Liebzeit v. Intercity State Bank (In re Blanchard)

MEMORANDUM DECISION

SUSAN V. KELLEY, Bankruptcy Judge.

The Trustee seeks to avoid a mortgage using the “strongarm” power of 11 U.S.C. § 544(a)(3). Under this provision, the trustee can exercise the rights and powers of a hypothetical bona fide purchaser of the debtor’s real property on the filing date. In effect, § 544(a)(3) asks: Suppose the debtor, instead of filing bankruptcy, had transferred the same real property to a bona fide purchaser who knew nothing of a claimant’s asserted interest in the property. Between the claimant and the bona fide purchaser, who would prevail under state law?…