ENCLOSURE MEMO. Richard I. Hutson, Esq. Fullerton &.Knowles, P.C. July 31, 2008

Transcription

1 HOWARD, STALLINGS; FROM & HUTSON, PA RAL'EIGHOFFICE Telephone: Facsimile : PO Box 12347, Raleigh, NC NEW BERN OFFIC E ATTORNEYSatLAW Telephone: Facsimile : PO Box 975, New Bern, NC E. Ceder Howard I, Allan Fro m Joseph H. Stalling s John N. Hutson Beth F. Atkins James B. Angell Peggy S. Vincent 'B. Joan Davi s Brian E. Moore Mary Z, Handy Philip W. Paine TO : Richard P. Leissner, Jr. Russell W. Johnson Kathleen B. Coyl e Andrea D. Schrag FROM : Of Counse l Edwin P. Friedberg DATE: RE : ENCLOSURE MEMO Richard I. Hutson, Esq. Fullerton &.Knowles, P.C. Philip W. Paine, Esq. (by Rita Steward, Paralegal) July 31, m United Rentals, Inc. v. James B. Angell, Chapter 7 Trustee fo r Partitions Plus of Wilmington, Inc., et al. No. 7:08-CV B O ENCLOSURE(S) : REMARKS : Mr. Hutson : Brief of Appellee James B. Angell, Chapter 7 Trustee for Partitions Plus of Wilmington, Inc. d/b/a Partitions, Inc. d/b/a Storm Protection Systems The enclosed document is served upon you in your capacity as attorney fo r Appellant, United Rentals, Inc.,,. v,t. a r t =.*`d B

2 IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF NORTII CAROLINA. CASE NO.: 07: BO UNTIED RENTALS, INC., Appellant v. JAMES B. ANGELL, CHAPTER 7 TRUSTEE FOR PARITI'IONS PLUS OF WILMINGTON, INC., DBAPAR1T110NS, INC. DBA STORM PROTECTION SYSTEMS, Appellee BRIEF OF APPELLEE JAMES B. ANGELL, CHAPTER 71RUSTEEFORPARTITIONS PLUS OF WILMINGTON, INC.; DBA PART 1'110NS, INC. DBA STORM PROTECTION SYSTEM S Appeal for the United States Bankruptcy Court For the Eastern District of North Carolin a (Case No. : JRL) (Adversary Proceeding No. : JRL) James B. Angell, Esq. North Carolina State Bar No.: Philip Paine, Esq. North Carolina State Bar No.: Attorneys for James B. Angell, Chapter 7 Trustee For Partitions Plus Of Wilmington, Inc., Dba Partitions, Inc. Dba Storm Protection Systems, Appellee Howard Stallings From & Hutson, PA P.OI. Box Raleigh, North Carolina Telephone: Facsimile: j angell@hsfli.com ppaine@hsih.com

3 TABLE OF CONTENTS TABLE OF CASES AND AUTHORITIES : iii STATEMENT OF THE BASIS FOR APPELLATE JURISDICTION : 1 STATEMENT OF THE ISSUES PRESENTED 1 STANDARD OF APPELLATE REVIEW : : 1 STATEMENT OF THE CASE : 1 SUMMARY OF ARGUMENT 2 STATEMENT OF FACTS 3 ARGUMENT 6 I. The Bankruptcy Court did not err in granting Summary Judgment for Appellee o n Appellee's claims Under 11 U.S.C. 547(b), as the Transfers are Preference s under the Bankruptcy Code 6 II. The Bankruptcy Court did not err in granting judgment for Appellee and findin g that the Transfers to the Appellant were not subject to the affirmative "new value " defense under 11 U.S.C. 541(c)(1) 30 CONCLUSION 42 CERTIFICAl E OF SERVICE : ii

4 TABLE OF CASES AND AUTHORITIES CASE S Active Fire Sprinkler Corp. v. The Unités States Postal Service, 811 F.2d 747 (2 "d Cir. 1987)..21 Acuity, A Mut. Ins. Co. v. Planters Bank, Inc., 362 F. Supp. 2d 885, 892 (W.D. Ky. 2005) Agudas Chasidei Chabad v. Gourary, 833 F.2d 431 (2"d Cir. 1987) 23 Angell v. Pennington, (In re Partitions Plus of Wilmington, Inc.), Case No JRL, Adv. Pro AP (June 11, 2007) Beatty v. Guggenheim Exploration Co., 225 N.Y. 380, 386, 122 N.E. 378, 38.0 (1919) 29 Builders Supply v. Bedros, 32 N.C. App. 209 (1977) : 14, 37 Bowen v. Darden, 241 N.C. 11, 13-14, 84 S.E.2d 289, 292 (1954) 29 Butler v. David Shaw, Inc., 72 F.3d 437, 440 (4th Cir. 1996) 1 Cades v. H & R Block, Inc., 43 F.3d 869 (4th Cir. 1994) 4 1 Callaway v. Kiddco, Inc. (In re Jacobsen Construction, Inc.), Adversary Proceeding No ATS (Bankr. E.D.N.C. March 26, 2007) 40 Cline v. Cline, 297 N.C. 336, , 255 S.E.2d 399, 404 (1979) 29 Cocolat, Inc. v. Fisher Dev., (In re Cocolat), 176 B.R. 540, 548 (Bankr. N.D. Cal. 1995) 35 Committee of Creditors Holding Unsecured Claims v. Koch Oil Co. (In re Powerine Oil Co.), 59 F.3d 969, 972 (9th Cir. 1995) 20 Cooper v. Grisofe Electric Corp. (In re Building Dynamics, Inc.), 134 B.R. 715 (Bankr. W.D.N.Y. 1992) 27 Cunningham v. T&R Demolition, Inc. (In re ML & Associates, Inc.), 301 B.R. 195 (Bankr. N.D. Tex. 2003) 27 Electric Supply Co. v. Swain Elec. Co., 328 N.C. 651, 403 S.E.2d 291 (1991) 15 Embree Construction Group, Inc.v.Rafcor, Inc., 330 NC 487, 411, S.E.2d 91 6 (1992) 2 1 Gaston Grading & Landscaping v. Young, 116 N.C. App. 719, 721 (1994) 14

