Justia U.S. 6th Circuit Court of Appeals Opinion Summaries

The debtors bought their house in 1994 and, after a Chapter 7 discharge in 2004, refinanced. The loan closed in California, although the house was in Michigan, and the debtors signed a note, but did not sign a mortgage. The loan was funded and assigned to appellant. A few months later, they filed a Chapter 13 petition and the lender produced a recorded mortgage, ostensibly signed by the debtors in Michigan. The Bankruptcy Court found that the signatures were forged. On remand from the district court, it imposed an equitable mortgage on the house. The district court reversed, finding the mortgage void ab initio. The Sixth Circuit affirmed. The district court properly considered the issue, held that the mortgage was void, and declined to impose an equitable mortgage because the assignee is subject to the defense of unclean hands, as was the original lender.

Plaintiffs paid off their home mortgage early and were charged a $30 "payoff statement fee" and a $14 "recording fee" in connection with the prepayment. They challenged the fees as violations of the mortgage contract, of state laws, and of the federal Real Estate Settlement Procedures Act, 12 U.S.C. 2601. The district court dismissed the suit as preempted by the federal Home Owners’ Loan Act, 12 U.S.C. 1461, and for failure to state a claim under RESPA. The Sixth Circuit held that the other claims were properly dismissed, but remanded a breach of contract claim. A Michigan Usury Act claim was preempted by HOLA; plaintiffs failed to state a claim under the deed recording statute, the state consumer protection law, or RESPA, which does not apply to charges imposed after the settlement. The court rejected a claim by the FDIC, appointed as receiver for the defendant-lender, that the court had been deprived of jurisdiction by the Financial Institution Reform, Recovery, and Enforcement Act, 12 U.S.C. 1281(d).

Debtors borrowed $157,291.77, secured by their home and took a second loan for $15,870, using their truck as security. They filed Chapter 7 bankruptcy protection and signed a reaffirmation agreement committing to pay those two debts. They stopped making payments; the truck had been stolen. The bank filed an unsecured claim. The trustee sought to avoid the mortgage as not properly perfected; the matter was resolved by agreement. The bank bought the property at auction, re-sold it at a profit of $33,400 and filed an unsecured claim for the full balance of the mortgage. The bankruptcy court allowed the claim; the bank received a total of about $37,000 in payments as an unsecured creditor on the two loans. The bank then sued the debtors in Kentucky state court, seeking about $89,000 on the real property loan and about $11,500 on the truck loan. The bankruptcy court reopened the case and voided the reaffirmation agreement on the ground of mutual mistake because the parties signed the agreement based on the false assumption that the bank held secured interests in the real property and the truck, which would have allowed debtors (rather than the bankruptcy estate) to retain ownership. The district court and Sixth Circuit affirmed.

In 1999 Debtor borrowed $75,558.93 secured by a recorded mortgage lien, encumbering real property and all improvements and fixtures. The property contains a manufactured home, with a plate indicating compliance with federal manufactured home standards. The lender's notes indicated that in 1997, the mobile home was gutted and rebuilt as a house. Debtor did not acquire a separate title to the manufactured home; it is unclear whether such a certificate ever issued. In 2009, Debtor filed a petition for chapter 13 relief. He sought to avoid the lien pursuant to 11 U.S.C. 544 because the Bank failed to perfect its lien on the manufactured home pursuant to Kentucky law. The bankruptcy court granted summary judgment to Debtor. The Sixth Circuit affirmed, first holding that Debtor had derivative standing to seek to avoid the lien. Regardless of the issuance of a certificate of title, Debtor has an interest in the home that is part of the bankruptcy estate. Under Kentucky law, a mobile home is personal property; perfection of a lien requires notation on the certificate of title. The mobile home had not been converted to real property and the lender did not perfect a lien on personal property.

Plaintiff is a non-profit, member-owned, water company serving rural areas of Ross County, Ohio. To finance its system, plaintiff borrowed nearly $10.6 million from the USDA. The disputed area of the county includes properties served by the city and properties served by plaintiff. Each has objected to the other's extension of new lines to the area. The district court granted plaintiff summary judgment, finding that the company is protected under the Agriculture Act, 7 U.S.C. 1926(b)(2), based on its obligations under the USDA contract, had a legal right to serve the area under a contract with the county, and did not have unclean hands. The Sixth Circuit affirmed.

