Justia Real Estate & Property Law Opinion Summaries

The First Circuit affirmed the judgment of the Bankruptcy Appellate Panel for the First Circuit (BAP) affirming the summary judgment entered by the bankruptcy court against the bankruptcy trustee (the Trustee) for an estate of two individuals, holding that an unrecorded mortgage in Puerto Rico is not a transfer of the debtor's property that is voidable by a bona fide purchaser that triggers the bankruptcy trustee's authority to avoid and preserve the lien.Jose Antonio Lopez Cancel and Carmen Nereida Medina Gonzalez acquired a property in Puerto Rico that they used as their primary residence. Banco Popular de Puerto Rico held the mortgage, but the mortgage was never recorded. The bankruptcy court treated the mortgage as a general unsecured claim covered by an earlier discharge order. The Trustee then filed this action to avoid the mortgage and preserve it on behalf of the bankruptcy estate, arguing that the unrecorded mortgage was a transfer of the debtor's property that was voidable by a bona fide purchaser. The bankruptcy court concluded that the Trustee could not avoid and preserve an unrecorded mortgage because, under Puerto Rican law, an unrecorded mortgage is not a property interest. The BAP affirmed. The First Circuit affirmed, holding that there was no error. View "Segarra Miranda v. Banco Popular de Puerto Rico" on Justia Law

In 2015, Ralph Isom filed for bankruptcy. Ultimately, a bankruptcy trustee for the estate settled with Isom’s primary creditor, Farms, LLC (“Farms”). As part of the settlement, the bankruptcy trustee conveyed a ten-acre parcel from the bankruptcy estate to Farms. Isom was living on the ten-acre parcel at the time. When Isom refused to vacate the ten-acre parcel, Farms initiated this forcible detainer action. The magistrate court entered judgment for Farms and ordered Isom to vacate the ten-acre parcel. Isom appealed to the district court, but also vacated the property as the magistrate court had ordered. Because Isom had vacated, and thus no longer occupied or owned the ten-acre parcel, the district court held that Isom’s appeal was moot. Further, the district court rejected the merits of Isom’s appeal. Isom appealed the district court’s decision on the merits, but failed to appeal the district court’s holding that his appeal was moot. The Idaho Supreme Court found that because Isom failed to raise, let alone argue against, the district court’s decision as it related to mootness, the issue was considered waived."Isom’s waiver is dispositive. As a result, we will not reach the merits of his appeal as it relates to the sufficiency of proof regarding the forcible detainer action." Judgment was thus affirmed. View "Farms, LLC v. Isom" on Justia Law

In 1998, Old Ben Coal Company conveyed its rights to the methane gas in various coal reserves to Illinois Methane. A “Delay Rental Obligation” required the owner of the coal estate to pay Methane rent while it mined coal in areas that Methane had not yet exploited. A deed, including the Delay Rental Obligation was recorded. A few years later, Old Ben filed for bankruptcy and purported to sell its coal interests “free and clear of any and all Encumbrances” to Alliance. Old Ben did not notify Methane before the bankruptcy sale but merely circulated notice by publication in several newspapers. Alliance later sought a permit to mine coal. Methane eventually sought to collect rent in Illinois state court. Alliance argued that Old Ben’s “free and clear” sale had extinguished Methane’s interest.The bankruptcy court held that Alliance was not entitled to an injunction. The district court and Sixth Circuit affirmed. The deed indicates that the Delay Rental Obligation runs with the land and binds successors; it “is not simply a personal financial obligation between” Old Ben and Methane. The covenant directly affects the value of the coal and methane estates. Methane was a known party with a known, present, and vested interest in real property, entitled to more than publication notice. View "Alliance WOR Properties, LLC v. Illinois Methane, LLC" on Justia Law

