Justia Real Estate & Property Law Opinion Summaries

The proceeds of a homestead sold after the filing of a petition for Chapter 7 bankruptcy remain exempt from the debtor's estate if they are not reinvested within the time frame required to invoke the proceeds rule of Texas homestead law. In Hawk v. Engelhart, 871 F.3d 287 (5th Cir. 2017), the Fifth Circuit held that funds withdrawn from an exempted retirement account after the filing of a Chapter 7 bankruptcy do not lose their exempt status even if the money is not redeposited in a similar account within 60 days pursuant to Texas's proceeds rule. In this case, the court saw no reason why Hawk's analysis should not apply to Texas's homestead exemption. Therefore, the homestead here was exempt because it was owned at the commencement of debtor's bankruptcy. Accordingly, the court reversed the district court's judgment and reinstated the bankruptcy court's order dismissing the adversary proceeding. View "Lowe v. DeBerry" on Justia Law

After a Montana state court issued a series of judgments against Donald Tangwall and his family, the family members transferred two pieces of property to the “Toni 1 Trust,” a trust allegedly created under Alaska law. A Montana state court and an Alaska bankruptcy court found that the transfers were made to avoid the judgments and were therefore fraudulent. Tangwall, the trustee of the Trust, then filed this suit, arguing that Alaska state courts have exclusive jurisdiction over such fraudulent transfer actions under AS 34.40.110(k). The Alaska Supreme Court concluded this statute could not unilaterally deprive other state and federal courts of jurisdiction, therefore it affirmed dismissal of Tangwall’s complaint. View "Toni 1 Trust v. Wacker" on Justia Law

Debtors filed a Chapter 7 bankruptcy petition. They included their interest in Franklin, Ohio real property with three mortgages. PNC held the first two. The home was “underwater.” The Trustee filed an adversary proceeding to avoid PNC’s alleged first mortgage under 11 U.S.C. 544(a)(1) and 544(a)(3) and Ohio law. The bankruptcy court stayed the proceeding pending resolution of questions of law that had been certified to the Ohio Supreme Court in another matter. The Ohio Supreme Court ultimately responded that O.R.C. 1301.401 applies to all recorded Ohio mortgages and acts to provide constructive notice to the world of a recorded mortgage that was deficiently executed under O.R.C. 5301.01. Although the parties agreed that the mortgage's acknowledgment clause was defective and did not substantially comply with section 5301.01, PNC asserted that section 1301.401 vitiates the Trustee’s power to avoid recorded mortgages based on defects in their execution as either a hypothetical bona fide purchaser under 11 U.S.C. 544(a)(3) or hypothetical judicial lien creditor under 11 U.S.C. 544(a)(1). The bankruptcy court denied a motion to dismiss. The Sixth Circuit Bankruptcy Appellate Panel affirmed, finding the Ohio Supreme Court did not address the Trustee’s avoidance powers as a hypothetical judicial lien creditor, and the Ohio Legislature did not make its amendments retroactive. View "In re Oakes" on Justia Law

Timothy and Belva Thorpe bought an Illinois house as joint tenants in 1987. They lived in that home until after Belva filed for divorce in October 2012. Timothy filed for bankruptcy protection in June 2013. A month later, an Illinois divorce court awarded Belva the marital home. At the moment Belva filed for divorce, section 503(e) of the Illinois Marriage and Dissolution of Marriage Act granted Timothy and Belva contingent rights in the entire house. The bankruptcy estate acquired Timothy’s half-interest in the marital home at the moment he declared bankruptcy. The district court held that Timothy’s estate took his half-interest subject to Belva’s contingency so that the divorce court’s award divested the estate of any right to the house. The Seventh Circuit affirmed, rejecting the trustee’s argument based on the second sentence of section 503(e), which provides that contingent interests in marital property “shall not encumber that property so as to restrict its transfer, assignment or conveyance.” The plain statutory text demonstrates that the bankruptcy estate took Timothy’s half-interest in the marital home subject to Belva’s contingent interest. View "Reinbold v. Thorpe" on Justia Law

Certain real property was sold in violation of an automatic stay from the homeowners’ bankruptcy proceedings. Because the property was situated in Nevada, and the bankruptcy proceedings commenced in Texas, the Supreme Court was presented with a purported conflict of laws issue. Appellant sought to quiet title in the district court. Respondent disputed the validity of the sale by filing a complaint in intervention. The district court granted summary judgment for Respondent, concluding that the United States Court of Appeals for the Ninth Circuit applied, Respondent had standing as a creditor enforce the automatic stay in the homeowners’ bankruptcy, and the foreclosure sale was void due to the violation of the automatic stay. On appeal, Appellant argued that the United States Court of Appeals for the Fifth Circuit law applied. The Supreme Court affirmed, holding that summary judgment was proper because, under both the Ninth and Fifth Circuits, a sale conducted during an automatic stay in bankruptcy proceedings is invalid. View "LN Management LLC Series 5105 Portraits Place v. Green Tree Loan Servicing LLC" on Justia Law

