Domum Locis, Inc. v. LLoyds TSB Bank PLC (In re Domum Locis, Inc.)

Citation:
United States Bankruptcy Appellate Panel of the Ninth Circuit, BAP Nos. CC-14-1571 and CC-14-1572
Tag(s):
Ruling:
Transfer of title to property in violation of order appointing a receiver is not void and title to the property becomes property of the transferee's bankruptcy estate.
Procedural context:
Appeal from order of Bankruptcy Court determining that property was not property of the debtor's bankruptcy estate.
Facts:
Borrower borrowed $9 million from Bank secured by real property. Borrower defaulted and Bank obtained appointment of a receiver and a related order enjoining Borrower from transferring the property. Borrower then transferred title to the property to the Debtor, which was wholly-owned by Borrower, and then Debtor filed a chapter 11 petition. The parties then sought a determination of whether the property was property of the estate. The Bankruptcy Court ruled that because the property was in custodia legis of the state court, any transfer without the permission of the state court was void, so the property was not property of the Debtor's estate. The BAP reversed, holding that title to property in the control of a receiver remains with the legal owner, so any transfer by the legal owner is voidable by the state court and punishable by contempt, but not void. The BAP also held that cause existed to grant Bank relief from the stay to allow the state court to determine whether to unwind the transfer.
Judge(s):
Dunn, Kirscher and Brandt

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