Debtor owned one parcel in Wisconsin and three in Michigan. Permanently disabled and unemployed, he obtained and defaulted on mortgages. The bank began foreclosure. Debtor sold one Michigan property and gave all proceeds to the bank, which continued its Wisconsin foreclosure. In the Michigan foreclosure, the bank bid the full amount of the loan (likely more than value) and obtained a deed. Debtor filed a chapter 13 petition before the Wisconsin foreclosure sale. The bank filed a proof of claim and motion for relief from the automatic stay to reverse foreclosure on the Michigan property and proceed with the Wisconsin sale. The bankruptcy court concluded that Debtor owed the bank nothing, so there was no reason to continue the Wisconsin foreclosure. The Sixth Circuit affirmed. The bank made a unilateral mistake by bidding the entire amount of the debt at the Michigan foreclosure sale. The sale may not be invalidated, absent fraud. The bank is required by Michigan law to pay, or credit, Debtor the full amount of its bid and has been paid in full. Pursuant to 11 U.S.C. 558, Debtor is entitled to offset the Michigan sale credit bid against the Wisconsin judgment, satisfying the Wisconsin judgment so that Debtor no longer owes the bank any money.

The debtor filed a voluntary petition under Chapter 11. Prior to expiration of the 120-day deadline to assume or reject nonresidential real property leases provided for under 11 U.S.C. 365, debtor obtained a 90-day extension of time to assume or reject leases, making August 30, 2010, the deadline. On August 13, 2010, the debtor filed a second motion for an extension. The landlord would not consent and, on August 27, the trustee filed a motion to assume the lease. The bankruptcy court held that the deadline set forth in 11 U.S.C. 365(d)(4) for assuming a nonresidential real property lease is satisfied upon the debtor filing a motion to assume the lease. The Sixth Circuit affirmed.

Defendant was convicted of bank fraud (18 U.S.C. 1344) and wire fraud (18 U.S.C. 1343), based a scheme to acquire a house for $1.4 million, intending to resell for a profit. The purchase involved recruiting a third-party with good financial credit to act as nominal purchaser. Defendant and her now-deceased husband provided the straw buyer with $30,000 that she deposited in her bank account, and falsified documents so that she appeared as president of defendants' sales group since 2003, earning a salary of $30,000-to-$40,000 per month. Within months of the purchase, the loan went into default. The lien holder foreclosed and resold the house, resulting in a net loss of $376,070.16. The straw buyer was not prosecuted, but testified without a nonprosecution agreement. The Sixth Circuit affirmed denial of a motion for a new trial. The prosecution's failure to disclose that the straw buyer was testifying without an agreement was not material, for purposes of a "Brady" violation or a claim of ineffective assistance.

A state court issued a judgment in forcible detainer and a notice of eviction, which was executed by defendants. Although the warrant did not mention personal property, the landlord and county attorney advised the officers that the landlord had the right to sell tenant's personal property. Tenant was threatened with arrest for his efforts to prevent removal of his personal property. Officers apparently assisted in removing the property to a truck and sent away state police officers called by the tenant. In tenant's suit under 42 U.S.C. 1983, the district court denied the officers' motion for judgment on qualified immunity grounds. The Sixth Circuit affirmed. The officers' participation amounted to an unconstitutional seizure of property in violation of a clearly established right; there was nothing extraordinary about the situation that entitled the officers to rely on advice given by the county attorney by phone.

Plaintiff filed a voluntary Chapter 13 bankruptcy petition and successfully sought to avoid a lien on her manufactured home held by defendant. The Bankruptcy Appellate Panel and Sixth Circuit affirmed. The mortgage did not originally cover the manufactured home, which was personal property until 2007,when a state court entered an in rem judgment and order of sale converting it to an improvement to real property. After that, the home was covered by the mortgage. The conversion, unlike the mortgage, was involuntary as to the plaintiff, so she had standing under 11 U.S.C. 522(h) to avoid the lien.