Liebzeit v. Intercity State Bank, et al. (In re Blanchard)

Summarized by Daniel Waxman , KEWA Financial Inc.
9 years 10 months ago

Citation:

Liebzeit v. Intercity State Bank, et al. (In re Blanchard), Case No. 15-1970 (7th Cir. App. Apr. 14, 2016)

Tag(s):

Ruling:

1. Under Wisconsin law, a mortgage can properly attach a lien to a vendor's interest in a land contract. 2. The lender perfected it's lien on the vendor's interest by recording a mortgage in the land records, rather than in accordance with the filing requirements of Wisconsin's version of Article 9 of the UCC.

Procedural context:

Affirming the decisions of the District Court for the Eastern District of Wisconsin and the Bankruptcy Court for the Eastern District of Wisconsin granting summary judgment in favor of the lender and against the trustee. The Court of Appeals, however, adopted the approach taken by the Bankruptcy Court as opposed to the District Court.

Facts:

In 2010, the Blanchards agreed to sell their property to the Hoffmans pursuant to a land contract. The Hoffmans paid $30,000 up front and monthly rental payments of $500 with the balance due in 2015 (or earlier). The Blanchards obtained a mortgage which allowed them to receive the full value of their property up front; the Hoffmans would satisfy the mortgage prior to 2015. The mortgage (which included "all privileges, . . . rents, . . .issues and profits") and an assignment of rents was recorded in the property records, but the land contract was not filed, nor was an assignment of the land contract. The lender was found to have had notice of the land contract at the time of the mortgage. In 2014, the Blanchards filed for bankruptcy and the trustee sought to use his strong arm powers to avoid the mortgage, on the theory that a mortgage can only attach to real property interests and because the Blanchards had sold the property to the Hoffmans, their only remaining interest was in the land contract, which was personal property.

Judge(s):

Hamilton, Posner, Ripple

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