The Eighth Circuit affirmed the bankruptcy appellate panel's decision upholding the bankruptcy court's order that fully voided Waltrip's judicial lien on debtor's homestead. In this case, after Waltrip filed suit against debtor in October 2016 for breach of contract in Missouri state court, a fire damaged debtor's home. The homeowner's insurance policy paid debtor for damages and Waltrip obtained a consent judgment that gave Waltrip a judicial lien against the homestead property. The parties do not dispute that Waltrip had a valid, avoidable lien that was affixed to debtor's property before she filed her bankruptcy petition. At issue is the extent to which Waltrip's lien impairs debtor's claimed homestead exemption.The court concluded, under Missouri law, that when property is properly exempted under 11 U.S.C. 522, a debtor is the sole owner of the insurance proceeds covering the property. Without any precedent to support Waltrip's position, the court declined to include the amount of the insurance payout when calculating the fair market value of debtor's home on the petition date, and thus the court affirmed the bankruptcy court's ruling using the $3,000 to $6,000 valuation of the unrepaired, fire-damaged property as determined on the petition date. The court also concluded that, because Waltrip's lien is smaller than the extent of the impairment, the entirety of Waltrip's lien can be avoided. Finally, the court concluded that the bankruptcy court did not abuse its discretion in reopening the case to avoid the lien or in denying Waltrip's requests for attorneys' fees and costs related to the reopening. View "David G. Waltrip, LLC v. Sawyers" on Justia Law

The Ninth Circuit reversed the district court's grant of summary judgment in favor of the 732 Hardy Way trust, the denial of summary judgment to the Bank, and the dismissal of the Bank's claims against the HOA in a quiet title action brought by the Bank, concerning title to real property in Nevada that was subject to a HOA nonjudicial foreclosure sale. At issue is whether the Bank, as the first deed of trust lienholder, may set aside a completed superpriority lien foreclosure sale on the grounds that the sale occurred in violation of the automatic stay in bankruptcy proceedings.The panel concluded that the Bank may raise the HOA's violation of the automatic stay provision and that the Bank has superior title. The panel explained that the Bank has standing under Nevada's quiet title statute, Nevada Revised Statute 40.010, and established case authority confirms that any HOA foreclosure sale made in violation of the bankruptcy stay—like the foreclosure sale here—is void, not merely voidable, Schwartz v. United States, 954 F.2d 569, 571–72 (9th Cir. 1992). Therefore, the district court erred in holding that the Bank lacked standing to pursue its quiet title claim in federal court. The panel remanded for further proceedings. View "Bank of New York Mellon v. Enchantment at Sunset Bay Condominium Ass'n" on Justia Law

The First Circuit dismissed Plaintiffs' appeal for want of jurisdiction, holding that the Federal Rules of Bankruptcy Procedure (the bankruptcy rules), and not the Federal Rules of Civil Procedure (the civil rules), govern cases that have come within the federal district court's jurisdiction as cases "related to" a pending bankruptcy proceeding. 28 U.S.C. 1334(b).In this case arising from the derailment and explosion in Lac-Megantic, Canada, Plaintiffs brought thirty-nine separate suits against several defendants. The derailment occurred on the watch of Montreal, Maine and Atlantic Railway (MMA). MMA sought the protection of the bankruptcy court. Plaintiffs' suits were removed to federal district court. Plaintiffs subsequently joined Canadian Pacific Railway Company as an additional defendant. The suits were centralized in the District of Maine. The district court later granted Plaintiffs' request to dismiss their claims against all defendants except Canadian Pacific pursuant to a settlement agreement that was part of MMA's plan of liquidation. The district court entered judgment for Canadian Pacific. Plaintiffs moved for reconsideration of their motion to file an amended complaint. The district court denied the motion as untimely. The First Circuit dismissed Plaintiffs' appeal, holding that the Bankruptcy Rules governed the procedural aspects of this case, Plaintiffs' motion to reconsider was untimely, and the attempted appeal was untimely. View "Roy v. Canadian Pacific Railway Co." on Justia Law

Appellee Highpointe Energy filed a quiet title action in Oklahoma against appellants the Viersens, and others. The disputed property concerned mineral interests from two different chains of title: one chain stemmed from a bankruptcy proceeding, while the other chain arose from a mortgage foreclosure proceeding and subsequent sheriff's sale. The trial court determined that the chain resulting from the foreclosure/sheriff's sale was superior to the bankruptcy chain. The Viersens appealed. The Oklahoma Supreme Court held that because the bankruptcy purchasers could secure no greater rights in the disputed property than the bankruptcy trustee held, the purchasers from the mortgage foreclosure proceeding held the superior title. View "Highpointe Energy v. Viersen" on Justia Law

