Justia Real Estate & Property Law Opinion Summaries

In 1998, Williams hired Jaffe as her attorney. The statute of limitations expired before Jaffe filed a complaint. Williams sued for legal malpractice, obtained a default judgment, and recorded that judgment on property owned by Jaffe and his wife as tenants by the entirety. Jaffe filed a chapter 7 bankruptcy petition in 2015, which identified that debt, indicating it was secured by a judgment lien on his residence. On the petition date, Jaffe and his wife owned the property as tenants by the entirety. Before bankruptcy proceedings were complete Jaffe’s wife died.When she died the tenancy by the entirety terminated; Jaffe held the property individually in fee simple. In Illinois, a creditor cannot force the sale of the tenancy by the entirety property to collect a debt against only one of the tenants but not all interests held by tenants by the entirety are immune from process. Jaffe argued that his contingent future interest in the property was exempt under 11 U.S.C. 522(b)(3)(B), which refers to “any interest in property which the debtor had, immediately before the commencement of the case, an interest as a tenant by the entirety or joint tenant to the extent that such interest as a tenant by the entirety or joint tenant is exempt from process under applicable nonbankruptcy law.UnThe Seventh Circuit reasoned that the statute exempts any interest held by an individual as a tenant by the entirety to the extent that state law exempts that particular interest so that the property cannot be excluded from the bankruptcy estate. View "Williams v. Jaffe" on Justia Law

Great Plains Royalty Corp. appealed the dismissal of its complaint and deciding ownership of certain real property in favor of Earl Schwartz Co. (“ESCO”); Basin Minerals, LLC; SunBehm Gas, Inc.; and other defendants. In 1968, Great Plains’ creditors initiated a bankruptcy case by filing an involuntary petition under Chapter 11 of the Bankruptcy Code. The bankruptcy court ruled Great Plains was “a bankrupt,” and the case was converted to a liquidation proceeding under Chapter 7 of the Bankruptcy Code. The trustee received permission to sell the estate’s assets, an auction sale was held, and Earl Schwartz was the winning bidder. An order confirming sale of the assets was entered; the order stated Schwartz entered into an agreement with SunBehm to purchase certain properties in the bankruptcy estate, and title was transferred on those properties directly from the estate to SunBehm. The trustee did not collect sufficient funds from the auction to pay all creditors in full. The bankruptcy case was closed in 1974. In 2013, the bankruptcy case was reopened, and a successor trustee was appointed. The successor trustee collected funds sufficient to pay “a 100 percent dividend” to the estate’s creditors, and he attempted to disburse the funds to the unpaid creditors. While the case was open various adversary proceedings were brought, including some to determine ownership of certain properties. Some of the adversary proceedings were decided, and others were dismissed for lack of jurisdiction. The bankruptcy court discharged the trustee and closed the bankruptcy case in May 2016. In December 2016, Great Plains sued ESCO, Basin, and SunBehm to quiet title to oil, gas, and other minerals in and under three properties located in McKenzie County, North Dakota. ESCO and Basin were successors in interest to Schwartz. Great Plains argued the district court erred by finding the bankruptcy trustee intended to sell all of Great Plains’ assets, including those not listed in the auction sale notice, to Earl Schwartz. The North Dakota Supreme Court concluded the district court’s decision to quiet title in favor of the defendants was based on its misapplications of the law and findings that were not supported by the evidence. The Court considered the remaining issues and arguments and concluded they were either without merit or are unnecessary to its decision. Because the court’s findings were clearly erroneous, the Supreme Court reversed the district court’s judgment deciding ownership of certain properties and dismissing Great Plains’ complaint with prejudice. The matter was remanded for further proceedings to determine the parties’ claims and ownership of the properties. View "Great Plains Royalty Corporation v. Earl Schwartz Company, et al." on Justia Law

