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Property Keyed to Saxer
In Re Smith
Citation:
288 B.R. 675 (W.D. N.Y., 2003).Facts
The Debtor, Scott Smith, is the owner of a residence with an asserted fair market value of $65,606. The Debtor also filed for chapter 13 bankruptcy. The Debtor purchased a home from Robert and Mary Jane Zak. The purchase was financed through two mortgages. The larger of the mortgages was given to institutional lender, PCFS Mortgage Resources, to secure a note in the amount of $68,000 and recorded on January 12, 1999. At the date of filing for his bankruptcy, the amount due on this note included a principal balance of $67,225.01 and interest of more than $4,000. The smaller of the mortgages was given to the Zaks as a purchase-money mortgage to secure a note in the amount of $16,217. As prior owners of the property, the Zaks accepted the note as partial consideration for the transfer of the title. The Zaks recorded their mortgage on January 22, 1999. The Zaks’ mortgage has no provision for subordination to the lien of PCFS and the Debtor offered no proof otherwise. At the date of the filing of bankruptcy, the Debtor owed roughly $15,000 to the Zaks on their note.
As a debtor in chapter 13 bankruptcy, the Debtor filed a motion to avoid the purchase-money mortgage of the Zaks. The Debtor argues that the mortgage of PCFS was recorded first and thus should constitute a prior lien on the property. Since this mortgage secures an obligation that is greater than the fair market value of the property, the Debtor argues that his chapter 13 bankruptcy plan can avoid the later recorded purchase-money mortgage of the Zaks.
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