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Barney v. Bank of America (In re Gifford)

Barney v. Bank of America (In re Gifford), Case No. 14-4001 (10th Cir. BAP July 24, 2015) (unpublished)
Constructive notice of the existence of a lien precludes a trustee’s avoidance of a perfected lien using section 544(a)’s strong arm powers and a debtor who grants a mortgage on her property does not retain an interest in property in that mortgage that a trustee can avoid under § 547(b).
Procedural context:
The Ch. 7 trustee brought suit in the Wyoming bankruptcy court against Bank of America’s (the “BOA”) alleging that the transfer of the mortgage by Mortgage Electronic Registration Systems, Inc. (“MERS”) was an avoidable preference under § 547, and his powers under § 544(a) allowed him to avoid the mortgage as unenforceable. Facing cross motions for summary judgment, the bankruptcy court granted BOA’s motion thereby precluding the trustee from avoiding BOA’s mortgage on debtor’s property. The 10th Circuit BAP affirmed relying in large part on the BAP’s 2012 decision in Royal v. First Interstate Bank (In re Trierweiler) in which it faced virtually identical issues. Coincidently, counsel who unsuccessfully argued the issues in Trierweiler was trustee’s counsel in this case. Reviewed de novo.
Three years prior to filing bankruptcy, debtor executed a note and mortgage in favor of Jackson State Bank and Trust (“JSB”) for the purchase of real property in Wyoming. Countrywide Home Loans, Inc. (“Countrywide”) was assigned the servicing rights and the mortgage was assigned to MERS and although the assignment did not identify MERS as agent or nominee, MERS acted as agent or nominee. The assignment to MERS was recorded. JSB transferred the note to Countrywide who was also a member of MERS and under Wyoming law, the mortgage follows the note and Countrywide became the beneficial holder of the mortgage. Countrywide then merged with the BOA and Countrywide’s servicing arm became BAC Home Loans Servicing, LP (“BAC). MERS assigned the mortgage to BAC, which assignment was recorded and about two months later, debtor filed bankruptcy. BAC subsequently merged with BOA.
Cornish, Karlin, Jacobvitz (Karlin)

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