Chase Manhattan Bank, USA, N.A. v. Deuel (In re Deuel)

MEMORANDUM DECISION

In 2004, Chase Manhattan Bank, USA, N.A. (“Chase”) initiated this adversary proceeding. The underlying facts are set out in numerous prior decisions including, most recently, a Ninth Circuit decision decided adversely to Chase. See Chase Manhattan Bank, USA, Inc. v. Taxel (In re Deuel), 594 F.3d 1073 (9th Cir.2010). In briefest summary, Chase extended a loan to debtor Jill Deuel (“Debtor”) and her non-filing, now former spouse, Will Deuel, 2 and the Deuels used the loan proceeds, in part, to repay Chase on account of a previous loan. The Debtor executed and delivered a trust deed in order to collateralize the new loan (the “New Trust Deed”), and Chase reconveyed the trust deed securing the note evidencing the pri- or loan. What Chase inexplicably failed to do was record the New Trust Deed.

The Debtor filed her bankruptcy case and scheduled the Chase obligation as a secured claim. Chase, knowing better, initiated this adversary proceeding (the “Chase Adversary”) to quiet title to the property and to obtain a declaratory judgment that the New Trust Deed, notwithstanding its lack of perfection through recordation, constituted a senior lien enforceable against…