Venoco operated a drilling rig off the coast of Santa Barbara, transporting oil and gas to its Onshore Facility for processing. Venoco did not own the Offshore Facility but leased it from the California Lands Commission. Venoco owned the Onshore Facility with air permits to use it. Following a 2015 pipeline rupture, Venoco filed for Chapter 11 bankruptcy and abandoned its leases, relinquishing all rights in the Offshore Facility.Concerned about public safety and environmental risks, the Commission took over decommissioning the rig and plugging the wells, paying Venoco $1.1 million per month to continue operating the Offshore and Onshore Facilities. After a third-party contractor took over operations, the Commission agreed to pay for use of the Onshore Facility. The Commission, as Venoco’s creditor, filed a $130 million claim for reimbursement of plugging and decommissioning costs. Before the confirmation of the liquidation plan, Venoco and the Commission unsuccessfully negotiated a potential sale of the Onshore Facility to the Commission. The Commission stopped making payments, arguing it could continue using the Onshore Facility without payment under its police power.After the estates’ assets were transferred to a liquidation trust, the Trustee filed an adversary proceeding, claiming inverse condemnation, against California. The district court affirmed the bankruptcy court’s rejection of California's assertion of Eleventh Amendment sovereign immunity. The Third Circuit affirmed. By ratifying the Bankruptcy Clause of the U.S. Constitution, states waived their sovereign immunity defense in proceedings that further a bankruptcy court’s exercise of its jurisdiction over the debtor's and the estate's property. View "In re Venoco, LLC" on Justia Law

Earl Schwartz Company and the co-personal representatives of the Estate of Earl N. Schwartz (amongst others, together “ESCO”) and SunBehm Gas, Inc. appealed a judgment quieting title to oil and gas interests in Great Plains Royalty Corporation. Great Plains cross appealed, arguing the district court erred when it denied its claims for damages. Great Plains’ creditors filed an involuntary petition for bankruptcy under Chapter 11 of the Bankruptcy Code in 1968. The case was converted to a Chapter 7 liquidation proceeding. The bankruptcy trustee prepared an inventory and published a notice of sale that listed various assets, including oil and gas interests. Earl Schwartz was the highest bidder. Schwartz entered into an agreement with SunBehm to sell certain interests described in the notice, and the district court order approved the transfer of those interests directly from the bankruptcy estate to SunBehm. The bankruptcy case was closed in 1974. Great Plains’ creditors were not initially paid in full; the bankruptcy case was reopened in 2013, Great Plains’ creditors were paid in full with interest, and adversary proceedings were brought to determine ownership of various oil and gas interests, to which ESCO was a party. ESCO argued the bankruptcy sale transferred all of the interests owned by Great Plains, regardless of whether they were listed in the notice of sale. The bankruptcy court rejected ESCO’s argument and determined title to various properties (not the subject of the present appeal). Then in 2016, Great Plains brought this quiet title action against ESCO and SunBehm; ESCO and SunBehm brought quiet title cross claims. The district court held a bench trial and found the bankruptcy trustee intended to sell “100%” of all of the oil and gas interests Great Plains owned at the time of the bankruptcy. But the North Dakota Supreme Court reversed, finding the district court erred when it determined the bankruptcy trustee intended to sell all of Great Plains’ interests, including those not listed in the notice of sale. On remand, ESCO and SunBehm claimed they held equitable title to oil and gas interests in various tracts identified in the notice of sale, interest which were confirmed by the bankruptcy court. The Supreme Court reversed the district court’s ruling on collateral estoppel as a misapplication of the law, and vacated the court’s title determination and its denial of Great Plains’ conversion claim. The case was remanded for the court to determine whether ownership of any interests in the tracts identified in the notice of sale passed to ESCO or SunBehm by virtue of the bankruptcy sale and confirmation order. View "Great Plains Royalty Corp. v. Earl Schwartz Co., et al." on Justia Law

The Court of Appeals answered a certified question of law by the United States Bankruptcy Court for the District of Maryland by holding that the Maryland Contract Lien Act (MCLA), Md. Code Ann. Real Prop. 14-201 - 206, does not permit liens that secure unpaid damages, costs, charges, and fees that accrue after the recordation of the lien.According to Appellant, if a lien complies with the procedural requirements for creation under the MCLA, the lien can secure unpaid damages arising after the recordation of the lien, and therefore, the MCLA permits continuing liens. Appellee, in turn, argued that continuing liens are prohibited by the plain language of the statute, its legislative history, and due process requirements. Specifically, Appellee argued that the MCLA prohibits any sum from being secured by a statutory lien before the property owner has the opportunity to contest the sum prior to attachment. The Court of Appeals held that the plain text, legislative history, and case law relevant to the MCLA collectively demonstrate the Legislature's intent to prohibit continuing liens. View "In re Walker" on Justia Law