455 B.R. 607
Bankr. E.D. Mich.2011Background
- Lebbos filed Chapter 7; Property at 29232 Lyndon St, Livonia, MI.
- WAMU originally funded $160,000 mortgage in 2004; mortgage recorded in Macomb County in error.
- WAMU (later JP Morgan successor) filed a Claim of Interest in Wayne County in 2009; attached Exhibit A with mortgage copy.
- JP Morgan sought relief from automatic stay in July 2009; Trustee did not oppose; stay relief granted.
- Debtor executed a new mortgage to JP Morgan and it was recorded September 2, 2009.
- Trustee filed adversary proceeding seeking to avoid JP Morgan’s lien under §547 or, alternatively, to declare JP Morgan’s interest unperfected under §544(a).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Effect of res judicata on Trustee’s §547/§544 claims | Trustee: stay-relief order did not adjudicate merits; res judicata not applicable. | JP Morgan: prior stay-order foreclosed later claims. | Res judicata not barred; no final merits adjudication on Trustee’s claims. |
| Effectiveness of JP Morgan’s recorded Claim of Interest under Michigan law | Claim of Interest was ineffective to perfect mortgage; mortgage remained unperfected. | Claim of Interest perfected JP Morgan’s interest; recording outside 90-day period bars §547 avoidance. | Claim of Interest did not perfect; transfer avoided under §547(e)(2)(C). |
Key Cases Cited
- Grella v. Salem Five Cent Savings Bank, 42 F.3d 26 (1st Cir. 1994) (limits of relief-from-stay scope; lien validity not adjudicated at stay hearing)
- In re Neal, 406 B.R. 288 (Bankr. E.D. Mich. 2009) (lost mortgage affidavit cannot perfect a mortgage; recording statutes violated)
- In re Camacho, 311 B.R. 186 (Bankr. E.D. Mich. 2004) (lost/missing mortgage recording; affidavit recording not always dispositive)
- Browning v. Levy, 283 F.3d 761 (6th Cir. 2002) (elements of res judicata; identity of causes of action)
- Sanders Confectionery Prods., Inc. v. Heller Financial, Inc., 973 F.2d 474 (6th Cir. 1992) (definition of identity of causes of action; scope of preclusion)