Zions First Nat'l Bank v. Christiansen Bros., Inc., (In re Davidson Lumber Sales, Inc.)
UNPUBLISHED
Chapter 11 debtor, a subcontractor, entered into a postpetition arrangement to supply lumber to a project. Debtor purchased the lumber from a sub-subcontractor, but did not pay for it when payment was due. Pursuant to state law, the sub-subcontractor placed a materialman's lien on the project, which was not estate property. Due to debtor's failure to pay, the general contractor paid the sub-subcontractor directly to obtain release of the lien, as was allowed under state law. The court held that neither placement of the mechanic's lien on the project, nor the general contractor's payment of the sub-subcontractor, constituted a violation of the automatic stay. The court further held that direct payment of the sub-subcontractor also did not violate the cash collateral provisions of 11 U.S.C. § 363, noting that nothing in § 363 precluded the actions taken. In any event, the creditor with a security lien on debtor's accounts receivable had not notified the general contractor ("account debtor") that payments made on its account could only be made to the debtor or to the secured creditor.