Summary:
The Bankruptcy Court, subsequently affirmed by the District Court, determined that the two liens held by Bank of America against real property were void pursuant to 11 U.S.C. § 544(a)(1) because of inaccurate property descriptions. See Meade v. Bank of America (In re Meade), 2011 Bankr. LEXIS 4631, 2011 WL 5909398 (Bankr. E.D.N.C. July 29, 2011), and Bank of America v. Meade,Bank of Am. v. Meade, 2012 U.S. Dist. LEXIS 96071 (E.D.N.C. July 9, 2012). Bank of America appealed to the 4th Circuit, but failed to seek a stay pending appeal and, pursuant to the Chapter 11 plan and other orders of the Bankruptcy Court, the Debtor sold the real property free and clear of all liens. Initially the property was to be sold to a third party for $84,900, but that sale fell through when the purchaser was unable to obtain title insurance due to the pending appeal. Ultimately, the Debtor sold the real property to his sister for $42,000.
Bank of America contended that the sale, to an insider for substantially less than the tax value of the property, was not negotiated in good faith, made for a sound business purpose or price allowing maximum return for the creditors. The Bankruptcy Court held that its order allowing the sale of the real property was clear on its face and that Bank of America, having not obtained a stay pending appeal, only held the status of a general unsecured creditor. It would not, accordingly, be allowed to collaterally attack the previous order and the sale was confirmed.
Commentary:
Assuming this Order stand, this will likely moot the appeal to the 4th Circuit.
For a copy of the opinion, please see:
Meade- No Collateral Attack Allowed due to Failure to Obtain a Stay Pending Appeal.pdf
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