5 Grochal v. Ocean Technical Services Corp. (In re Baltimore Marine Industries),476 F.3d 238, 241 (4th Cir. 2007) 22, 3 0 Harleysville Worcester Mutual Insurance Company v. Fleet National Bank (In re Suprema Specialties, Inc.); 370.B.R. 517 (S.D.N.Y. 2007) 23, 24, 25, Indiana Lumberman Mutual Insurance Company, Inc.v. Construction Alternatives, Inc.anRe Construction Alternatives, Inc.), 2 F.3d 670 (6th Cir. 1993) 25 In re Alexander-Scott Group, 1996 U.S. Dist. LEXIS (M.D.N.C. May 20, 1996) 14 In re Builders Supply of Wihnington, Inc., 40 B.R. 753, 755 (Bankr. E.D.N.C.1984) 1 7 In re GEM Construction Corp of Virginia, 262 B.R. 638 (Bantu. E.D. Va. 2000) 20 In re J.A. Jones, 361 B.R. 94 ;.106 ()hnkr. W.D.N.C. 2007) 18, 20, 32 In re Knapp, 285 B.R. 176, 181 (Bantu. M.D.N.C. 2002) : 13 In re Merts Equipment Co :, 438 F. Supp. 295, (M.D. Ga. 1977) 37 In re State Street Associates, L.P., 323 B.R. 544 (Bankr. N.D.N.Y. 2005) 24 In re Virginia-Carolina Financial Corp., 954 F.2d 193, 198 (4th Cir. Va. 1992) 12. Johnson v. Stevenson, 269 N.C. 200, 203, 152 S :E.2d 214, 217 (1967) 29 Leatherman v. Leatherman, 297 N.C. 618, , 256 S.E.2d 793, (1979) 29 LFD O.eratin Inc. v. Ames De.'t. Stores Inc. In re Ames De.'t Stores Inc., 274 B.R. 600 (Bankr. S.D.N.Y. 2002) 2 3 Mace v. Construction Corp., 48 N.C. App. 297 (1980) ; 14,3 7 Mebane Lumber Co. v. Avery & Bullock Builders, Inc., 270 N.C. 337, 341 (1967) 1 4 Muth v. United States, 1 F.3d 246, 250 (4th Cir. 1993) 29 O'Rourke v. Coral Construction, Inc. an re E.R. Fegert, Inc.), 88 B.R. 258 (BAP 9th Cir. 1988) 3 8 Pearlman v. Reliance Insurance Corn, 371 U.S. 132 (1962) 21, 37 Precision Walls v. Cramptonanre Precision Walls), 196 B.R. 299 (E.D.N.C. 1996) 7, 21, 32 Priddy v. Lumber Co., 258 N.C. 653 (1963) 9 iv

6 Reliance Ins. Co. v. U.S. Bank, N.A., 143 F.3d 502 (9 a' Cir. 1998) 38 Sara Lee Corp. v. Carter, 351 N.C. 27, (1999) : 29 Shapiro v. Jacob's Electrical Construction, Inc. (In re Eastern. Concrete Paving Co.), 293 B.R (Bankr. E.D. Mich. 2003) Small v. Williams, 313 F. 2d.2d 39 (4 u' Cir, 1963) 12. Smith v. Creative Financial Mgnt.,Inc(In re Virginia-Carolina Fin. Corp.), 954 F.2d 193, 19 9 (4th Cir. 1992) : 20 Stratford Financial Corp. v. Finex Corp., 367 F.2d nd Cir :... : : 24 Strickland v. General Bldg & Masonry Contractors, Inc., 22 N.C. App. 729 (1974) : : Travelers Indemnity Co. v. First Nat'l StateBank, 328 F. Supp. 208, 215 (D.N.J. 1971) 37 United Bonding Ins. Co. v. Catalytic Constr. Co., 533 F.2d 469, 475 (9 th Cir. 1976) United States v. Craft, 535 U.S. 274 (2002) 13 Universal Mechanical, Inc. v Hunt, 114 N.C. App. 484 (1994) 14 Watts v. Slough (In re Slough), Adv. Pro. L AP, Case No JRL (March 24, 2005, DE 40) 17 Williams v. Profs Transp., Inc., 294 F.3d 607, 614 (4th Cir. W. Va. 2002) 29 STATUTES 11 U.S.C. 101(37) -15, U.S.C. 506(a) 12, 15, 17, U.S.C ,7,12,13,18,19,20,21,30-35,38,39,40,4 1 N.C. Gen. Stat N.C. Gen. Stat N. C. Gen. Stat N.C. Gen. Stat v

7 N.C. Gen. Stat N.C. Gen. Stat N.C. Gen. Stat. 44A-8 9, 13, 3 6 N.C. Gen. Stat. 44A N.C. Gen. Stat. 44A-11 :..9, 13, 3 6 N.C. Gen. Stat. 44A-12 9, 10, 13, 36 N.C. Gen. Stat. 44A-13 10, 13, 3 6 N.C. Gen. Stat. 44A N.C. Gen. Stat. 44A-16 10, 14, 1 5 N.C. Gen. Stat. 44A-18 10, I1, 13, 14 N.C. Gen. Stat. 44A N.C. Gen. Stat. 44A-20 9, 10, 11, 1 8 N.C. Gen. Stat, 44A-21 10, 12, 14 N.C. Gen. Stat. 44A-22 I 1 N.C. Gen. Stat. 44A-23 10, 13, 36 TREATISES AND AUTHORITIE S Restatement (Third) of Suretyship & Guaranty 27 (1995) 3 8 Restatement of Security 141 (1941) Am.Jur.2d Subrogation 26 (1974) 3 8 H.R. Rep. No. 595, 95th Cong., 1st Sess. 177, 373 (1977) 39 RULE S Fed. R. Bankr. P. 8010(a)(2) 1 vi