Debtor-landlord did not retain sufficient rights in rents assigned to lender for those rents to be included in landlord's bankruptcy estate. Town Center owns a 53-unit Shelby Township residential complex; its construction was financed by a $5.3 million loan owned by ECP. The mortgage included an assignment of rents to the creditor in the event of default. Rents from the complex are Town Center’s only income. Town Center defaulted. ECP sent notice to tenants in compliance with the agreement and with Mich. Comp. Laws 554.231, which allows creditors to collect rents directly from tenants of certain mortgaged properties. ECP recorded the notice documents as required by the statute. ECP filed a foreclosure complaint. A week later, Town Center filed for Chapter 11 bankruptcy relief, then owing ECP $5,329,329 plus fees and costs. The parties reached an agreement to allow Town Center to collect rents, with $15,000 per month to pay down the debt to ECP and the remainder for authorized expenses. Town Center’s bankruptcy petition resulted in an automatic stay on the state-court case, 11 U.S.C. 362(a). ECP unsuccessfully moved to prohibit Town Center from using rents collected after the petition was filed. The district vacated. The Sixth Circuit reversed; Town Center did not retain sufficient rights in the assigned rents under Michigan law for those rents to be included in the bankruptcy estate. View "In re: Town Center Flats, LLC" on Justia Law

The district court granted a request for entry of a charging order against a personal guarantor and judgment debtor’s transferable interest in an LLC. The judgment debtor and intervenor filed a motion to quash alleging that multiple levies and garnishments were improper. The district court granted the motion to quash. The Supreme Court affirmed in part and reversed in part, holding (1) the entry of the charging order was proper; but (2) the district court erred in granting the motion to quash because it is proper to have multiple levies and garnishments at the same time so long as they are under a single execution. Remanded. View "DuTrac Community Credit Union v. Hefel" on Justia Law

In 2005, the Rhode Island Supreme Court found that title to the Regatta Club in Newport and the parcel of land on which it was constructed belonged to a group of condominium associations. Thereafter, the operator of the Regatta Club (Operator) voluntarily filed for Chapter 11 bankruptcy. Two of the title-holding associations (together, Associations) filed proofs of claim seeking relief for the Operator’s alleged trespass on their property between 1998 and 2005. The First Circuit affirmed the bankruptcy court’s finding that the Associations had impliedly consented to the Operator’s use and occupancy of the Regatta Club and remanded on the issue of whether there was an implied obligation that the Operator pay the Associations for its use and occupancy of the Club. On remand, the bankruptcy court found (1) there was no such implied-in-fact contract between the parties, and (2) the Associations were not entitled to relief under a theory of unjust enrichment. The First Circuit affirmed, holding (1) no implied-in-fact contract existed between the parties; and (2) the bankruptcy court did not abuse its discretion in concluding that inequity would not result if the Operator did not pay the Associations for the use and occupancy of the Regatta Club during the claim period. View "Goat Island South Condominium Ass’n v. IDC Clambakes, Inc." on Justia Law

In 2014, Brown filed a voluntary Chapter 7 bankruptcy petition, disclosing her ownership of a residence in Ypsilanti, Michigan, valued at $170,000 and subject to $219,000 in secured mortgage claims held by two separate creditors. Brown’s initial petition stated her intent to surrender her residence to the estate and did not claim any exemptions for the value of her redemption rights under Michigan law. The Trustee sought the court’s permission to sell the house for $160,000 and to distribute the proceeds among Brown’s creditors and professionals involved in selling the home. Brown objected and sought to amend her initial disclosures to claim exemptions for the value of her redemption rights (about $23,000) under Mich. Comp. Laws 600.3240, citing 11 U.S.C. 522(d). The bankruptcy court granted the Trustee permission to sell the property and denied Brown’s requested exemptions. The district court and Sixth Circuit affirmed, reasoning that Brown lacked any equity in the property after it sold for substantially less than the value of the secured claims. View "Brown v. Ellmann" on Justia Law

Charles Breland was a developer of real property, with properties in Alabama and Florida. In 2002, Breland hired David Hudgens to provide legal services for him and his companies. According to Hudgens, Breland informed him early during their professional relationship that he "was suffering significant cash flow problems." As a result, Hudgens says, the various law firms with which Hudgens worked while providing Breland and his companies with legal services delayed billing "a significant portion of the attorneys' fees and costs" for those services. Breland disputed that, claiming that he and/or his companies paid Hudgens more than $2.7 million for Hudgens's legal services between 2004 and 2010. In 2009, Breland filed a Chapter 11 bankruptcy petition. Breland filed the required schedules, required disclosure statement, and a proposed plan of reorganization that identified Hudgens & Associates, LLC ("H&A") as an unsecured creditor holding a $1 million claim and identified ETC as an unsecured creditor holding a $390,000 claim. Hudgens filed a proof of claim in the Breland bankruptcy on behalf of H&A for "legal fees" in the amount of $2,334,987.08 and filed proofs of claim on behalf of ETC for "guaranty of note" in the amounts of $879,929.55. Breland did not make payments according to the bankruptcy reorganization plan. Breland conveyed property to Gulf Beach Investment Company of Perdido, LLC which Hudgens alleged was in violation of the reorganization plan. Hudgens filed suit against Breland and Gulf Beach seeking enforcement of the plan, monies owed under the plan, and to void transfer of the property to Gulf Beach. The trial court entered a judgment on the parties' motions for a partial summary judgment, noting that it was not addressing the plaintiffs' "mortgage claim" because it had denied that claim in a September 2015 order. After setting forth extensive findings of fact and conclusions of law, the trial court awarded the plaintiffs $2,189,342.96 (consisting of $1.5 million in principal, plus interest); "denied and dismissed" the defendants' fraud, breach-of-contract, and slander-of-title claims; and certified the judgment as final pursuant to Rule 54(b). The trial court denied the defendants' postjudgment motion, and the defendants appealed. That case was assigned case no. 1150876, and the Alabama Supreme Court consolidated case nos. 1150302 and 1150876 for the purpose of writing one opinion. After review, the Court dismissed both appeals, finding the trial court exceeded its discretion in certifying as final the underlying appeals. View "Equity Trust Co. v. Breland" on Justia Law