490 B.R. 236
Bankr. W.D. Ky.2013Background
- On April 2, 2001, Debtor executed a mortgage to CIT Group in the amount of $59,432.16 secured by real property at 1924 Lawrence Road, Olmstead, Kentucky, which was unrecorded.
- Debtor filed a Chapter 7 petition on November 11, 2003 (First Chapter 7 Case) and later received a discharge on March 12, 2004; no lien avoidance motions were filed during that case.
- On October 18, 2011, the debt was assigned and the Bank acquired the mortgage (CIT Group’s mortgage assigned to Vericrest and then to Bank) and recorded it on October 18, 2011.
- Debtor filed a second Chapter 7 petition on May 7, 2012.
- In 2012-2013 the Trustee sought to avoid the Bank’s mortgage as void; the Bank cross-moved seeking in rem foreclosure rights, arguing the mortgage survived the first case and validly attached to the property.
- The Court denied the Trustee’s motion and granted the Bank’s cross-motion, holding the discharge injunction covers only personal liability and not in rem rights after case closure, and that recording a post-discharge mortgage to protect liquidation priority was permissible.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the post-discharge mortgage can be avoided as void. | Trustee argues discharge voids the mortgage. | Bank argues discharge enjoined personal liability but permits in rem rights post-closure. | Mortgage survives; not voidable; in rem rights permit foreclosure. |
Key Cases Cited
- Celotex Corp. v. Catrett, 477 U.S. 317 (1986) (summary judgment standard; burden shifting on movant)
- Lashlee v. Sumner, 570 F.2d 107 (6th Cir. 1978) (summary judgment framework; genuine issues of material fact)
- Taft Broadcasting Co. v. United States, 929 F.2d 240 (6th Cir. 1991) (cross-motions for summary judgment evaluated on merits)
- Mingus Constructors, Inc. v. United States, 812 F.2d 1387 (Fed. Cir. 1987) (resolve each motion on its own merits; draw inferences against movant)
- Johnson v. Home State Bank, 501 U.S. 78 (1991) (discharge does not pay or satisfy the debt; liens survive pending avoidance)