8 STATEMENTOFTHE BASISFORAPPELLATE JURISDICTION The Appellee agrees with and adopts the statement of the basis for appellate jurisdiction set forth in the Appellant's brief. Fed. R. Bankr. P. 8010(a)(2). STATEMENT OF THE ISSUES PRESENTED 1.. Whether the United States Bankruptcy Court for the Eastern District of North Carolina properly granted Summary Judgment for Appellee on Appellee' s claims under 11 U.S.C. 547(b), as the Transfers are Preferences under the Bankruptcy Code. 2. Whether the United States Bankruptcy Court for the Eastern District of North Carolina properly granted judgment for Appellee in finding that the. Transfers to the Appellant were not subject to the affirmative "new value" defens e under 11 U.S.C. 541(c)(1). STANDARD OF APPELLATE REVIEW On appeal from a final decision of a bankruptcy court, the District Court acts as a n appellate tribunal, reviewing findings of fact of the bankruptcy court for clear error an d reviewing the bankruptcy court's conclusions of 7law de novo. Butler v. David Shaw, Inc., 72 F.3d 437, 440 (4th Cir. 1996). BRIEF STATEMENT OF THE CAS E On July 14, 2006, the Trustee filed a complaint commencing this action alleging that Partitions Plus of Wilmington, Inc. (the "Debtor") made preferential transfers to Appellant in th e amount of $75, and that these transfers are avoidable under 11 U.S.C. 547(b) (hereinafter the "Transfers") and recoverable from Appellant under 11 U.S.C. 550(a), or, in. the alternative, that the Debtor had made fraudulent transfers to Appellant pursuant to 11 U.S.C. 548, which were recoverable pursuant to 11 U.S.C. 550 and 551. On August 14, 2006, Appellant filed an answer, generally denying the allegations in the complaint and asserting defenses pursuant to 1 1 1

9 U.S.C. 547(c)(1)(new value), 547(c)(2)(ordinary course) and 547(c)(subsequent new value). On lime 14, 2007, after both parties filed cross motions for summary judgment, the Court entered an order granting summary judgment to Appellee on the issue of whether Appellan t received preferential transfers under 11 U.S.C. 547(b), and granting Appellant summar y judgment on the issue of whether Appellant is entitled to offset any amount deemed a preferenc e as subsequent new value under 11 USC 547(c)(4) in the amount of $8, On December 10, 2007, the Bankruptcy Court entered a Final Pretrial Conference Order with the consent of the parties, restricting the matters to be heard at trial to whether the Transfer s to the Defendant were excepted from avoidance under the. "contemporaneous new value " defense set out in 11 U.S.C. 547(c)(1) or under other theories regarding construction lien laws as a result of the alleged release or waiver by Defendant of claims against the Bond in th e amounts received, and whether the Appellee is entitled to a judgment against Appellant pursuant to 11 U.S.C. 550(a). The case was tried in front of the Bankruptcy Judge on February 28, The Bankruptcy Court entered an order on March 31, 2008 finding that Appellant had failed to prove its new value defense and that judgment should be entered for Appellee in the amount of $66, On April 30, 2008, the Bankruptcy Court amended its Order to include an award t o the Trustee of pre judgment interest. On May 9, 2008, Appellant filed a Notice of Appeal of the March 31, 2008 judgment, and all interlocutory order reflected in or on which the judgment was based, including the March 3 i, 2008 initial Judgment and the June 14, 2007 Summary Judgment Order. SUMMARY OF ARGUMENT The Bankruptcy Court did not err in entering summary judgment for Appellee in th e 2

10 Summary Judgment Order in finding that the Transfers at issue constituted preferential transfer s in accordance with 11 U.S.C. 547(b). The payments were not made from funds held in trust for the Appellant under an express trust or subject to an equitable lien. Appellant did not show that its unified lien claims under N. C. Gen. Stat. 44A, its unasserted bond claims against the performance bond on certain bonded projects, or language in the General Agreement of Indemnity signed by the Debtor and the bonding company, U.S. Fire Insurance Company, woul d have resulted in Appellant receiving full payment compared to the distribution United Rental s would have received a hypothetical chapter 7 case pursuant to 11 U.S.C. 547(b)(5). The Bankruptcy Court did not err in entering judgment for Appellee in the March 31 ; 2008 and April 30, 2008 Orders finding that the Appellant failed to prove its contemporaneou s new value defense in accordance with 11 U.S.C.. 547(c)(1). Appellant did not show that relinquishment of any rights that Appellant might have based on its unfiled lien claims under N. C. Gen. Stat. 44A, its unasserted bond claims against the 'performance bond on certain bonde d projects, or language in the General Agreement of Indemnity signed by the Debtor and th e bonding company, U.S. Fire Insurance Company constituted "new value" that was relinquishe d by Appellant contemporaneously with the Transfers. STATEMENT OF THE FACT S Partitions Plus of Wilmington, Inc. (the "Debtor") contracted with various contractors t o provide drywall labor and materials on a variety of construction projects in North Carolina an d South Carolina, including at the Dosher Memorial Hospital in Southport, North Carolin a ("Dosher") and the Mayfaire Shopping Center in Wilmington, North Carolina ("Mayfaire"). (Docket No. 1, Attachment Nos. 9, 12) In conjunction with performing its obligations, the Debtor rented equipment from Appellant United Rentals, Inc. for improvements to the projects, 3

11 including the Mayfair and Dosher projects. (Docket No. 1, Attachment No. 12) The Debtor entered into a General Agreement of Indemnity with US Fire Insuranc e Company (the "GAI") in consideration of and in exchange for US Fire issuing Payment an d Performance Bonds. (Docket No. 1, Attachment No. 14). The GAI contained a provision which stated that : "Where any bond is executed in connection with a contract, the Indemnitor s covenant and agree to hold all money or proceeds of such contract, whether received as payment or as loans, as a trust for the benefit of laborers, materialmen, suppliers, subcontractors and the Surety and to use such money or other proceed s for the purposes of performing the contract and discharging the obligations of the Bond beneficiaries, and for no other purpose.... The Contractor will, upon demand of the Surety and in implementation of the trust or trusts hereby created, establish a trust account or accounts with a bank or similar depository designated by the Surety and approved of by the Contractor, for the deposit therein of al l monies received from the contract referenced in the Bond." (Docket No. 1, Attachment No. 14, GAI 6). US Fire issued Payment and Performance bond s for the Debtor on each the Mayfair and Dosher projects. (Docket No. 1, Attachment Nos. 22, 23) The Debtor operated two bank accounts during the one year period prior to filing it s bankruptcy petition, an operating account and a payroll account. (Docket No. 2, Attachment No. 8, Angell Aff. 5). The payroll account was used to pay payroll to employees. (Docket No. 2, Attachment No. 8 Angell Aff. 5). The Debtor would transfer funds from its operating account and deposited those funds in the payroll account when necessary to make payroll. (Docket No. 2, Attachment No. 8, Angell Aff. 5). During the 90 day period prior to the Debtor filing bankruptcy, United Rentals received the Transfers, three payments from the Debtor totaling $75, (Docket No. 2 Attachment No. 6, Complaint 6). An analysis of the invoices of the Appellant shows tha t The following chart illustrates the payments made to the Debtor, from the respective

