uncontrolled scramble for the debtor‘s assets in a variety of uncoordinated proceedings in different courts.” (quotation marks omitted)). Bankruptcy Code Section 362 describes the scope of the stay, listing what does, and does not, fall within its ambit. Amongst those things the stay bars are “any act[s] to create, perfect, or enforce any lien against property of the estate[.]”
As with most things, exceptions to the stay exist. Crucially for this case, Section 362(b)(3) provides an exception for “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 section 546(b)....”
Section 546(b), in turn, subjects the bankruptcy trustee‘s rights and powers to generally applicable laws that “permit[ ] perfection of an interest in property to be effective against an entity that acquires rights in such property before the date of perfection....”
Both Section 362(b)(3) and Section 546(b) refer to “an interest in property“—the phrase on which this appeal turns. If the Subcontractors had an “interest in property” when CSS filed for bankruptcy, the parties agree that the Subcontractors fulfill all of the other Section 362(b)(3) exception criteria and may thus notice and perfect their interests post-petition.
To determine whether the Subcontractors had an interest in property, we must consider what “interest in property” means. In doing so, we look first to the plain language of the term, which Congress failed to define. We may consult dictionaries to get at its “plain or common meaning.” Blakely v. Wards, 738 F.3d 607, 611 (4th Cir. 2013) (en banc) (quoting Nat‘l Coal. for Students with Disabilities Educ. & Legal Def. Fund v. Allen, 152 F.3d 283, 289 (4th Cir. 1998)).
According to Black‘s Law Dictionary, an interest in property is “[a] legal share in something; all or part of a legal or equitable claim to or right in property.” Black‘s Law Dictionary 816 (7th ed. 1999). The American Heritage Dictionary defines interest as a “right, claim, or legal share[.]” American Heritage Dictionary 914 (5th ed. 2011). And the Oxford English Dictionary Online defines it as “legal concern in a thing; esp. right or title to property, or to some of the uses or benefits pertaining to property.” Oxford English Dictionary Online, available at http://www.oed.com/view/Entry/97735?rskey=rk3c1C&result=1&isAdvanced=false#eid (last visited April 21, 2014).
This Court has already made plain that the broad term “interest in property” encompasses more than just liens. In re Maryland Glass Corp., 723 F.2d at 1141-42 (stating that “section 546(b) speaks of an ‘interest in property’ and does not limit its scope to ‘liens’ ” and holding that, under local law, government had an interest in land for tax purposes, the absence of perfected liens notwithstanding). We are not the only circuit court to have done so. See, e.g., In re 229 Main St. Ltd. P‘ship, 262 F.3d 1, 7 (1st Cir. 2001) (“We hold that ‘interest in property,’ as that term is used in
That courts have differentiated between “interests” and “liens” makes sense—because, while they are closely related, they are logically distinct from one another. Specifically, a lien secures an interest that already exists. See, e.g., In re AR Accessories Grp., Inc., 345 F.3d at 458-59 (describing lien as “a mechanism for ... enforcement of a preexisting right“); 51 Am. Jur. 2d Liens § 2 (2014) (“A lien is a cause of action, a remedy ..., or a method by which to enforce an underlying claim. That is, a lien is part and parcel of the underlying claim, the former existing only because of the latter.” (footnotes omitted)). Indeed, BB & T essentially concedes as much when it notes that “Chapter 44A provide[s] certain remedies ... to laborers and materialmen who furnished services or materials toward the improvement of real property[,]” “includ[ing] the right to obtain a lien on funds....” Appellant‘s Br. at 21.
We find the Seventh Circuit‘s analysis in In re AR Accessories particularly illuminating. In that case, state law provided a government agency with a statutory lien on the property of an employer that failed
Similarly, here, we must determine whether the Subcontractors had an interest in property despite their not yet having served noticed of, i.e., perfected, liens under North Carolina law prior to CSS‘s filing for bankruptcy. To determine when the Subcontractors’ interests in the funds arose, we must turn to the pertinent North Carolina laws.
B.
The North Carolina Constitution mandates that the General Assembly “shall provide by proper legislation for giving to mechanics and laborers an adequate lien on the subject-matter of their labor.”
The main statute at issue in this appeal is
Upon compliance with this Article:
(1) A first tier subcontractor who furnished labor, materials, or rental equipment at the site of the improvement shall be entitled to a lien upon funds that are owed to the contractor with whom the first tier subcontractor dealt and that arise out of the improvement on which the first tier subcontractor worked or furnished materials.
(2) A second tier subcontractor who furnished labor, materials, or rental equipment at the site of the improvement shall be entitled to a lien upon funds that are owed to the first tier subcontractor with whom the second tier subcontractor dealt and that arise out of the improvement on which the second tier subcontractor worked or furnished materials. A second tier subcontractor, to the extent of the second tier subcontractor‘s lien provided in this subdivision, shall also be entitled to be subrogated to the lien of the first tier subcontractor with whom the second tier contractor dealt provided for in subdivision (1) of this section and shall be entitled to perfect it by notice of claim of lien upon funds to the extent of the claim.
