490 B.R. 1
Bankr. D.C.2013Background
- Bank of America, N.A. holds a mortgage/deed of trust on property in which the debtor has an interest.
- Bank failed to record the deed of trust in DC land records.
- Bank filed a civil action to compel execution of recording forms and caused lis pendens to be filed.
- Debtor filed Chapter 13 seeking to treat the lien under the plan.
- Debtor objects to the bank’s secured status relying on In re Arnold’s treatment of unrecorded liens under DC law.
- Court addresses whether unrecorded liens can be treated as enforceable secured claims and whether the debtor may use avoidance powers.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether an unrecorded DC deed of trust can be a lien and secured claim. | Bank’s lien exists as a charge against property. | Unrecorded lien should be ineffective under Arnold. | Lien remains enforceable against debtor’s property. |
| Whether debtor may avoid or defeat the lien under avoidance provisions. | Lien should be avoidable via §544 if unperfected. | Debtor cannot exercise trustee avoidance powers; plan provisions not applicable. | Debtor cannot rely on avoidance powers to render lien ineffective. |
| Effect of §502(d) and debtor’s standing to object to the claim. | Debtor can object to claim under §502(a) and §502(d) impacts. | §502(d) requires trustee power and debtor lacks standing to invoke it. | §502(d) does not authorize debtor to avoid or disallow the claim; objection allowed only to the extent permitted. |
Key Cases Cited
- In re Arnold, 483 B.R. 515 (Bankr.N.D.Ill.2012) (unrecorded mortgage treated as not per se excluded from lien; DC law differs on perfection)
- Dawson v. Thomas (In re Dawson), 411 B.R. 1 (Bankr.D.D.C.2008) (trustee avoidance powers limited to §522(h) applicability)
- Holloway v. IRS (In re Odom Antennas, Inc.), 340 F.3d 705 (8th Cir.2003) (standing to invoke §502(d) restricted to trustee powers)
- Energy Income Fund, L.P. v. Compression Solutions Co. (In re Magnolia Gas Co.), 255 B.R. 900 (Bankr.W.D.Okla.2000) (discussion of §502(d) and avoidance concepts)
- United Jersey Bank v. Morgan Guar. Trust Co. (In re Prime Motor Inns, Inc.), 135 B.R. 917 (Bankr.S.D.Fla.1992) (trustee/avoidance principles in claim objections)
- Knapper v. Bankers Trust Co. (In re Knapper), 407 F.3d 573 (3d Cir.2005) (footnote discussions on avoidance/§1325 interplay)
- Estate Constr. Co. v. Miller & Smith Holding Co., 14 F.3d 213 (4th Cir.1994) (context on avoidance/creditor rights in liens)