This is an appeal by Thomas C. Richardson, the Chapter 7 Trustee (the “Trustee”), from an order of the bankruptcy court granting summary judgment to Citimortgage, Inc. (“Citimortgage”) and denying summary judgment to the Trustee on his avoidance action pursuant to Bankruptcy Code Section 544(a)(3). The Trustee argues that Citimortgage’s mortgage on the debtor’s Property was released upon the filing of a “Certificate of Discharge” and that Citimortgage’s attempt to “reperfect” the mortgage failed. Therefore, the Trustee argues that as a hypothetical bona fide purchaser he has priority over the interest of Citimortgage in the debtor’s Property.
The issue presented in this appeal is whether the bankruptcy court erred when it held that under Michigan law a trustee, standing in the shoes of a hypothetical bona fide purchaser, had constructive notice of a mortgage that had been erroneously discharged by a certificate of discharge that was subsequently rescinded.
The Bankruptcy Appellate Panel found that under the facts and circumstances of this case, a Michigan state court, in equity, would recognize the efficacy of a mortgagee’s rescission of the erroneously filed Discharge and give the mortgagee priority over holders of liens arising after the date the mortgagee filed a document in the public records making clear that the discharge was erroneously filed.
Affirmed
[gview file=”http://www.ca6.uscourts.gov/opinions.pdf/11b0007n-06.pdf”]