Justia Real Estate & Property Law Opinion Summaries

The Court of Appeals held that, for purposes of New York's Uniform Commercial Code (UCC) 9-406, an "assignee" includes the holder of a presently exercisable security interest in an assignor's receivables.New Style Contractors, Inc. engaged Checkmate Communications LLC as a subcontractor. Pursuant to a promissory note and security agreement, Checkmate could borrow up to $3 million from Worthy Lending LLC. Checkmate granted Worthy a security interest in its assets, and Worthy filed a UCC-1 financing statement against Checkmate perfecting its secured position regarding Checkmate's assets. Worthy then sent New Style a notice of its security interest and collateral assignment in the New Style accounts. When Checkmate defaulted on the note and filed for bankruptcy. Worthy brought this action against New Style pursuant to UCC 9-607, alleging that Worthy was entitled to recover all amounts New Style owed to Checkmate after New Style's receipt of the notice of assignment. Supreme Court dismissed the complaint. The Appellate Division affirmed, concluding that Worthy did not have an independent cause of action against New Style pursuant to UCC 9-607 because the statute does not authorized a secured creditor as distinct from an assigned, to recover from a nonparty debtor like New Style. The Court of Appeals reversed, holding that the language of the statute required reversal. View "Worthy Lending LLC v. New Style Contractors, Inc." on Justia Law

Peralta bought a house by an installment contract with the seller, Recon. He stopped making payments. Recon sued. To obtain a second chance, Peralta agreed that if he breached again, Recon could get a judgment for possession and immediately evict him. Another breach would extinguish any rights that Peralta had in the house. Peralta stopped paying. Recon obtained a judgment for possession. Peralta stayed in the house and filed for Chapter 13 bankruptcy. Peralta argued that Chapter 13 lets a bankrupt homebuyer “cure[]” a “default” on a mortgage during the bankruptcy process until the home “is sold at a foreclosure sale” 11 U.S.C. 1322(c)(1). Pennsylvania treats foreclosed installment contracts like mortgages, so Peralta argued that cure gave him an interest in his property.Reversing the bankruptcy court, the district court and Third Circuit ruled in favor of Rencon. An installment contract never has a “foreclosure sale.” The property's title stays with the seller until the contract is paid off. For installment contracts, the closest analog to a foreclosure sale is a judgment for possession. Recon got a judgment before Peralta tried to cure, so that remedy was unavailable. That judgment was entered before Peralta filed for bankruptcy, so his home was not part of his bankruptcy estate. Mere possession without a good-faith claim to it did not change that. View "In re: Peralta" on Justia Law

Richards sold her home six days before filing a chapter 7 bankruptcy petition, netting $36,793.60, which Richards placed into escrow with the Wilkey law firm, which represents Richards in her bankruptcy proceeding. Richards disclosed the sale of her residence on her Statement of Financial Affairs and provided a copy of the escrow ledger to the Trustee. Richards claimed that the proceeds from the sale were exempt under 11 U.S.C. 522(d)(1) as proceeds from the sale of Richards’s residence. The chapter 7 Trustee filed an objection, which the bankruptcy court sustained, finding no language in section 522(d)(1) that would permit the exemption of the proceeds from the prepetition sale of the Richards’s homestead.The Sixth Circuit Bankruptcy Appellate Panel affirmed. The proceeds were not being “used as a residence” at the time the petition was filed. Section 522(d)(1) provides for an exemption in “the debtor’s aggregate interest, not to exceed $25,150 in value, in real property or personal property that the debtor or a dependent of the debtor uses as a residence.” The language of the Code is unambiguous, vesting no exemption power in the proceeds arising out of the prepetition sale of a debtor’s homestead. View "In re: Richards" on Justia Law

Fountain of praise, a church, leased space to Central Care Integrated Health Services. Shortly after the execution of the lease, the relationship soured when the parties disagreed on the frequency and amount of rent payments. Eventually, Fountain of Praise terminated the lease and successfully evicted Central Care from the premises.Subsequently, Central Care filed for Chapter 11 reorganization. Central Care then sued Fountain of Praise in state court, claiming breach of contract and unjust enrichment. Fountain of Praise then removed the case to bankruptcy court as an adversary proceeding. The bankruptcy court entered judgment in favor of Fountain of Praise, finding that any breach was excusable due to Central Care's failure to make timely rent payments and that Central Care lacked the requisite interest in the property for an unjust enrichment claim.Central Care appealed, and the district court judge assigned to the case reassigned the case to a magistrate judge who affirmed the bankruptcy court's judgment.On appeal, the Fifth Circuit vacated the magistrate judge's order, finding that the district court improperly authorized referral of the appeal from a bankruptcy court decision to a magistrate judge. Under 28 U.S.C. Section 158, appeals from a bankruptcy court must be heard either by the district court or a panel of bankruptcy court judges. View "South Central v. Oak Baptist" on Justia Law

Defendant and her then-husband bought a condo for $525,000 with the intention of making it their primary residence. To finance the purchase, the couple took out a mortgage with the Plaintiff bank. Defendant did not sign the note but consented to her husband doing so. The mortgage contained a "future advances" clause, which granted Plaintiff a security interest in the Mortgage covering future funds Defendant's husband might borrow.Four years later, Defendant's husband borrowed additional funds from Plaintiff to keep his business afloat. Defendant did not sign the note. A few months later, Defendant's husband filed for Chapter 7 bankruptcy and the condo was sold for $650,000, approximately $250,000 of which was deposited in escrow. The couple divorced and Defendant moved out of the state.In Defendant's husband's bankruptcy case, the court held a portion of the escrowed sale proceeds must pay down his business notes pursuant to the mortgage’s future advances clause and that he could not claim a homestead exemption. Plaintiff was granted summary judgment on its claims that Defendant's proceeds were also subject to the future advances clause and that Plaintiff could apply those proceeds to Defendant's husband's business note.Defendant appealed on several grounds, including unconscionability, contract formation, and public policy, all of which the court rejected, affirming the district court's granting of summary judgment to Plaintiff. View "Sanborn Savings Bank v. Connie Freed" on Justia Law

