In re Thulis, 474 B.R. 668 (Bankr. W.D. Wis. 2012) –
Typically an unrecorded mortgage will be void as against a bona fide purchaser under state law. This in turn will allow an unrecorded mortgage to be avoided in a bankruptcy using the “strong arm” powers under Section 544 of the Bankruptcy Code. Thulis reaches this result after a discussion of circumstances that may provide notice to a purchaser besides constructive notice from a recorded document. Continue reading
In re Zota Petroleums, LLC, 42 B.R. 154 (Bankr. E.D. Va. 2012) –
Zota addresses the interaction between (1) a sale free and clear of interests under Section 365(f) of the Bankruptcy Code and (2) a tenant’s right to retain possession under Section 365(h) of the Bankruptcy Code when a debtor landlord rejects the lease in a case where the debtor sold its assets, assumed and assigned its interests as a tenant under a prime lease, but rejected its interests as a landlord under a sublease. Continue reading
A typical trust fund statute provides that payments to a construction contractor are treated as funds held in trust until its subcontractors and suppliers have been paid. In the case of a contractor bankruptcy this can be a significant benefit, since the subcontractors and suppliers can argue that the trust funds should be turned over for payment since they are not even part of the bankruptcy estate since. However, sometimes the value of this protection can be illusory, as a material supplier discovered in this case while trying to defend against a preference
claim. Continue reading
Determining the priority of liens in manufactured homes owned by the debtor raised the standard question of how to classify the collateral, and thus the proper method of perfection. In particular, should a deed of trust that served as a fixture filing trump a state UCC financing statement? Continue reading
Peoples National Bank, N.A. v. Jones, 482 B.R. 257 (S.D. Ill. 2012) –
In Jones, the district court reversed the bankruptcy court and held that a standard dragnet clause in a mortgage was not sufficient to secure an advance made by the mortgagee in connection with other real estate. Continue reading
In re Diplomat Construction, Inc., 481 B.R. 215 (Bankr. N.D. Ga. 2012) –
Is there an obligation to sell to the highest bidder in a bankruptcy sale? In Diplomat Construction, the court approved a sale to a bidder that offered less than half of the offer of the highest bidder. Under normal circumstances, cash is king and the highest bidder is automatically selected as the winning purchaser. However, as illustrated by this case, occasionally there are exceptions. Continue reading
Bankruptcy-RealEstate-Insights 