Washington Mutual Savings Bank v. James (In Re Brooks)

79 B.R. 479, 1987 Bankr. LEXIS 905, 16 Bankr. Ct. Dec. (CRR) 992
CourtUnited States Bankruptcy Appellate Panel for the Ninth Circuit
DecidedOctober 8, 1987
DocketBAP No. WW 8-1321-AsEMe, Bankruptcy No. 86-00062
StatusPublished
Cited by42 cases

This text of 79 B.R. 479 (Washington Mutual Savings Bank v. James (In Re Brooks)) is published on Counsel Stack Legal Research, covering United States Bankruptcy Appellate Panel for the Ninth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Washington Mutual Savings Bank v. James (In Re Brooks), 79 B.R. 479, 1987 Bankr. LEXIS 905, 16 Bankr. Ct. Dec. (CRR) 992 (bap9 1987).

Opinion

OPINION

ASHLAND, Bankruptcy Judge:

Washington Mutual Savings Bank appeals from an order voiding its interest in the debtor’s real property. We must decide whether the re-recording of a deed of trust which technically violated the stay imposed by Bankruptcy Code § 362 in a husband’s bankruptcy may, on that ground, be avoided by the trustee in a wife’s subsequent bankruptcy. We hold that the lien may not be avoided and reverse.

FACTS

On October 1, 1984 Washington Mutual Savings Bank loaned approximately $60,-000 to Wiley Dean Brooks and Elna Kay Brooks, then husband and wife. The bank accepted a deed of trust on real property as security and recorded the deed on October 3, 1984.

Sometime after this transaction, the bank realized that a mistake regarding the legal description existed in the document. The bank corrected the mistake and re-recorded the deed on June 5, 1985. Unknown to the bank, on June 3, 1985, Wiley Brooks had filed a Chapter 7 bankruptcy, thereby invoking the automatic stay. 11 U.S.C. § 362.

The trustee in the Wiley Brooks bankruptcy did not object to the re-recordation by the bank. The bankruptcy court discharged Wiley Brooks on September 18, 1985.

In September 1986 Wiley and Elna Brooks divorced.

On December 6, 1986 Elna Brooks filed bankruptcy. The Chapter 7 trustee in this bankruptcy attacked the re-recordation by the bank. On March 13, 1987 the bankruptcy court held the following: the trustee could attack the deed only if it was void from its inception; Washington state law allows unilateral re-recordation to correct mutual mistakes; the act by the bank violated the automatic stay in the bankruptcy of Wiley Brooks, therefore collateral attack by Elna Brooks’ trustee was allowed. The bank timely filed this appeal on March 23, 1987.

DISCUSSION

The automatic stay provision of Bankruptcy Code § 362 benefits the debt- or. See, S.Rep. No. 95-989, 95th Cong., 2d Sess. 49 — 51 (1978). A Chapter 7 trustee has the option to avoid a lien which is created in violation of the automatic stay. Sections 541 through 549 outline the specific powers of the trustee to avoid liens and to retrieve property of the estate. 11 U.S.C. §§ 541-549.

The wording of § 549, which specifically addresses post-petition transfers, indicates that a transfer made in violation of the stay may be voidable at the trustee’s discretion. “[T]he trustee may avoid a transfer of property of the estate — (1) that occurs after the commencement of the case; ...” 11 U.S.C. § 549 (emphasis added). In re Fuel Oil Supply and Terminaling, Inc., 30 B.R. 360, 362 (Bankr.N.D.Tex.1983), states that since the stay benefits the debtor, a trustee’s avoidance powers should be viewed as discretionary. See, In re Stivers, 31 B.R. 735 (Bankr.N.D.Cal.1983).

This suggests that a post-petition transfer in violation of the stay is not absolutely void once committed, but rather voidable. Subsections (b) and (c) of § 549 describe specific instances when the trustee may not avoid certain actions. Section 549 would have no purpose if post-petition transactions were treated as absolutely void.

Moreover, even if the trustee of Wiley Brooks had no knowledge of the recorded deed, his personal knowledge is not relevant. See, In re Gurs, 27 B.R. 163 (9th Cir. BAP 1983). In Gurs the court stated that the Code does not create any extra “bona fide purchaser” rights for trustees under § 544(a)(3). A trustee must still check the public records and be aware of encumbrances as would any purchaser. See, In re Marino, 813 F.2d 1562, 1565 (9th Cir.1987).

*481 Section 549(d) states that an action to recover property may not be commenced after the case has been closed. 11 U.S.C. § 549(d)(2). See, In re Weiman, 22 B.R. 49 (9th Cir. BAP 1982); In re Wilson, 4 B.R. 605 (Bankr.E.D.Wash.1980). Wiley Brooks’ bankruptcy closed almost two years ago. Therefore, even if this court were to find the re-recordation invalid under the facts of this case, the time to avoid it has expired. The validity of the bank’s lien went uncontested by Wiley Brooks’ trustee thus the statute of limitations has run on the trustee’s avoidance powers. Other parties affected by the stay are afforded no substantive or procedural rights under these provisions of the Bankruptcy Code. In re Stivers, 31 B.R. 735 (Bankr.N.D.Cal.1988). Consequently, if the debtor or the trustee chooses not to invoke the protections of § 362, no other party may attack any acts in violation of the automatic stay.

Furthermore, Washington is a community property state in which property “acquired after marriage by either husband or wife or both[ ] is community property. Either spouse, acting alone, may manage and control community property,_” Wash. Rev.Code Ann. § 26.16.030 (1986). In Household Finance Corp. of Kelso v. Corby, 61 Wash.2d 184, 377 P.2d 441 (1963), the court stated that actions in bankruptcy court can have effects on the community property.

The marital community, consisting of the husband and wife, having the capacity under the laws of Washington to incur debts, has the right to have them discharged in bankruptcy. The [ ] agent of the marital community [ ] has the authority to file a petition in bankruptcy on behalf of the community. The petition filed by Corby (the husband) gave the bankruptcy court jurisdiction of Corby and his wife, ... and therefore, the discharge by the bankruptcy court was valid.

Household, 377 P.2d at 442-43. Additionally, a rebuttable presumption exists that actions by an agent of the marital community are for the benefit of the community. Household, 377 P.2d at 443; see, National Bank of Commerce of Seattle v. Green, 1 Wash.App. 713, 463 P.2d 187, 190 (1969). Moreover, the community property of Wiley and Elna Brooks became property of the estate in the Wiley Brooks bankruptcy. § 541(a)(2).

The trustee cites In re Sambo’s Restaurants, 754 F.2d 811 (9th Cir.1985), for the proposition that violations of stay are absolutely void. A closer look at the case reveals that it actually supports the idea that a technical violation of stay will not necessarily make that violation void. In Sambo’s,

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Cite This Page — Counsel Stack

Bluebook (online)
79 B.R. 479, 1987 Bankr. LEXIS 905, 16 Bankr. Ct. Dec. (CRR) 992, Counsel Stack Legal Research, https://law.counselstack.com/opinion/washington-mutual-savings-bank-v-james-in-re-brooks-bap9-1987.