12 general contractors on the Mayfair (totaling $46,066.69, see below), Dosher (totaling $19,178.85), and other projects (totaling $10,603.90) as well as the subsequent balances in th e Debtor's operating account following receipt of the funds from the Mayfair and Dosher projects but prior to the payment of the Transfers to United Rentals ' : Date Payment to Debtor Debtor's Operatin g Debtor's Payment to Account Balance United Rentals May 10, 2004 $45, Mayfair4 May 18, 2004 $93, Dosher4 June 3, 2004 $ June 7, 2004_ $7, Dosher4 June 14, 2004 $50, ` June 30, 2004 $7, July 19, 2004 $7,99'7.53- Dosher4 July 20, 2004 $18, Docket Entry 2, Attachment No, 5 Angell Aff. 14 (an analysis of the check stubs indicates that funds were paid for projects a s follows : Dosher $1,935.25; Mayfaire - $44,131.45; Shop - $4,098.27; and Other -.$02) See Table Attached as Exhibit A, information derived from Docket Entry I, attachment Docket Entry 2, Attachment No. 5 Angell Aff. 4 (an analysis of the check stubs indicates that funds were paid for projects as follows : Dosher $3, ; Tactical - $ ; Library - $2,119.07; and University - $698.86) See Table Attached as Exhibit A, information derived from Docket Entry 1, attachment Docket Entry 2, Attachment No. 5 Angell Aff 4 (an analysis of the check stubs indicates that funds were paid for projects as follows : Dosher $13,391.77; Mayfaire - $1, ; Tactical - $268.78; Library - $106.00; Jacobs - $1,750.69; BB&T - $ and Other -.$O1) See Table Attached as Exhibit A, information derived from Docket Entry I, attachment Docket Entry 2, Attachment No Docket Entry 2, Attachment No. 10. The Debtor filed for chapter 11 bankruptcy protection on September 1, (Docket No.2 Attachment No. 6, Complaint 1). On, 2004, the Debtor's case was converted to on e under chapter 7 of the Bankruptcy Code, and James B. Angell was appointed Trustee. (Docket No.2 Attachment No. 6, Complaint If 2). United Rentals did not and has not ever filed any claims of lien or claim of lien on funds regarding any funds withheld from the Debtor. (Trial Transcript February 29, 2008 pp ). United Rentals has not filed any claim on any payment bond regarding any funds owed to Unite d 1 Appellee's arguments relating to bond claims and trusts and equitabl e interests based on the bonds are made only as to the Dosher and Mayfair e projects, although the Appellant's inchoate lien claim arguments would see m to apply to all projects. 5

13 Rentals by the Debtor. (Trial Transcript February 29, 2008 pp ). A demand letter was sent by the Plaintiff to the Defendant on May 16, 2006 demanding the return of the Transfers. (Docket No. 2, Attachment No. 6, Complaint 7). When no such repayment was made, the :: Plaintiff commenced this action on July 21, 2006 to : avoid the Transfers pursuant to 11 USC 547, or in the alternative, pursuant to 11 USC 548. (Docket No. 2, Attachment No. 6, Complaint 6). The Defendant filed its answér on August 14, 2006, denying liability, and asserted defenses to the Transfers as being preferential payments under 1 1 U.S.C. 547(b) as well as affirmative defenses in the event that the Transfers were deeme d preferences under 11 USC: 547 (c)(1), (3) and (4). (Docket No. 2, Attachment No. 7). ARGUMENT. I. a. The Bankruptcy Court Properly Granted Summary Judgment For The Appelle e On The Issue Of Whether The Transfers Were Preferential Transfers A s Provided In 11 U.S.C. 547(B). Prima facie Case - 11 U.S.C.047(b). Under 11 U.S.C. 547(b), the trustee may avoid any transfer of: an interest of the debtor in property (1) to or for the benefit of a creditor ; (2) for or on account of an antecedent debt owed by the debtor before such transfer wa s made; (3) made while the debtor was insolvent ; (4) made (A) on or within 90 day s before the date of the filing of the petition; or (B) between ninety days and one year before the date of the filing of the petition, if such creditor at the time of suc h transfer was an insider; and (5) that enables such creditor to receive more than such creditor would receive if (A) the case were a case under chapter 7 of thi s title; (B) the transfer had not been made, and (C) such creditor received paymen t of such debt to the extent provided by the provisions of this title. (emphasis added) For the puiposes of 11 U.S.C. 547, the trustee has the burden of proving the avoidabilit y of a transfer under 547(b). 11 U.S.C. 547(g). In its Brief, Appellant contends that the Court erred in entering summary judgment i n finding, first, that the funds involved in the Transfers were an "interest of the debtor in property " 6

14 based on its trust theories, Appellant's Brief, pp , Secondly, United Rentals argues that the Court er red by finding that the Trustee had met his burden of proof under 11 U.S.C. 547(b)(5), based on assertions that United Rentals could have filed a lien claim or a bond claim, thus placing United Rentals into the position as a secured creditor. Appellant's Brief, pp b. The Bankruptcy Court Properly Found That Appellant Received More As A Resul t Of The Transfers Than Appellant Would Receive If(A)The Case Were A Case Under Chapter7Of This Title;(B)The Transfers Had Not Been Made ; And(C) Appellant Received Payment Of Such Debt To The Extent Provided By Th e Provisions Of Title II., United States Code. i. The Appellant's. "Inchoate" Lien Rights Under N.C. Gen. Stat. Chapter 44A Did. Not Result In Rights To Payment In Full. 1. Precision Walls v. Crampton is Controlling Law. This Court has previously examined the precise issue contended by the Appellant here in th e case of Precision Walls v. Crampton (In re Precision Walls), 196 B.R. 299 (E.D.N.C. 1996)(Judge Boyle deciding). Precision Walls held as follows : One of the primary purposes of the Bankruptcy Code is the equal treatment of al l creditors of a particular debtor. Section 547 realizes this goal in part by empowering the trustee to recover certain transfers made by the debtor in th e period immediately preceding the filing for bankruptcy protection. Of particular significance here, 547(b)(5) permits recovery of a prepetition transfer only if the creditor received more than it would have through a hypothetical Chapter 7 liquidation had the transfer not been made. If a creditor is fully secured, the transfer is not generally recoverable. In contrast, if a creditor is unsecured, the transfer is generally avoidable by the trustee. 11 U.S.C Thus, the recoverability of a transfer turns on the status of a creditor and whether tha t creditor was "preferred" over other creditors of the same class. Creditor status is determined by reference to state law. See Butner v. United States, 440 U.S. 48, 54-55, 59 L. Ed. 2d 136, 99 S. Ct. 914 (1979) ; Havee v. Belk, 775 F.2d 1209, (4th Cir. 1985). Section 44A-18 of the North Carolin a General Statutes provides that upon compliance with Article 2 of Chapter 44A, a subcontractor who provides labor or materials at a construction site is entitled to a lien upon funds owed to the contractor arising out of the relevant improvement. N.C. Gen. Stat. 44A-18(1) (1995). The statute further provides that a subcontractor may perfect its lien by filing written notice with the obligor, th e party liable to the general contractor. Id. 44A-18(6). Perfection of the lien 7

