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In re Hecker

United States Bankruptcy Appellate Panel of the Eighth Circuit

August 8, 2013

In re Dennis E. HECKER, Debtor.
v.
New Buffalo Auto Sales, formerly known as New Buffalo Chrysler, LLC; Maurice J. Wagener; Palladium Holdings, LLC; GMAC Mortgage Corporation, Defendants-Appellees. Randall L. Seaver, Trustee, Plaintiff-Appellant In re Dennis E. Hecker, Debtor. Randall L. Seaver, Trustee, Plaintiff-Appellee
v.
New Buffalo Auto Sales, formerly known as New Buffalo Chrysler, LLC; Maurice J. Wagener; Palladium Holdings, LLC, Defendants-Appellees GMAC Mortgage Corporation, Defendant-Appellant.

Submitted: June 26, 2013.

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[Copyrighted Material Omitted]

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Matthew R. Burton, argued and on the brief, Minneapolis, MN, for appellant Randall L. Seaver.

Mychal A. Bruggeman, argued and on the brief, Minneapolis, MN, for appellee Maurice J. Wagener.

William P. Wassweiler, argued and on the brief, James M. Lockhart, Karla M. Vehrs, on the brief, Minneapolis, MN, for appellees New Buffalo Auto Sales and Palladium Holdings.

Keri A. Phillips, argued, Benjamin B. Bohnsack, on the brief, St. Cloud, MN, for appellant GMAC Mortgage Corporation.

Before FEDERMAN, Chief Judge, SALADINO and NAIL, Bankruptcy Judges.

FEDERMAN, Chief Judge.

Trustee Randall L. Seaver appeals from the Bankruptcy Court's Order [1] holding that he recover nothing from Defendants New Buffalo Auto Sales, LLC, Maurice J. Wagener, and Palladium Holdings, LLC, on his action to avoid a transfer which occurred when the Defendants perfected their liens on estate property postpetition. GMAC Mortgage Corporation appeals from that part of the Order holding that the automatic stay was not violated and that GMAC lacked standing in the matter. For the reasons that follow, we affirm as

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to the Trustee's appeal and dismiss GMAC's appeal for lack of appellate standing.

INTRODUCTION

These consolidated appeals relate to a home previously owned by Debtor Dennis E. Hecker. One of the appeals— arising out of an adversary action brought by the Chapter 7 Trustee in Hecker's bankruptcy case against New Buffalo Auto Sales, Maurice J. Wagener (New Buffalo's principal), and Palladium Holdings— was previously before us.[2] As relevant here, that action sought to avoid the postpetition registration of prepetition judgments by such Defendants (which perfected the judgment liens) against the property under 11 U.S.C. ยง 549. The related appeal, which is before us for the first time here, concerns whether GMAC, which held second and third mortgages on the property against which such judgments were registered, is entitled to an order voiding such registrations as being in violation of the automatic stay.

FACTUAL BACKGROUND

When Hecker filed his Chapter 7 bankruptcy petition on June 4, 2009, he owned a home in Medina, Minnesota commonly referred to as " Northridge," which was registered Torrens property.[3] Northridge was encumbered by a first mortgage in favor of U.S. Bank in the original principal amount of $250,000. It was also encumbered by second and third mortgages in favor of GMAC Mortgage Corporation (" GMAC" ) (both of which also involved MERS as nominee or co-mortgagee) totaling $900,000 in their original principal amounts. In addition, Northridge had county and federal tax liens of more than $2.6 million against it. The value of Northridge is not clear, but no one contends that the property had a value in excess of one million dollars. Thus, the property was under water by at least two million dollars.

In addition, the Koch Group, LLC obtained a prepetition judgment against Hecker in the Hennepin County District Court in the amount of $813.67 on April 29, 2009. New Buffalo and Wagener, jointly, also obtained a prepetition judgment in the amount of $324,938.72 against Hecker in the Hennepin County District Court on May 7, 2009. Wagener is a member and the chief manager of New Buffalo. Koch sold its judgment to Palladium, whose in-house counsel testified at trial that it is in the business of buying claims to properties that are subject to foreclosure proceedings. We refer to Koch and Palladium collectively as " Palladium," and to New Buffalo, Wagener, and Palladium collectively as the " Judgment Creditors."

Neither the New Buffalo/Wagener judgment nor the Palladium judgment was registered against Northridge's Certificate of Title when Hecker filed his bankruptcy petition on June 4, 2009. Under Torrens law, the judgments did not become liens against Northridge until they were registered on the Certificate of Title.[4] Therefore, at the time Hecker's bankruptcy petition was filed, the Judgment Creditors were unsecured creditors.

In September 2009, U.S. Bank (as the first lienholder) sought and obtained relief

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from the automatic stay to foreclose on Northridge. Since there clearly was no equity in the property, the Trustee did not oppose the motion. The foreclosure sale was set for January 19, 2010. Notice of U.S. Bank's foreclosure was served on December 11, 2009 by leaving a copy of the notice of foreclosure with an adult at the property. Although Hecker was not personally served with the notice of foreclosure, the parties to this action agreed in Joint Pre-Trial Stipulations of Fact filed with the Bankruptcy Court (the " Pre-Trial Stipulations" ) that he had actual knowledge of it and, in fact, discussed the foreclosure and redemption process with counsel for U.S. Bank on several occasions.[5]

On January 7, 2010, the Trustee filed a motion for approval of a settlement with Hecker, his girlfriend, and Ralph Thomas, who was a business associate of Hecker's. The agreement called for, inter alia, a $75,000 payment from Thomas to the ...


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