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Beverly Weber obtains summary judgment in lien avoidance action
Chapter 13 Debtor filed an adversary proceeding to avoid the lien of America’s Servicing Company due to an incorrect legal description contained in its deed of trust. Prior to the bankruptcy filing, America’s Servicing and a prior lien holder (Pramco) entered into and recorded a subordination agreement that referenced ASC’s lien and contained the correct legal description of the Property. ASC filed a summary judgment motion asserting that the Chapter 13 Debtor did not have standing to avoid the lien, as that falls only under the Chapter 13 Trustee’s avoidance powers, specifically enumerated to it under Chapter 5 of the United States Bankruptcy Code. ASC’s motion also asserted that even if the Trustee or the Debtor could try to avoid the lien, they would not be able to prove that they were bona fide purchasers without notice of the ASC lien. The Debtor moved successfully to have the Chapter 13 substituted as plaintiff in the adversary proceeding, however the BKY court held that because the lien of ASC contained the correct common address of the property and the correct grantor and grantee, and because the recorded subordination agreement contained the correct legal description and referencing information of the ASC lien, the Chapter 13 Trustee had notice of the ASC lien, which defeats an essential element of a bona fide purchaser.
Case No. 06-21107, United States Bankruptcy Court for the Western District of Missouri
Adversary No. 07-02004
Memorandum Opinion dated 8/17/07, Dow, J.
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