Ute Mesa Lot 1, LLC v. First Citizens Bank & Trust, et al

Ute Mesa, a Colorado real estate developer, received a multi-million dollar loan to construct a single family home on property it owned in Aspen. To secure the loan, United Western Bank prepared a deed of trust incorrectly identifying Ute Mesa's sole member as the owner rather than Ute Mesa. The Bank filed suit seeking a reformation of the deed of trust and a declaration that it had a first priority lien on the property. Days later, the Bank filed notice of lis pendens in the county real property records. Ute Mesa filed for Chapter 11 bankruptcy relief, and continued as debtor-in-possession of the property. Ute Mesa then filed an adversary proceeding against the Bank to avoid the lis pendens as a preferential transfer. The bankruptcy court granted the Bank's motion to dismiss, and the federal district court affirmed. Ute Mesa argued on appeal that a "transfer of an interest in property" occurs when a bona fide purchaser cannot acquire an interest superior to that of a creditor. According to Ute Mesa, because the lis pendens prevented a bona fide purchaser from acquiring an interest in the property superior to the Bank’s interest, the lis pendens qualified as a transfer of an interest in the property. The Tenth Circuit affirmed the district court's decision, finding that a lis pendens is "merely a notice" and does not constitute a lien, therefore, no transfer occurred. View "Ute Mesa Lot 1, LLC v. First Citizens Bank & Trust, et al" on Justia Law