Strong Arm Powers: For Want of An “S” the Mortgage Was Lost

Hardesty v. Mortgage Electronic Registration Systems, Inc. (In re Boothe), 510 B.R. 154 (Bankr. S.D. Ohio 2013)

A chapter 7 trustee successfully sought to avoid a mortgage using his “strong arm” powers on the basis that the mortgage was not properly acknowledged. Once again a mortgagee paid dearly for sloppy execution of a document. Continue reading

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Lease Abatement: The Act of Eliminating or Nullifying

N. Providence, LLC v. Great Atlantic & Pacific Tea Co., Inc. (In re Great Atlantic & Pacific Tea Co., Inc.), 510 B.R. 42 (S.D.N.Y. 2014)

A lease provided that if the landlord failed to pay a construction allowance when due, the tenant debtor’s obligation to pay rent and charges abated until payment was received. The bankruptcy court interpreted this as a forfeiture provision so that the landlord was not entitled to set off the construction allowance against rents as they became due. The landlord appealed to the district court. Continue reading

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Sale Free and Clear: Permitted “Matters of Record” May Be Broader Than You Expect

In re Joan Fabrics Corp., 508 B.R. 881 (Bankr. D. Del. 2014)

The buyer of assets in a bankruptcy sale sought to enforce its asset purchase agreement against a county that was seeking to collect personal property taxes arising prior to the sale by exercising a statutory lien on the property acquired by the buyer. Continue reading

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Homestead (And Other) Exemptions: Some Fraud Counts More Than Others

Law v Siegel, 134 Sup.Ct. 1188, 188 L.Ed.2d 146 (2014) -

A bankruptcy court ordered that a debtor’s homestead exemption be surcharged to pay the attorney’s fees of a Chapter 7 incurred in overcoming the debtor’s fraud. The order was affirmed on appeal until it reached the Supreme Court. Continue reading

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Title Insurance: May Not Solve As Many Problems As You Might Expect

Amzak Capital Mgmt. v. Stewart Title of Louisiana (In re West Feliciana Acquisition, L.L.C.), 744 F.3d 352 (5th Cir 2014)

In the context of the bankruptcy proceeding to determine the validity of a mortgage, the mortgagee filed a third-party complaint against its title agent, local counsel and underwriter asserting claims for breach of contracts and negligence. The bankruptcy court granted summary judgment for the mortgagee, the district court disagreed, and the mortgagee appealed to the 5th Circuit. The decision on appeal turned on whether title insurance gives a guarantee that a mortgage is enforceable or and indemnity for losses arising from title defects. Continue reading

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Tortious Interference Claims: Something To Keep In Mind

Highland Capital Mgmt. L.P. v. UBS Securities, LLC (In re Lyondell Chemical Co.), 505 B.R. 409 (S.D.N.Y. 2014)

A hedge fund sued an investment bank for tortious interference based on its exclusion from participation in exit financing for a debtor. The bankruptcy court granted the investment banker’s motion to dismiss for failure to state a claim, and the hedge fund appealed. Continue reading

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Foreclosure Sale: In a Race With a Bankruptcy Filing, Who Wins?

RBS, Inc. v. Bell (In re Bell), 507 B.R. 898 (S.D. W.Va. 2014)

The purchaser at a foreclosure sale sought relief from the automatic stay to complete the sale. The bankruptcy court denied the request on the basis that the debtors’ interest in the property was not extinguished prior to the bankruptcy filing. The purchaser appealed, and the district court reversed. Continue reading

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