§ 544

Hamilton v. Wash. Mutual Bank FA. (In re Colon)

Plaintiff trustee in bankruptcy brought an adversary proceeding seeking to use the strong arm powers under 11 U.S.C. § 544 to avoid defendant mortgagee's lien against debtors'homestead for the benefit of the bankruptcy estate. Primarily the trustee argued that the mortgage, which described the property as "Lot 29" instead of "Lot 79," would not give a bona fide purchaser constructive notice. The mortgagee moved for summary judgment.
Ruling: 
Trustee could avoid the mortgage with erroneous description as a bona fide purchaser or as a hypothetical lien creditor since the mortgage did not impart constructive notice on the trustee.
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Wash. Mut. Bank F.A. v. Sommerville (In re Sommerville)

Plaintiff, a servicer for a prior lien holder, alleged that it filed a corporate deed of release in error and that defendant debtor's note has not been paid in full. The servicer sought to have the deed of release set aside and the deed of trust reinstated. The debtor and defendant trustee opposed reinstatement of the deed of trust as violating 11 U.S.C. § 544(a). The parties filed cross-motions for summary judgment.
Ruling: 
Lien holder was barred by automatic stay from correcting the lien holder's mistaken release of debtor since filing established the trustee as a hypothetical lien creditor senior to the lien holder.
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Morris v. Boeing Wichita Credit Union (In re Hicks)

Plaintiff, a chapter 7 trustee, brought an adversary proceeding against defendants, the debtors and their creditor, to avoid a lien pursuant to 11 U.S.C. § 544(a)(2). The creditor filed a third party complaint against third-party defendant, the State of Kansas Department of Revenue ("KDOR"), in the event that the trustee prevailed on his claim. The matter was before the court on a stipulation of facts and briefs of the parties.
Ruling: 
Trustee was granted motion to avoid creditor's lien since the certificate of title did not reflect the lien.
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Stubbs v. Chase Manhattan Mortg. Corp. (In re Stubbs)

Plaintiffs, a debtor joined by her chapter 13 trustee, brought an adversary proceeding pursuant to 11 U.S.C. § 544(a)(3) against defendant creditors seeking to avoid a mortgage lien based on an alleged improper acknowledgment. The matter was before the court for consideration upon a stipulated record.
Ruling: 
Mortgage lien was avoidable and subordinate to the hypothetical bona fide purchaser trustee since the mortgage had an improper acknowledgement and thus failed to provide constructive notice.
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Farmer v. Green Tree Serv. LLC (In re Snelson)

Plaintiff, a chapter 7 trustee in bankruptcy, filed an adversary complaint seeking to avoid a lien on the debtor's mobile home held by defendant creditor, pursuant to 11 U.S.C. § 544, and to recover the value of the mobile home for the benefit of the debtor's estate under 11 U.S.C. § 551. The trustee claimed the lien was avoidable due to a clerical error in the description of the collateral. Both parties moved for summary judgment.
Ruling: 
Trustee could not avoid creditor's lien since the creditor's security interest was perfected despite a clerical error in the description of the collateral.
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Mostoller v. CitiCapital Commer. Corp. (In re Stetson & Assocs.)

Plaintiff chapter 7 trustee brought an adversary complaint to avoid several liens against personal property of the debtor that were held by defendant creditor pursuant to financing statements filed pursuant to Tenn. Code Ann. § 47-9-101 et seq. (Article 9 of the Uniform Commercial Code.) The creditor moved for relief from the automatic stay and for abandonment by the trustee of the bankruptcy estate's interest in the collateral.
Ruling: 
Trustee could not avoid a creditor's lien and did not have priority over the creditor's interests since the creditor's interests were perfected at the time of filing.
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Lehtonen v. Time Warner Inc. (In re PurchasePro.com Inc.)

Plaintiff trustee of debtor's liquidating trust filed a complaint against defendant transferee under Nevada's version of the Uniform Fraudulent Transfer Act. The complaint also alleged that defendant was liable under Nevada corporate law for a failure to provide the full amount of the agreed-upon consideration required when defendant exercised its rights under the warrant. Defendant moved to dismiss.
Ruling: 
Trustee's complaint against stock transferee was not dismissed since cancellation of stock option and the immediate reissuance of an amended and restated stock option that resulted in economic harm to the debtor was a fraudulent transfer of an interest of the debtor.
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