California Central Trust Bank-Corp. v. Been (In re Been)

OVERVIEW

California Central Trust Bank Corporation (CCTB), the holder of a $79,500 promissory note secured by a deed of trust on nonresidential real property of Chapter 7 debtor Grace E. Been, timely appeals from the order of the Bankruptcy Appellate Panel affirming the bankruptcy court’s order that Been could avoid all but $7,777 of CCTB’s judgment lien on Been’s residence under 11 U.S.C. § 522 (f). CCTB was a sold out junior lienholder in Been’s nonresidential real property when the senior lien holder conducted a nonjudicial foreclosure on the property and there were no funds to pay CCTB. The bankruptcy court concluded that CCTB’s subsequent default judgment against Been in a state action seeking judgment on the promissory note created a judicial lien on Been’s residence, which could be avoided in bankruptcy. We affirm.

FACTS AND PRIOR PROCEEDINGS

The material facts are not in dispute. On August 7, 1991, the debtor Grace Been and a third party executed a promissory note for $79,500 with Community Group Funding (CGF). The promissory note was secured by a deed of trust encumbering the nonresidential real property in Ventura County, California. The property was already subject…