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In re McConville

filed: May 21, 1996.

IN RE: JAMES DELBERT MCCONVILLE, DEBTOR. TEVIS T. THOMPSON, JR., TRUSTEE, PLAINTIFF-APPELLEE,
v.
DAVID MARGEN; LAWTON ASSOCIATES, DEFENDANTS-APPELLANTS.



Appeal from the United States District Court for the Northern District of California. D.C. No. CV-94-03308-FMS. Fern M. Smith, District Judge, Presiding. Original Opinion Previously Reported at:,.

Before: James R. Browning and John T. Noonan, Jr., Circuit Judges, and Robert R. Merhige,*fn* District Judge. Opinion By Judge Noonan.

Author: Noonan

NOONAN, Circuit Judge:

David Margen and Lawton Associates (the Lenders) appeal a judgment of the district court in favor of Tevis Thompson, Jr., (the Trustee), trustee in bankruptcy of James D. and Clara M. McConville (the Debtors). The judgment held void a deed of trust given by the Debtors to the Lenders after the Debtors had filed for bankruptcy. Applying § 362(a)(4) of the Bankruptcy Code, we affirm the judgment of the district court.

FACTS

The Debtors dealt in distressed real property. On July 8, 1993, the Debtors agreed to purchase from Bayview Federal Bank (Bayview) eight apartments at 725 Elmhurst, Oakland, California (the property) for $122,000. They paid $10,000 down to Bayview, nonrefundable. The closing was set no later than 30 days from July 8. The Debtors counted on funding to be furnished by Robert Kamp. However, Kamp was unable to provide the funds by the closing date. The Debtors obtained an extension to August 13, 1993 and for this extension paid to the Bank an additional nonrefundable $5,000.

On July 14, 1993 the Debtors filed a Chapter 11 petition in bankruptcy. There is no evidence in the case that they disclosed this filing to Bayview, Kamp, or Lawton Associates, who had arranged with Kamp for him to make the loan on the property. When Kamp did not come up with the cash, Lawton Associates in conjunction with David Margen (collectively, the Lenders) agreed to make a bridge loan to the Debtors to tide them over till Kamp came through. The Lenders believed that the property was worth more than $122,000. They were told by Kamp that the Debtors' credit was good and that he was looking for other opportunities to lend to the Debtors. The Lenders had no information that the Debtors had already filed for bankruptcy. They did not require a loan statement from the Debtors and had no representation from them as to their assets and liabilities.

On August 12 the Debtors executed a note and deed of trust on the property in favor of the Lenders in the principal amount of $107,000. The note was payable in 30 days. The Lenders retained $10,000 of the loan as a fee. With the balance the Debtors acquired the property on August 13, 1991. On the same date the Lenders recorded the trust deed.

PROCEEDINGS

The Debtors' bankruptcy case was converted to a Chapter 7 proceeding on September 13, 1993 and the Trustee was appointed. The Lenders sought relief from the automatic stay to foreclose the deed of trust. The bankruptcy court denied the relief. The Trustee then filed a complaint to void the lien created by the deed of trust as an unauthorized, post-petition transfer, voidable under Bankruptcy Code § 549(a). After hearing, the bankruptcy court held that the Lenders were purchasers in good faith, but that both the execution of the deed of trust and its recordation violated the automatic stay of Bankruptcy Code § 362(a)(4) and that the transfer was not a transfer of real property to a good faith purchaser as provided in the exception created by Bankruptcy Code § 549(c). The bankruptcy court entered judgment for the Trustee, declaring that the Lenders had no lien against the proceeds of the sale of the property.

The Lenders appealed to the district court which held that a lender who acquired a lien on real property was not a "purchaser" within the meaning of § 549(c). The judgment of the bankruptcy court was affirmed.

The Lenders appeal.

ANALYSIS

The transfer of any interest after the filing of the bankruptcy petition is in literal violation of 11 U.S.C. ยง 362(a)(4), according to which a petition "operates as a stay, applicable to all entities, of. . . any act to create, perfect, or enforce any lien against property of the estate." Section 362(b)(1) through (18) creates explicit exceptions to the automatic stay. No exception is ...


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