15 entitles a creditor to priority over the interests or claims of others in the funds. Id. 44A-22. In light of appellant's failure to perfect its lien, appellant must be classified a s an unsecured creditor in bankruptcy. The record is clear, and appellant does not contest, that it did not file any notice with the obligor, and therefore did not comply with the requirements for perfection. Under the statute only perfection vests a creditor with priority over others, See 'id. Nevertheless, appellant argue s that its receipt of payment should excuse its failure to perfect because it coul d have perfected the lien had it not received payment. In effect, appellant asks this court to recognize perfection by possession (receipt of payment) in spite of th e statutorily imposed requirement of notice. "It is well established that a lienis lost if the steps to perfect it are not taken in the manner and within the time prescribed by law." Strickland v. General Bldg. & Masonry Contractors,. Inc. ; 22 N.C. App. 729, 731, 207 S.E.2d 399 (1974) (emphasis added). "If a lien is not perfected, it cannot be enforced." Cameron & Barkley Co. v. American Ins. Co., 112 N.C. App. 36, 39-40, 434 S.E.2d 632 (1993). If appellant had filed notice with the owner as prescribed by the statute, then its receipt of funds subsequent to perfection would not be avoidable by the trustee because appellant would be a secured creditor under North Carolina law. Appellant failed, however, to comply with the statute. Although the requirement of written notice may seem technical because th e notice is given to the property owner rather than filed publicly as is done with liens on realty or personalty, the notice serves a similar purpose. For example, before a subcontractor extends credit to a contractor, it can inquire of a property owner as to the existence of any perfected liens. Notice also alerts the owner to financial instability on the part of its general contractor as well as to th e possibility of the perfection of additional liens. Furthermore, the parties have not cited, and this court has not found, any North Carolina case law authorizing extra - statutory methods of perfection. Finally, this court is not in a position to second guess the North Carolina legislature with respect to its enactment of a notic e requirement for perfection. Therefore, this court will require. a subcontracto r to comply with the state statute in order to obtain the protections provide d by the Bankruptcy Code to secured creditors. 196 B.R. pp (emphasis added). The State of North Carolina has not amended it s materialmens' lien statutes to eliminate the notice requirement in the twelve years sinc e Precision Walls was decided, and the Precision Walls opinion therefore remains good law. 2. North Carolina Lien Laws Support the Holding in Precision Walls. There are generally two types of liens available to persons providing materials or labor t o real property under Chapter 44A of the North Carolina General Statutes. - (1) a lien on real 8

16 property that may be asserted by the contractor who is dealing with the owner, or by lower tier subcontractors through statutory subrogation; and (2) a lien on funds owed on the project Lien on Real Property. Under Chapter 44A, persons who furnish labor, services or materials pursuant to a contract with the owner of real property (herein, "Contractor") for th e making of an improvement thereon "shall, upon complying with the provisions of this Article, have a right to file a claim of lien on real property on the real property to secure payment of all debts owing" for labor, services or materials provided pursuant to the contract. N.C. Gen. Stat. 44A-8 (emphasis added). This claim of lien on real property "is perfected...: upon the filing of the claim of lien on real property..." N.C. Gen. Stat. 44A-11. The Contractor's claim of lien on real property is to be filed in the office of the clerk of superior court in the county where the rea l property is located at any time after the maturity of the underlying obligation but not later than 120 days after the last furnishing of labor or materials at the site of the improvement by th e person claiming the lien. N.C. Gen. Stat. 44A-12. A lien is lost if the steps required to perfect i t are not taken in the same manner and within the time prescribed by law. Priddy v. Lumber Co., 258 N.C. 653 (1963), Strickland v. General Bldg & Masonry Contractors, Inc., 22 N.C. App. 729 (1974). Subrogation rights. A first, second or third tier subcontractor (herein, "Subcontractor" ) who has furnished labor, materials or rental equipment in the improvement of real property, "who gives notice of claim of lien upon funds as provided in this Article" may enforce th e Contractor's lien on real property by complying with the statutory filing and notice requirements. N.C. Gen. Stat. 44A-23. The claim of lien on real property is perfected as of the time set fort h in N.C. Gen. Stat. 44A-10 (first furnishing of labor or materials to the site) upon filing of th e 2 In fact, there is a third type of lien not relevant to the issues on appea l that serves as a remedy in the case of an owner who makes payment i n violation of lien on funds. See N.C. Gen. Stat. 44A-20(d). 9

17 claim of lien on real property pursuant to N.C. Gen. Stat. 44A-12. N.C. Gen. Stat. 44A-23(a). Enforcement. Tn the case of either a Contractor or Subcontractor, an action to enforce a claim on lien on real property must be commenced no later than 180 days after the last famishing of labor or materials to the real property. N.C. Gen. Stat. 44A-13, 44A-23. A claim. of lien on real property is discharged by failure to enforce the claim, of lien. on real property within the prescribed time. N.C. Gen. Stat. 44A-16(3).. Priority. A claim pf lien on real property takes effect from the time of the first furnishin g of labor or materials at the site of the improvement by the person claiming 'the claim of lien. N.C. Gen. Stat. 44A-10. If an action is not filed in accordance with N.C. Gen. Stat. 44A-13, then the judgment entered in the action enforcing the claim of lien on. real property is not entitled to an y priority under the provisions of N.C. Gen. Stat. 44A-14(a), but is entitled only to those prioritie s accorded by law to money judgments. N.C. Gen. Stat. 44A-l 3(c). Extent of Lien. Where the obligor is an owner and the funds in the hands of the obligo r and the obligor's personal liability, if any, under N.C. Gen. Stat. 44A-20 are less than the sum of the amount of valid claims of liens upon funds that have been received by the obligor unde r this Article and the amount of the valid claims of liens on real property upon the owner' s property filed by the subcontractors with the clerk of superior court under N.C. Gen. Stat. 44A- 23, the parties entitled to liens upon funds and the parties entitled to subrogation claims of lien s on real property upon the owner's property shall share the funds on a pro rata basis. N.C. Gen. Stat. 44A-21(b). 2. Lien on Funds. N.C. Gen. Stat. 44A -18 states, Upon compliance with this Article, a first tier subcontract who furnished labo r 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 tie r subcontractor dealt and that arise out of the improvement on which the first tier subcontractor worked or furnished materials. N.C. Gen. Stat. 44A-18(1). The 10

