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Opinion 267

Case Name: 

Billings v. Cinnamon Ridge, Ltd. (In re Granada, Inc.),92 B.R. 501 (Bankr.D.Utah)

Judge: 
Judge Clark
Date: 
Oct-28-1988
Case Number(s): 
87PC-0812
Status: 

PUBLISHED

Body: 

Chapter 11 trustee filed an adversary complaint against a limited partnership, of which debtor was the general partner, seeking to quiet title to a mobile home park and adjacent unimproved property. The partnership responded that, since it held equitable title to the subject real property, trustee's 11 U.S.C. § 544(a)(3) right to stand in the shoes of a bona fide purchaser was limited by 11 U.S.C. § 541(d) to debtor's bare legal title. Therefore, the partnership argued, trustee lacked the power to avoid partnership's equitable interest under § 544. The court disagreed that § 541(d) limits trustee's avoidance powers, since § 541(d) relates only to property made part of the estate by § 541(a)(1) or (2), or to debtor's prepetition property; whereas property recovered pursuant to a trustee's avoidance powers becomes part of the bankruptcy estate through § 541(a)(3) or (4). Thus, a bankruptcy estate consists of both debtor's prepetition property and property that the trustee recovers by avoidance. In any event, the court concluded that, under Utah law, one with legal title could transfer that property to a bona fide purchaser free and clear of an unrecorded equitable interest. Partnership also claimed that trustee could not be a bona fide purchaser under 11 U.S.C. § 544(a)(3), because partnership's actual, open, and unambiguous possession of the property when the petition was filed gave trustee inquiry notice, requiring him to investigate partnership's interest. However, the court found that the facts did not support partnership's claim, since nothing about the operation/possession of the property was in conflict with debtor's record title.

Internal Ref: 
Opinion 267
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