A chapter 7 trustee sought a declaration that a refinanced mortgage only encumbered the interest of the person specifically defined within the body of the mortgage as a “Borrower/Mortgagor.” The mortgage instrument listed the co-debtor's wife as a “Borrower” in the signature block but the mortgage did not specifically name her as a “Borrower” within the text of document other than in the signature block. The bankruptcy court regarded the mortgage as ambiguous under these circumstances, considered extrinsic evidence, and concluded that the property was fully encumbered by the mortgage. Pending appeal, the Ohio Supreme Court answered certified questions, stating that the failure to identify a signatory by name within the body of the mortgage instrument did not render the agreement unenforceable against the signatory’s in rem rights as a matter of law and that when a mortgage is properly signed, initialed and acknowledged by a signatory who is not named within the document itself, the mortgage is not invalid as a matter of law. The Bankruptcy Appellate Panel affirmed, concluding that the mortgage encumbered the rights of both husband and wife. View "In re Perry" on Justia Law

Oakes filed a Chapter 7 bankruptcy petition in 2013, including Franklin, Ohio real property, valued at $160,000. PNC holds a mortgage lien on the property, which was filed in 2003. That mortgage lien was not executed in accordance with the Ohio law; Oakes’ signatures were not acknowledged before a notary public. In 2013, Ohio Rev. Code 1301.401(C) was enacted, providing that “Any person contesting the validity or effectiveness of any transaction referred to in a public record is considered to have discovered that public record and any transaction referred to in the record as of the time that the record was first filed with the secretary of state or tendered to a county recorder for recording.” The Chapter 7 Bankruptcy Trustee sought to avoid the PNC mortgage because it was not properly recorded. In the meantime, the Ohio Supreme Court held that O.R.C. 1301.401 applied to all recorded mortgages and acts to provide constructive notice of a recorded mortgage, even if that mortgage was deficiently executed. The bankruptcy court denied PNC’s motion for judgment, finding that the statutory constructive notice had no effect on a trustee’s avoidance powers as a judicial lien creditor. The Bankruptcy Appellate Panel and Sixth Circuit affirmed. A bankruptcy trustee may avoid a deficiently executed mortgage when acting as a judicial lien creditor. View "Harker v. PNC Mortgage Co." on Justia Law

In 2006 Trinity borrowed about $2 million from a bank, secured by a mortgage. The bank sold the note and mortgage to ColFin, which relied on Midland to collect the payments. In 2013, Midland recorded a “satisfaction,” stating that the loan had been paid and the mortgage released. The loan was actually still outstanding. Trinity continued paying. In 2015, ColFin realized Midland’s mistake and recorded a document canceling the satisfaction. Trinity stopped paying. ColFin filed a state court foreclosure action. Trinity commenced a bankruptcy proceeding, which stayed the foreclosure, then filed an adversary action against ColFin, contending that the release extinguished the debt and security interest. The bankruptcy court, district court, and Seventh Circuit rejected that argument and an argument that the matter was moot because the property had been sold under the bankruptcy court’s auspices. There is a live controversy about who should get the sale proceeds; 11 U.S.C. 363(m), which protects the validity of the sale, does not address the disposition of the proceeds. Under Illinois law, Trinity did not obtain rights from the 2013 filing, which was unilateral and without consideration; no one (including Trinity) detrimentally relied on the release, so ColFin could rescind it. ColFin caught the problem before Trinity filed its bankruptcy petition, so a hypothetical lien perfected on the date of the bankruptcy would have been junior to ColFin’s interest. View "Trinity 83 Development LLC v. Colfin Midwest Funding LLC" on Justia Law

The Supreme Court reversed in part the district court's judgment granting JLC Wyoming LLC a deficiency judgment against Stanley Thomas for the unpaid amount of a judgment against Fourth Quarter Properties 86 (FQP) and Thomas, holding that the district court did not credit Thomas with all payments made against an earlier judgment.FQP and Thomas obtained a $30 million loan from MetLife Insurance (MLIC) with a ranch as collateral, but when they could no longer make the payments, MLIC obtained a judgment against them for the outstanding balance plus interest (the judgment). Before the foreclosure sale, FQP filed for bankruptcy protection. MLIC purchased the ranch at a foreclosure sale. MLIC then sold its rights to the ranch and the remaining balance on the judgment to JLC. JLC obtained a deficiency judgment against Thomas for the unpaid amount of the judgment. The Supreme Court held (1) Thomas, a non-party to FQP’s bankruptcy case, was not entitled to the reduced amount FQP negotiated with MLIC in the bankruptcy case for the outstanding judgment; and (2) the district failed properly to credit Thomas for prior payments he and FQP made against the judgment. View "Thomas v. JLC Wyoming, LLC" on Justia Law

