Bezanson v. Laconia Savings Bank (In re Bertholet Enterprises, Inc.)

88 B.R. 9, 1987 Bankr. LEXIS 2265
CourtUnited States Bankruptcy Court, D. New Hampshire
DecidedDecember 29, 1987
DocketBankruptcy No. 86-282; Adv. No. 87-19
StatusPublished
Cited by3 cases

This text of 88 B.R. 9 (Bezanson v. Laconia Savings Bank (In re Bertholet Enterprises, Inc.)) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, D. New Hampshire primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Bezanson v. Laconia Savings Bank (In re Bertholet Enterprises, Inc.), 88 B.R. 9, 1987 Bankr. LEXIS 2265 (N.H. 1987).

Opinion

MEMORANDUM OPINION

JAMES E. YACOS, Bankruptcy Judge.

This adversary proceeding involves a Complaint by a bankruptcy trustee to determine the validity, priority, and extent of a lien. The Complaint raises the issue [10]*10whether a certain mortgage deed was properly executed and acknowledged by the debtor in accordance with the law of the State of New Hampshire, such that the trustee has no power to avoid a lien by defendant Laconia Savings Bank. The matter is presently before the Court upon the parties’ cross-motions for summary judgment.

The bankruptcy trustee had also filed this Complaint against Gilbert A. Lambert claiming an invalid mortgage and requesting the Court to declare the mortgage avoidable pursuant to § 544(a). The trustee had advised that he withdraws the request for relief as to Gilbert A. Lambert. Thus, the only defendant remaining before the Court is The Laconia Savings Bank.

On June 20, 1986, the debtor, Bertholet Enterprises, Inc., filed a voluntary petition pursuant to chapter 11 of the Bankruptcy Code. The case was converted to chapter 7 on February 4, 1987. As of the date of filing, the debtor was the owner of certain real estate conveyed to the debtor by Gilbert A. Lambert by Warranty Deed dated August 1, 1985 but recorded August 9, 1985. Defendant Laconia Savings Bank claims to have a secured claim in the above-referenced real estate by virtue of a Mortgage Deed dated August 9, 1985 and recorded that date. The trustee claims that the Mortgage Deed is not valid against the trustee in his status as lien creditor and bona fide purchaser, pursuant to 11 U.S.C. § 544(a)(1), (2) & (8), because the Mortgage Deed was not properly executed or acknowledged by the debtor.

Specifically, the Mortgage Deed was prepared and executed in the name of Raymond Bertholet, Jr., and not in the name of the debtor-corporation, Bertholet Enterprises, Inc. The Mortgage Deed did not contain the name of the debtor-corporation as the mortgagor at the time it was executed by Raymond Bertholet, Jr. and acknowledged by a notary public. Subsequent to the execution and acknowledgment, but pri- or to recording, a title abstractor from the Bank’s attorney’s office typed in the name of the debtor-corporation in the grantor clause and in the meaning and intending clause of the Mortgage Deed. However, the signature and acknowledgment of Raymond Bertholet, Jr. on the Mortgage Deed makes no reference to his capacity as agent of the debtor-corporation.

Nevertheless, certain facts support the conclusion that Raymond Bertholet, Jr. executed the Mortgage Deed to Laconia Savings Bank in his capacity as agent of Ber-tholet Enterprises, Inc. On July 9, 1985, prior to the conveyance of real estate from Gilbert Lambert to Bertholet Enterprises, Inc., Raymond Bertholet, Jr. directed the secretary of the corporation to indicate on the books of the corporation that appropriate authority was given to him by the corporation to act on its behalf in purchasing the real estate from Gilbert Lambert. See Minutes of Special Meeting of Stockholders and Directors, Bertholet Enterprises, Inc., dated July 9, 1985; Stipulations, Paragraph 2E, Exhibit H. The cited Minutes of July 9, 1985 specifically provide on behalf of Bertholet Enterprises, Inc. that:

“It was voted in the affirmative: to purchase Cycle-Rama, Inc. motorcycle dealership in Plaistow, New Hampshire including land, building, inventory, fixtures and equipment and to authorize the President, Raymond A. Bertholet, Jr. to sign all documents and to do all things necessary to close the transaction.”

Raymond Bertholet, Jr. is the sole shareholder and director of the debtor-corporation. This express granting of authority was relative to the transaction between Lambert and the corporation. The authorization is indicative of, and corroborates, the parties’ general understanding that Raymond Bertholet, Jr. was acting on behalf of Bertholet Enterprises, Inc. in the entire transaction regarding the purchase of the Cycle-Rama, Inc. dealership and its related real property.

On July 22,1987, after hearing oral argument on the cross-motions for summary judgment, the Court made oral rulings of fact and conclusions of law, incorporated herein by reference. The Court ruled, inter alia, that the trustee had no power as a bona fide purchaser under 11 U.S.C. § 544(a)(3) to nullify the mortgage claim by [11]*11the Laconia Savings Bank, because the sequence of events at the Registry and the documents themselves were sufficient to give constructive notice of the claim of mortgage held by Laconia Savings Bank on the real estate involved. Accordingly, insofar as the trustee’s motion for summary judgment is premised upon the trustee’s power, as a bona fide purchaser, to attack the Mortgage Deed, the motion is denied.

The issue remaining before the Court is whether the trustee’s separate avoiding capacity as a hypothetical judicial lien creditor under 11 U.S.C. § 544(a)(1), or the alternative hypothetical lien status of a creditor with execution returned unsatisfied under 11 U.S.C. § 544(a)(2), supports an avoidance of the mortgage. A related issue is Laconia Savings Bank’s CounterClaim, alleging mutual mistake and requesting reformation, to support its mortgage claim against attack, regardless of the trustee’s power as a judicial lien creditor. At the conclusion of the hearing on July 22, 1987, the Court noted tentatively, without deciding the issue, that the theory of reformation seemed to be inapplicable to the facts of this case.

The Court has already determined that the trustee had constructive notice of Laco-nia Savings Bank’s claim of mortgage. Therefore, if there is no distinction under New Hampshire law between bona fide purchasers and lien creditors in regard to the enforceability of prior equitable interests of which a subsequent purchaser or lien creditor has notice, the Court must enter summary judgment in Defendant La-conia Savings Bank’s favor. The trustee contends that, even if he did have notice of Laconia Savings Bank’s mortgage claim, the notice is immaterial as a matter of law, because the mortgage deed was invalid due to the debtor’s failure to execute or acknowledge the deed.

“[Ajlthough the trustee’s status is conferred by federal bankruptcy law, his rights vis-a-vis other parties are to be determined by reference to state law.” In re Morse, 30 B.R. 52, 54 (Bankr.App.1st Cir.1983) (citations omitted). Federal bankruptcy law provides that the trustee shall have, as of the commencement of the case, and without regard to any knowledge of the trustee, the rights and powers of hypothetical lien creditors as indicated above. § 544(a)(1) and (2). “In construing the rights of the trustee as a hypothetical ... creditor under state law as against other parties, the phrase ‘without regard to the knowledge of the trustee’ found in 11 U.S. C. § 544(a) does not give the trustee any greater rights than he, or any other person would have as a ... creditor under applicable state law.” In re Morse, 30 B.R. 52, 54 (Bankr.App.1st Cir.1983) (citations omitted).

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88 B.R. 9, 1987 Bankr. LEXIS 2265, Counsel Stack Legal Research, https://law.counselstack.com/opinion/bezanson-v-laconia-savings-bank-in-re-bertholet-enterprises-inc-nhb-1987.