18 liens upon funds granted under this section shall secure amounts earned by th e lien claimant as a result of having furnished labor, materials, or rental equipmen t at the site of the improvement under the contract to improve real property, including interest at the legal rate..., whether or not such amounts are due and whether or not performance or delivery is complete. N.C. Gen. Stat. 44A-18(5). Similar rights to a lien on funds are provided to first, second, and third tier subcontractor s who furnished labor, materials or rental equipment as to funds owed to the contractor o r subcontractor with whom they dealt, as well as subrogation rights to claim lien rights as to fund s owed to the contractor and upstream subcontractors. N.C. Gen. Stat. 44A-18. A lien upon fund s 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 N.C. Gen. Stat. 44A-19 and is effective upon the obligor' s receipt of the notice. N.C. Gen. Stat..44A-l8. Priority. Upon receipt of the notice of claim of lien upon funds, the obligor is under a duty to retain any funds subject to the lien or liens upon funds up to the. total amount of such liens upon funds as to which notices of claims of lien upon funds have been received. N.C. Gen. Stat. 44A-20(a). Liens upon funds perfected under this Article have priority over all other interests or claims theretofore or thereafter created or suffered in the funds by the person agains t whose interest the lien upon funds is asserted. N.C. Gen. Stat. 44A-22. Extent of Lien on Funds. Where the obligor is a contractor or subcontractor and the fund s in the hands of the obligor and the obligor's personal liability, if any, under G.S. 44A-20 are less than the amount of valid liens upon funds that have been received by the obligor under thi s Article, the parties entitled to liens upon funds shall share the funds on a pro rata basis. N.C. Gen. Stat. 44A-21(a)(emphasis added). 3. AppellantDid Not HaveASecurity InterestAs AResult Of Its "Inchoate Lien Rights". 11

19 In its Brief, Appellant argues strenuously that Appellee failed to meet its burden of proof under 547(b)(5) because Appellant had "inchoate" lien rights under these statutes to the fund s held by the Debtor that were used to make the Transfers. Specifically, Appellant argues that by virtue of its "inchoate lien rights", it had a secured claim, [Brief, p. 32], citing 11 U.S.C. 506(a), This section provides that "An allowed claim of a creditor secured by a lien on property in whic h the estate has an interest... is a secured claim to the extent of the value of such creditor's interest in the estate's interest in such property." Appellant then cites Smallv.Williams, 313 F. 2d. 39 (4th Cir. 1963), for the proposition that "payments upon a preferred claim which have th e effect of releasing assets of comparable value to the claims of general creditors are no t preferential. They are not preferential because they do not deplete the debtor's estate or diminis h the assets available for 'distribution among the general creditors." [Brief, at p; 34]. Appellant contends that it is relieved of the obligation to enforcing its lien rights. [Brief, p. 35] The Trustee's burden of proof under 11 U.S.C. 547(b)(5) is met upon a showing that the creditor would have received less than a 100% payout in a Chapter 7 liquidation. In re Virginia - Carolina Financial Corp., 954 F.2d 193, 198 (4th Cir. Va. 1992). See also, Small v. Williams, 313 F.2d at 44 (finding that when the value of the security is substantially less than the secured claim, however, a partial payment upon the secured claim which does not effect a release of any of the security or reduce the claim to the extent that it is effectively secured, does result in a depletion of the debtor's estate.). The Bankruptcy Court properly found that "there ar e inadequate funds to pay provide a payout in full to unsecured creditors, and this fact is not contested by the defendant." (Docket No. 1 Attachment No. 16, Summary Judgment Order, p. 8). This finding is not contested by Appellant. Therefore, in addition to determining whether Appellant would have had a secured clai m 12

20 when the bankruptcy was filed, Appellant will not be entitled to avoid a finding under 547(b)(5 ) unless it is shown that the value of the property upon which Appellant claims a security interest was equal to its claims on the filing date and the amount of the preferential payments. Appellant takes issue with both arguments. 1. "Inchoate" lien rights are a remedy and are not a security interest.. Notwithstanding the "inchoate lien right" terminology frequently employed by North, Carolin a courts and by the Appellant in its Brief, the question under the Bankruptcy Code is what right s Appellant had in the funds due to the Debtor. A common idiom describes property as a, "bundle of sticks" -- a collection of individual rights which, in certain combinations, constitute property... State law determines which sticks are in a person's bun.dle, but federal law determines whether those sticks constitute property [interests]. In looking to state law, this Court must consider th e substance of the state law flights, not the labels the State gives them or the conclusions it draw s from them. United States v. Craft, 535 U.S. 274 (2002). Effectiveness. Chapter 44A' does not use the term "inchoate" in addressing lien claims. The statutes are clear that the rights in property or funds only arise upon compliance with Articl e 44A, N.C. Gen. Stat. 44A-8, filing of a claim of lien on property, N.C. Gen. Stat. 44A-11, 44A-12, giving notice of a claim of lien on funds, N.C. Gen. Stat. 44A-11, N.C. Gen. Stat. 44A-13, 44A-23(a), (b)(4), and timely enforcing a lien on property by bringing suit. N.C. Gen. Stat. 44A-13, 44A-23(a), (b)(4). Until these conditions are satisfied, the obligor is under n o obligation to the Contractor or Subcontractor and the Contractor or Subcontractor is free to us e the funds received free and clear of any obligations imposed under Chapter 44A. N.C. Gen, Stat. 44A-18, 44A-20. Although the lien rights are effective as to amounts owed at the time that notice is given 13

