In Re: The Woodson Company, Debtor. Fireman's Fund Insurance Companies v. William B. Grover, Trustee, and Official Unsecured Creditors' Committee

Appellant, trustee in bankruptcy, appeals from a summary judgment excluding assets from the bankrupt estate. We reverse and remand.

FACTS

In 1984, the debtor, Woodson Company (Woodson), a licensed mortgage broker, filed under chapter 11 of the Bankruptcy Code. At the time of bankruptcy Woodson had a loan portfolio worth $65 million composed of approximately 380 loans secured by deeds of trust to real estate; approximately 2,200 investors furnished the funds for the loans.

Typically, Woodson located and evaluated proposed loans and potential borrowers. Woodson Investors, Ltd. (WIL), a California limited partnership of which Woodson was the sole general partner, provided the initial financing for approved loans. WIL was the payee of promissory notes executed by the borrowers and beneficiary of deeds of trust securing the notes.

Woodson located “permanent fund” investors (permanent investors) or “revolving fund” investors (revolving investors) to “take out” the interests of the limited partnership in the loans. WIL then assigned fractional interests in specific promissory notes and deeds of trust to the investors. The assignments were recorded in the county recorder’s office.…