* * *
(5) The liens upon funds granted under this section shall secure amounts earned by the lien claimant as a result of having furnished labor, materials, or rental equipment at the site of the improvement under the contract to im-prove real property, including interest at
the legal rate provided in G.S. 24-5, whether or not such amounts are due and whether or not performance or delivery is complete. In the event insufficient funds are retained to satisfy all lien claimants, subcontractor lien claimants may recover the interest due under this subdivision on a pro rata basis, but in no event shall interest due under this subdivision increase the liability of the obligor under G.S. 44A-20.
(6) A lien upon funds granted under this section is perfected upon the giving of notice of claim of lien upon funds in writing to the obligor as provided in G.S. 44A-19 and shall be effective upon the obligor‘s receipt of the notice. The subrogation rights of a first, second, or third tier subcontractor to the claim of lien on real property of the contractor created by Part 1 of Article 2 of this Chapter are perfected as provided in G.S. 44A-23.
Section 44A-18‘s text makes plain that it secures an interest that already exists. It states that a lien on funds created “under this section shall secure amounts earned by the lien claimant as a result of having furnished labor, materials, or rental equipment at the site of the improvement under the contract to improve real property....”
Further, a subcontractor‘s entitlement to a lien on funds arises upon delivery of the materials and equipment: “For this entitlement, he need only show that the materials were delivered to the site of the improvement.” Contract Steel Sales, Inc. v. Freedom Const. Co., 321 N.C. 215, 362 S.E.2d 547, 551 (1987). See also
Under most mechanics lien statutes, a supplier of labor or materials to a construction site enjoys an inchoate lien which arises at the commencement of work on the project. To preserve their lien rights, unpaid mechanics and materialmen must file a notice of lien.... When these perfection steps are taken, the claimant‘s lien rights ‘vest’ and relate back to the commencement of work. By Section 546(b), the trustee has no right to avoid what would otherwise be an unperfected lien.
Thomas G. Kelch & Michael K. Slattery, Real Property Issues In Bankruptcy 4-17-18 (West 1999).
In 2012, the North Carolina legislature amended Section 44A-18 with language intended to make clear that a subcontractor is entitled to a lien on funds as soon as construction materials are delivered: “A lien upon funds granted under this section arises, attaches, and is effective immediately upon the first furnishing of labor, materials, or rental equipment at the site of the improvement by a subcontractor.”
The bankruptcy court decisions that the North Carolina legislature sought to neuter with its clarifying amendment were In re Mammoth Grading, Inc., No. 09-01286-8-ATS (Bankr. E.D.N.C. July 31, 2009); In re Harrelson Utilities, Inc., No. 09-02815-8-ATS, 2009 WL 2382570 (Bankr. E.D.N.C. July 30, 2009); and In re Shearin Family Investments, LLC, No. 08-07082-8-JRL, 2009 WL 1076818 (Bankr. E.D.N.C. Apr. 17, 2009). “Prior to these decisions, it was commonly accepted practice that a lien on funds was an inchoate right, arising at the time funds became owed to the obligee.” North Carolina Construction Law § 3:78 (2013). But in those decisions, the bankruptcy court appears to have conflated the lien with the underlying interest it secures. See, e.g., In re Shearin Family Invs., 2009 WL 1076818, at *2. The bankruptcy court somehow read the future tense into the word “shall.” Id. (“[T]he statute creating the lien,
C.
Now turning to the case before us, the parties agree that the only live issue on appeal is whether the Subcontractors had an interest in property when CSS filed for bankruptcy. The bankruptcy court and district court both held that they did, and we agree.
As we have already explained, an interest in property is broad and covers more than simply liens, which serve to secure a pre-existing interest. See, e.g., In re Maryland Glass Corp., 723 F.2d at 1141-42. There is no dispute that the Subcontractors delivered materials and equipment to CSS for its building work before CSS filed for bankruptcy. Under North Carolina law, the Subcontractors became entitled to a lien securing the funds earned “as a result of having furnished labor, materials, or rental equipment....”
BB & T counters that any rights or interests the Subcontractors had at the time CSS filed its petition were “inchoate” and meaningless until noticed and thereby perfected. No doubt, an entitlement to a lien under
BB & T also places heavy emphasis on the phrase “[u]pon compliance with this Article” set out at the top of Section 44A18 before the statute‘s enumerated subsections. According to BB & T, that phrase must mean that no interest exists unless the statutory notice and perfection requirements have been met. We freely admit that the purpose of the phrase “[u]pon compliance with this Article” is less than clear. But if the law requires no more than delivery for entitlement to a lien to arise-and that is precisely what we have just held-then delivery is all that is required to be in “compliance with this Article” for purposes of being entitled to a lien. Further, North Carolina‘s legislature removed the phrase in its 2012 clarifying amendment. Clearly, it did not view that phrase as important to, much less determinative of, when interests in property arise under
In sum, we hold that the Subcontractors had an interest in property at the time CSS filed its bankruptcy petition. The parties agree that all other conditions for
III.
For the foregoing reasons, the district court‘s affirmance of the bankruptcy court‘s order is
AFFIRMED.