21 and/or the lien is filed, the lien priorities only attach to the funds due or the extent of the funds due when the lien is in effect. There is nothing in the statutes or case law to the effect that the lien relates back to funds previously owed and paid by the owner to the Contractor (in the case of a lien on real property). In fact, the case law is to the contrary. If, at the time the owner receive s notice of the second tier subcontractor's lien claim, the owner no longer owes any funds to th e general contactor, then no funds are in the possession of the owner to which suc h subcontractor's lien can attach. The subcontractor's lien rights are limited to the rights of the parties above him. See, Mace v. Construction Corp., 48 N.C. App. 297 (1980) ; Builders Supply v. Bedros, 32 N.C. App. 209 (1977). Lien "rights" are not absolute. Notices or claims of lien defective in form or timing can defeat the lien. If at trial, it is determined that a claim of lien is defective when filed, there is n o lien. Gaston Grading & Landscaping v. Young, App. 719, 721 (1994)(claim of lien) ; see also, Mebane Lumber Co. v. Avery & Bullock Builders, Inc., 270 N.C. 337, 341 (1967), In re Alexander-Scott Group, 1996 U.S. Dist. LEXIS (M.D.N.C. May 20, 1996), Universal Mechanical, Inc. v Hunt, 114 N.C. App. 484 (1994)(notice of lien on funds). Finally, by statute, the lien rights as asserted in one Subcontractor ' s claim of lien o r notice of claim of lien are subject to being pro rated among all Subcontractors who may hav e previously or subsequently asserted lien claims. N.C. Gen. Stat. 44A-21. Lien rights on fund s available to a first, second or third tier subcontractor may be further limited by the amount s owed to each of those who are senior in. the stream of payment. N.C. Gen. Stat. 44A-18. In addition, a claim of lien on real property is discharged by failure to enforce the claim of lien on real property within the prescribed time. N.C. Gen. Stat. 44A-l 6(3). Timing is critical to valuation. It is clear from the statutes, that the timing of providin g 14

22 notice to the owner and/or general contractor and/or filing the lien is then central to the issue of whether, at the time that the notice is given or the lien is filed, there were sufficient funds owe d in the chain of payment to result in 100%o payment of Appellant's claims. Even so,. the later filing or notice of claims may dilute the amounts claimed by Appellant. Inchoate "liens" are not"liens" under the Bankruptcy Code. As argued out by Appellant, 11 U.S.C. 506(a)(l) recognizes the allowance of secured claims asserted by "a creditor secured by a lien on property. in which the estate has an interest". Appellant's Brief, p. 32, The term "lien" means charge against or interest in property to secure payment of a debt or performance o f an obligation. 11 U.S.C. 101(37). Chapter 44A"liens"are similar to the remedies of attachment and garnishment. Although. the procedures and priority provisions, differ, the liens available under Chapter 44A are mor e akin to the procedural remedy of attachment and garnishment than a "charge against property o r an interest in property," In essence, since those who owe the funds are under no obligation unti l notice is received, the "inchoate lien rights" have no consequence until and.unless the statutory notices are provided. If ineffective but untimely notice is given, the "inchoate lien rights" ar e ineffective. If the funds are paid out prior to notice being given, or, as to real property, the lie n rights are waived by the general contractor, then there is no property against which the lien wil attach. See, e.g., Electric Supply Co. v. Swain Elec. Co., 328 N.C. 651, 403 S.E.2d 29 1 (1991)(frnding that a subcontractor has no lien on funds where there is nothing owed to th e contractor at or after the time the subcontractor's lien claim is filed). If the statutory periods lapse prior to giving notice, then the lien rights are discharged without ever having been effective. Under North Carolina law, attachment is a proceeding ancillary to a pending principa l 1 5

23 action, is in the nature of a preliminary execution against property, and is intended to brin g property of a defendant within the legal custody of the court in order that it may subsequently b e applied to the satisfaction of any judgment for money which may be rendered against th e defendant in the principal action. N.C. Gen. Stat (a). Judgment may be rendered in an action in which property of the defendant has been attached which judgment shall provide for th e application of the attached property... to the satisfaction of the plaintiffs claim as established in the principal action. N.C. Gen. Stat (c). Attachment may be had in any action the purpose of which, in whole or in part, or in the alternative, is to secure a judgment for money. N.C. Gen. Stat Garnishment is not an independent action but is a proceeding ancillary to attachment an d is the remedy for discovering and subjecting to attachment (1) tangible personal property belonging to the defendant but not in his possession, and (2) any indebtedness to the defendant and any other intangible personal property belonging to him. N.C. Gen. Stat A levy is made on a garnishee upon delivering to the garnishee a copy of the order of attachment, a summons to the garnishee and a notice of levy in the appropriate statutory forms. N.C. Gen. Stat Any garnishee who shall pay to the defendant any debt owed the defendant or deliver to the defendant any property belonging to the defendant, after being served wit h garnishment process, and while the garnishment proceeding is pending, shall not thereby reliev e himself of liability to the plaintiff. N.C. Gen. Stat ,31. If judgment is entered for the plaintiff in the principal action, the sheriff shall satisfy such judgment out of money collected by him or paid to him in the attachment proceeding or out of property attached by him. N.C. Gen. Stat Like the remedy of attachment, the principal action in a lien suit is based on the 1 6

24 indebtedness of the defendant to the plaintiff. Upon notice of the attachment order, third partie s are legally required to hold indebtedness for application to the plaintiff's debt; failure to do so results in personal liability of the garnishee. Upon obtaining a judgment against the defendant,. the plaintiff is entitled to payment from the attached property. Virtually, the..only differences between the remedy of.attachment. and Chapter 44A is the procedures for -establishing the liens.:, and. the. priority.. of the liens, once established. Case law indicates that an attachment lien created within the preference period i s avoidable, even though the,creditor had rights to obtain the remedy prior to the commencement of the preference period. See, In. re Builders Supply of Wilmington, Inc., 40 B.R. 753, 75 5 (Sankt.. E.D.N.C.1984). Just as the right to obtain enforceable lights in property or an orde r charging property under the attachment statutes is not a "lien" within the meaning of 1 1 U.S.C. 506(a) Watts v. Slough (In re Slough), Adv. Pro. L AP, Case No JRL (March 24, 2005, DE 47)(Bankruptcy Court held in the context of a prejudgment attachment that failure to properly. comply with the statutory procedures for a prejudgment attachment results in failure of the claimant's lien rights), the rights of a Subcontractor to obtai n similar rights against third parties based on an "inchoate lien right" does not rise to the level of a secured claim under 11 U.S.C. 506(a). In either case, had the creditor taken the steps to obtain the remedy, then the "relation back" provisions are used to determine the rights of the various parties to the funds in existence when the lien becomes effective (although, as noted above, othe r lienholders are of equal priority). Appellant's lien rights were always inchoate. Appellant takes these positions notwithstanding that it "has not specifically enforced any mechanic's lien rights or filed any mechanic's liens against the debtor", as admitted in its responses to Discovery filed o n 17

