Tran v. Citizens Bank, N.A. (In re Tran)
- Summarized by David Treacy , U.S. Bankruptcy Court, Eastern District of Kentucky
- 7 months 1 day ago
- Case Type:
- Consumer
- Case Status:
- Affirmed
- Citation:
- No. 24-1101 (1st Circuit, Jul 01,2025) Published
- Tag(s):
-
- Ruling:
- The U.S. Court of Appeals for the First Circuit upheld a bankruptcy court's summary judgment determination that, under Massachusetts law, an affidavit of sale filed prepetition provided constructive notice of the foreclosure of the debtor's residence, extinguishing his equity of redemption. Thus, the debtor could not avoid the transfer of his equitable interest in his residence under 11 U.S.C. § 544(a)(3) even though the foreclosure deed recorded after the sale did not comply with state law.
- Procedural context:
- The First Circuit, like the bankruptcy court, assumed Debtor had standing to bring an avoidance action as a debtor in possession under 11 U.S.C.§ 522(h). However, the facts recited in the opinion suggest that Debtor, who commenced an adversary proceeding one day after filing his bankruptcy petition, did not wait for the case trustee to attempt to avoid the challenged transfer as § 522(h)(2) requires. Supreme Court Associate Justice Stephen G. Breyer (Ret.) sat on the First Circuit panel by designation.
- Facts:
- Debtor/Appellant Andy Luu Tran granted Creditor/Appellee Citizens Bank, N.A. a mortgage on his Massachusetts residence in 2008. In 2022, the Bank foreclosed on the residence via an auction and Appellee Herbert Jacobs was the high bidder. The Bank and Jacobs executed a memorandum of sale post-auction and the Bank recorded an affidavit of sale thereafter that complied with state law. A foreclosure deed also was recorded, but its form did not comply with state law. The day after Jacobs served Debtor with a notice to vacate, Debtor filed a chapter 13 petition in the U.S. Bankruptcy Court for the District of Massachusetts. The following day, Debtor filed an adversary proceeding against the Bank and Jacobs under 11 U.S.C. § 544(a)(3), "seeking to avoid what he termed the 'transfer of title' that occurred at foreclosure due to the improperly recorded deed." On cross-motions for summary judgment, the bankruptcy court, applying Massachusetts law, held (a) "the only 'transfer' that occurred at foreclosure was of [Debtor's] equity of redemption, because legal title at that point was with the Bank[;]" (b) Debtor's "equity of redemption ... was extinguished at the conclusion of the foreclosure auction by the execution of the memorandum of sale between the Bank and Jacobs[;]" (c) the improperly record deed didn't "revive" Debtor's "extinguished equity of redemption[;]" and (d) the properly recorded affidavit of sale provided constructive notice of the transfer to a hypothetical good faith purchaser such that, under § 544(a)(3), the transfer (here, the extinguishment of Debtor's equity of redemption for the residence) could not be avoided. Debtor appealed to the U.S. District Court for the District of Massachusetts, which affirmed, and then took a further appeal to the First Circuit.
- Judge(s):
- Barron, Breyer, and Kayatta
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