Gregory and Andrea Chernushin owned a second home in Colorado in joint tenancy with right of survivorship. Eventually, Mr. Chernushin (not Ms. Chernushin) filed for bankruptcy. During the bankruptcy proceedings, Mr. Chernushin died. The bankruptcy trustee, Robertson Cohen, then filed an adversary complaint against Ms. Chernushin, seeking to sell the home. Ms. Chernushin argued the bankruptcy estate no longer included any interest in the home because Mr. Chernushin’s joint tenancy interest ended at his death. The bankruptcy court agreed with Ms. Chernushin, as did the district court on appeal. The trustee appealed, but the Tenth Circuit concurred the bankruptcy estate had no more interest in the home than Mr. Chernushin and Mr. Chernushin’s interest extinguished when he died. View "Cohen v. Chernushin" on Justia Law

Vendors and contractors provided materials and services in connection with an offshore mineral lease. Under the Louisiana Oil Well Lien Act, La. Rev. Stat. 9:4863(A)(1), 9:4864(A)(1), they secured liens on the lessee’s operating interest upon the commencement of labor. They timely recorded the liens. The lessee later sold “term overriding royalty interests” to OHA. In the lessee’s subsequent bankruptcy proceeding, the service providers intervened, seeking to enforce their liens on OHA’s royalty interests. The district court agreed with the bankruptcy court and dismissed their complaints, concluding that the statute that created the liens extinguished them via a safe-harbor provision. The Fifth Circuit affirmed. The safe-harbor question is one of statutory interpretation: Was OHA’s purchase of the overriding royalties a purchase of “hydrocarbons that are sold or otherwise transferred in a bona fide onerous transaction by the lessee or other person who severed or owned them” at severance? The royalties were “sold,” the transaction was “bona fide,” and the seller was a “lessee.” OHA purchased more than an interest in proceeds; it purchased an interest in the to-be-produced hydrocarbons themselves. A purchase of overriding royalties is a purchase of “hydrocarbons” under the statute, so the lienholders’ failure to provide pre-purchase notice renders their liens extinguished. View "OHA Investment Corp. v. Schlumberger Technology Corp." on Justia Law

Gilman filed a voluntary Chapter 7 bankruptcy petition. Phillips was a creditor. Gilman identified properties in Van Nuys and Northridge, describing the Northridge property as “in escrow” and claiming a household exemption for the Van Nuys property, and stating “Debtor has Cancer and has not been able to work.” He did not list any contracts relating to the sale of the Van Nuys property. Gilman would later admit that escrow was open on that property when he filed for bankruptcy. Phillips filed an adversary proceeding, alleging fraud, and objected to Gilman’s homestead exemption. Gilman did not oppose the objection and did not appear at the hearing. The bankruptcy court sustained Phillips’ objections. Gilman filed an amended Schedule C, claiming a reduced exemption and obtained Rule 60(b) relief, based on his counsel’s mistaken failure to oppose Phillips’ objections. The bankruptcy court held that escrow did not eliminate Gilman’s right to a homestead exemption. The Ninth Circuit held that it had jurisdiction to review the district court’s order affirming the grant of the homestead exemption; that the bankruptcy court did not abuse its discretion in granting Rule 60(b) relief from judgment on the ground of excusable neglect; and that the bankruptcy court erred in concluding that the debtor established his claim to a homestead exemption under California law without determining whether the debtor intended to continue to reside in the property. View "Phillips v. Gilman" on Justia Law

In this consolidated appeal stemming from the bankruptcy of nineteen companies that were tenants-in-common of a student housing development called the Reserve, the Fifth Circuit reversed in part and affirmed in part the bankruptcy court's judgment. The court reversed the bankruptcy court's reduction of UTSA's share of net proceeds from 21.17% to 3.14%, based on serious procedural deficiencies, the lack of notice to UTSA regarding the imposition of a constructive trust, and the remedy's violation of the terms of the Code. The court held, however, that the bankruptcy court did not err in reducing Woodlark's proof of claims from $510,475,98 to $410,097.78. The court remanded for further proceedings. View "UTSA Apartments, LLC v. UTSA Apartments 8 LLC" on Justia Law