25 November 22, 2006, well after the time for enforcing or perfecting any lien rights had lapsed. (Docket No. 2, Attachment 13, Defendant's Responses to Requests for Admissions). In fact, Appellant argues that "[t]here is no need to actually perfect or enforce lien rights in order t o protect against preference claims." [Appellant's Brief at p. 35] In an apparent contradiction, Appellant further argues that United Rentals had the right to perfect its echanic's lien after the Bankruptcy petition without obtaining relief from the automatic stay, citing 11 U.S.C. 546(b). [Brief, at pp ]. Although Appellant may have had the right to assert and enforce rights under N.C. Gen. Stat. 44A; the result of Appellant's failure to comply with the requirements of Chapter 44 A prior to payment was that any liens that it otherwise may have had were "inchoate" and unperfected at the time Appellant received the Transfers. Accordingly, the duties of the, owner and/or general contractor set out in N.C. Gen. Stat. 44A-20 did not come into play, such that the funds held by the Debtor were unencumbered with the statutory duties prescribed by N.C. Gen. Stat. 44A- 20 and the Debtor was free to use those funds for any expenditures it chose free o f. the restrictions of Chapter 44A. 4. J.A.Jones does not support Appellant's position. The J.A. Jones decision cited by Appellant does not support Appellant's position as to th e 547(b)(5) issue. In re J.A. Jones, 361 B.R. 94, 106 (Bankr. W.D.N.C. 2007) ("Since Defendants held no liens against any debtor property, under Smith they are unsecured creditors not shielded by 547(b)(5) from preference attack."). Unperfected lien rights do not create a security interest in favor of the Appellant an d otherwise to not make the Appellant's claim secured. The Bankruptcy Court properly found that the Appellant's claim was merely an unsecured claim. 1 8

26 ii. The Appellant's unasserted rights against the bonding company did not result in rights to payment in full from the Debtor's bankruptcy estate. Appellant contends that the Transfers resulted in it being in no better position than it would have been had it not been paid because the bonding company, U.S. Fire, was subrogate d to the rights of the estate under the Mayfaire and Dosher contracts and sufficient funds existed t o fully secure the bonding company. [Appellant's Brief, at p. 21] Once again, this Court i s reminded that the 11 U.S.C. 547(b)(5) issues were addressed at summary judgment and the 1 1 U.S.C. 547(c)(l) issues were addressed after taking evidence at trial. At summary judgment, the Bankruptcy Court determined as a matter of law, that ther e were insufficient funds to pay unsecured creditors in the case in full. (Docket No. 1, Attachment No.16, Summary Judgment Order, p. 8). This finding is in accordance with the presumption that the estate is insolvent during the 90 days prior to the filing date, 11 U.S.C. 547(f), and is not disputed by the Appellant. The sole evidence presented by the Appellant at summary judgment that the Appellan t would have filed a bond claim was nothing more than a mere assertion in its Responses to Plaintiff's Interrogatory, #14 (Docket No. 2, Attachment No. 13) that, "Had United Rentals not received the alleged transfers, it would have enforced its rights pursuant to the Bond Projects o n the Bonded jobs." Appellant nonetheless admits that it did "nothing to file a claim under any bonds you may have had a right to file a claim under". (Docket No. 2, Attachment No. 13, Exhibit D, United Rentals' Responses to Request for Admission, # 11, 12). The Summary Judgment Order held that "the focus of [ 547(b)(5)] is not whether th e defendant would have received payment from someone else for its claims. Instead, the court must determine whether in a chapter 7 bankruptcy liquidation, there would have been enoug h funds to pay this creditor's claim out of the estate if it had not been preferentially paid." (Docket 1 9

27 No. 1, Attachment No. 16, Summary Judgment Order, pp. 7-8 (citing Smith v. Creative Financial. Management, Inc. v. Virginia Carolina Financial Corp., 954 F.2d 193,199 (4th Cir. 1992)), The focus of the. preference statutes is on the effect of a transfer on the debtor, not on :the transferee. In re GEM Construction Corp of Virginia, 262 B.R. 638 (Banks. E.D. Va. 2000).. ("GEM II") As such, numerous courts, including our own Circuit, view parties holding liens on third party property (but not that of the debtor) to be unsecured creditors for. 547(b)(5 ) purposes. Smith v. Creative Financial Mgmt., Inc (In re Virginia-Carolina Fin, Corp.), 954 F.2d 193, 199 (4th Cir. 1992) ; see also Committee of Creditors Holding Unsecured Claims v. Koch Oil Co. (In re Powerine Oil Co.), 59 F.3 d 969, 972 (9th Cir. 1995). As the Smith Court explains : [T]he court must focus, not on whether a creditor may have recovered al l of the monies owed by the debtor from any source whatsoever, but instead upon. whether the creditor would have received less than a 100% payout in Chapter 7 liquidation.... This interpretation reflects the common sense notion that a creditor need not return a sum received from the debtor prior to bankruptcy if th e creditor is no better off vis-a-vis the other creditors of the bankruptcy estate than he or she would have been had the creditor waited for liquidation and distribution of the assets of the estate. Smith v. Creative Financial Mgmt., Inc (In re Virginia- Carolina Fin. Corp.)., 954 F.2d 193, 199 (4th Cir. 1992). Since Defendant held no liens against any debtor property, under Smith it is an unsecured creditor not shielded by 547(b)(5) from preference attack. In re J.A. Jones, 361 B.R. 94, 10 1 (Bankr. W.D.N.C. 2007). This is the basis of the Banlauptcy Court's decision - although unde r Appellant's theories, it might have been paid by the surety as a result of the bonds, the elements of 11 U.S.C. 547(b)(5) are not established unless the Appellant can show it had a security interest in property of the debtor, which by its admissions in response to Appellee's discovery, it cannot show. iii. The Appellant's alleged equitable lien did not result in rights to payment in full. 2 0