Debtor executed a security deed for a piece of property. She acknowledged the deed to her closing attorney who certified the acknowledgment on the deed’s final page.Under Georgia law, a deed must be attested by two witnesses, and at least one of them needs to be an official such as a notary or court clerk. Here, the deed was invalid because the attorney was a notary, but he failed to attest to the deed. The error was discovered a few years later when the debtor filed for Chapter 7 bankruptcy. Under federal law, a bankruptcy trustee may void a deed if it is voidable by a bona fide purchaser. The managing trustee noticed the problem and sued the loan companies to keep the property in the bankruptcy estate. The loan companies argue that they have produced what the statute requires to save a problematic deed: an affidavit from a “subscribing witness.” Here, the court reasoned that a person becomes a subscribing witness only when she attests a deed, and the closing attorney did not do so. Therefore, the loan companies’ interest in the real property is voidable. View "Pingora Loan Servicing, LLC, et al. v. Cathy L. Scarver" on Justia Law

In 2007, Olsen granted Country Visions a 10-year right of first refusal on Wisconsin land. The right was recorded in local property records. Olsen subsequently dissolved and, in 2010, its former partners filed for bankruptcy. Country Visions was not notified and was not listed in the bankruptcy proceedings. Under an agreed plan, ADM became the owner of the Wisconsin land. Country Visions was not given an opportunity to exercise its right of first refusal. In 2015, ADM arranged to resell the property. Country Vision sought compensation in state court.ADM asked the bankruptcy court to enforce the “free and clear” sale and prohibit the state court litigation, citing 11 U.S.C. 363(m). The bankruptcy court and district court denied ADM’s request. The Seventh Circuit affirmed. Good-faith purchasers are protected by section 363(m) but ADM was not a good-faith purchaser and must defend the state court litigation. ADM had actual notice of the right, in a title report, but did not notify the bankruptcy court; as a non-party, Country Visions could not be expected to appeal the order approving the sale. View "Archer-Daniels-Midland Co. v. Country Visions Cooperative" on Justia Law

The Supreme Court held that a recorded judgment lien attaches to homestead property where the judgment debtor has equity in excess of the amount exempt under Arizona law.Pacific Western Bank (PWB) obtained a California judgment against Todd McLauchlan that was domesticated and recorded in Arizona. McLauchlan later filed a Chapter 7 bankruptcy petition identifying an ownership interest in a residence and claiming the statutory homestead exemption in the residence. PWB filed a proof of claim, $552,497 of which was secured by the recorded judgment lien. The remaining $115,985 was unsecured. After McLauchlan received his discharge he sold the residence and realized $56,852 in excess of the $150,000 homestead exemption. PWB filed a motion seeking a determination that McLauchlan's bankruptcy discharge did not affect its interest secured by its recorded judgment. At issue was whether, under Ariz. Rev. Stat. 33-964(B), judgment liens attach to homestead property. The Supreme Court answered in the affirmative. View "In re McLauchlan" on Justia Law

In this appeal arising out of an adversary action filed in a Chapter 11 proceeding in the Bankruptcy Court for the District of Massachusetts the First Circuit affirmed the judgment of the bankruptcy court allowing the debtor to avoid a mortgage, holding that there was no error in the bankruptcy court's judgment.After Debtor filed for Chapter 11 bankruptcy Debtor commenced an adversary proceeding against U.S. Back seeking to "avoid" the mortgage because her name was missing from the certificate of acknowledgment. The district court granted Debtor's motion. The district court affirmed. The First Circuit affirmed, holding that summary judgment was properly granted for Debtor because the omission of Debtor's name from the certificate of acknowledgment was a material defect under Massachusetts law. View "U.S. Bank, N.A. v. Desmond" on Justia Law

The Supreme Court affirmed the judgment of the district court exercising jurisdiction over the underlying fraudulent conveyance action and avoiding all of Paul Morabito's transfers to Superpumper, Inc., Sam Morabito, Snowshoe Petroleum, Inc., and Edward Bayer, individually and as trustee of the Bayuk Trust (collectively, Superpumper) and awarding Paul Morabito's bankruptcy trustee (Trustee) the subject property or the value thereof, holding that the district court did not err.Paul and Consolidated Nevada Corporation entered into a settlement agreement with JH Inc., Jerry Herbst, and Berry-Hinckley Industries (collectively, the Herbsts) for $85 million and later defaulted on the agreement. After a bankruptcy court adjudicated Paul as a Chapter 7 debtor the Herbsts filed a fraudulent transfer action against Paul and Superpumper, the transferees of Paul's assets. The state district court avoided all of Morabito's transfers to Superpumper and awarded the Trustee the subject property or the value thereof. The Supreme Court affirmed, holding (1) the district court had subject matter jurisdiction over the fraudulent conveyance action; (2) Superpumper waived its in rem jurisdiction argument; and (3) the district court did not abuse its discretion in allowing attorney-client communications to be admitted into evidence at trial. View "Superpumper, Inc. v. Leonard" on Justia Law