655 F.3d 585
6th Cir.2011Background
- Dickson filed a July 16, 2007 Chapter 13 petition to reorganize debts.
- Countrywide held a mortgage lien on real property and a manufactured home atop it.
- State Court converted the manufactured home to real estate on June 7, 2007, via in rem judgment; home deemed to comply with KRS 186A.297.
- Countrywide failed to perfect its lien by noting it on the title or via affidavit; lis pendens could not perfect a lien on personal property.
- Bankruptcy court held Dickson had standing under §522(h) and that the lien was avoidable under §547 as a preference; Countrywide appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Standing to avoid lien under §522(h) | Dickson has standing to avoid under §522(h) as the debtor. | Dickson lacks standing; lien is consensual and Trustee should avoid. | Dickson has direct statutory standing to avoid the lien. |
| Perfection of Countrywide’s lien pre-conversion | Countrywide never perfected the lien on the manufactured home as personal property. | Lien was created by the mortgage and perfected by conversion to real property. | No perfected lien pre-conversion; lis pendens cannot perfect a lien on personal property. |
| Effect of state-court conversion on lien | Conversion did not validate or perfect Countrywide’s security interest. | Conversion created a perfected lien under the mortgage against real property. | State-court conversion binds Countrywide; upon conversion, Countrywide possessed a perfected lien. |
| Transfer at issue for §547 analysis | Transfer is the state-court judgment converting the home to real property. | Transfer is the mortgage contract itself. | State-court judgment is the operative transfer; it was within the 90-day preference window. |
| Voluntariness of the transfer under §547 | Conversion by operation of law was involuntary, triggering §547. | The transfer was voluntary via mortgage agreement. | Conversion by operation of law was involuntary; lien avoided as a preference under §547. |
Key Cases Cited
- Citizens Nat'l Bank of Jessamine Cnty. v. Washington Mut. Bank, 309 S.W.3d 792 (Ky. Ct. App. 2010) (title notation required to perfect lien; lis pendens ineffective for personal property)
- Cobbins v. Tenn. Dep’t of Transp., 566 F.3d 582 (6th Cir. 2009) (issue preclusion framework and four requirements)
- Funches v. Household Fin. Consumer Discount Co., 381 B.R. 471 (E.D. Pa. 2008) (involuntary transfer concept under 11 U.S.C. § 547 context)
- Hoffman v. Cent. Pa. Nat’l Bank (In re Hoffman), 96 B.R. 46 (W.D. Pa. 1988) (multiple transfers within a transaction; broad definition of transfer)
- Kildow v. EMC Mortg. Corp. (In re Kildow), 232 B.R. 686 (Bankr. S.D. Ohio 1999) (standing under § 522(h) requirements)