BUT, woman’s possession of condo constitutes constructive notice … thus, may NOT DIP avoid must diligently inspect for tenants on D’s property obtain Trustee estoppel (tenants disclaiming ownership interest to protect certificates trustee’s status as hypothetical BFP4V) In will have subjective of a prior unrecorded Ch. 11, DIP “knowledge” conveyance… BUT, may NOT have objective “notice” O conveys property to A, AND A is in possession… O, as in DIP Ch. 11, becomes hypothetical may NOT A’s interest (DIP has BFP4V DIP avoid AND “knowledge” “notice”) O conveys property to A, BUT A is NOT in possession… O, as in DIP Ch. becomes hypothetical MAY A’s interest (DIP has 11, BFP4V DIP avoid but NO “knowledge”, “notice”) If C’s unrecorded is mentioned in D’s then TD bankruptcy petition, this would constitute (trustee/DIP may NOT constructive notice avoid)… BUT, b/c would be deemed recorded on day on bankruptcy TD … (thus, recorded within 90 days of bankruptcy), then IS TD preferential (Mortgage acts as MERS Electronic Registration Service) person” “holding on behalf of mortgage as loans repeatedly assigned/transferred, records need NOT be changed (MERS remains on record as nominee) If/when attacks transaction under some judges trustee MERS § 544(a)(3), agree does NOT have interest in loans (C-lenders NOT being MERS reasonable w/ Ds, esp. considering foreclosure crisis)… BUT, C-lenders NOT being reasonable b/c have NO choice can’t write … down/modify loans (MAY render banks insolvent, AND bondholders hold veto power) is § 551 transfer avoided for the benefit of the estate but only with “preserved respect to property of the estate”… Assume property worth $1M, on property is worth $800K (NOT TD1 recorded), worth $300K trustee avoids TD2 TD1… then, (like hermit crab) occupies of NO windfall for trustee TD1 … “shell” holder of (remains TD2 undersecured)… though, state law, if holder of were NOT aware of then TD2 TD1, … would take priority over TD2 TD1 used in conjunction w/… § 551
… BUT, woman’s possession of condo constitutes constructive notice thus, DIP may NOT avoid Trustee must diligently inspect for tenants on D’s property obtain estoppel certificates (tenants disclaiming ownership interest to protect trustee’s status as hypothetical BFP4V) In Ch. 11, DIP will have subjective “knowledge” of a prior unrecorded conveyance… BUT, may NOT have objective “notice” O conveys property to A, AND A is in possession… O, as DIP in Ch. 11, becomes hypothetical BFP4V DIP may NOT avoid A’s interest (DIP has “knowledge” AND “notice”) O conveys property to A, BUT A is NOT in possession… O, as DIP in Ch. 11, becomes hypothetical BFP4V DIP MAY avoid A’s interest (DIP has “knowledge”, but NO “notice”) If C’s unrecorded TD is mentioned in D’s bankruptcy petition, then this would constitute constructive notice (trustee/DIP may NOT avoid)… … BUT, b/c TD would be deemed recorded on day on bankruptcy (thus, recorded within 90 days of bankruptcy), then TD IS preferential MERS (Mortgage Electronic Registration Service) acts as “holding person” on behalf of mortgage as loans repeatedly assigned/transferred, records need NOT be changed (MERS remains on record as nominee) If/when trustee attacks MERS transaction under § 544(a)(3), some judges agree MERS does NOT have interest in loans (C-lenders NOT being reasonable w/ Ds, esp. considering foreclosure crisis)… … BUT, C-lenders NOT being reasonable b/c have NO choice can’t write down/modify loans (MAY render banks insolvent, AND bondholders hold veto power) § 551 transfer avoided is “preserved for the benefit of the estate but only with respect to property of the estate”… Assume property worth $1M, TD1 on property is worth $800K (NOT recorded), TD2 worth $300K trustee avoids TD1… … then, trustee (like hermit crab) occupies “shell” of TD1 NO windfall for holder of TD2 (remains undersecured)… … though, state law, if holder of TD2 were NOT aware of TD1, then TD2 would take priority over TD1 § 551 used in conjunction w/…
Bankruptcy_Schechter-Fall-2009.docx