Manchester v. Neundorf

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Janice D. Loyd

U.S. Bankruptcy Judge

IN THE UNITED STATES BANKRUPTCY COURT

FOR THE WESTERN DISTRICT OF OKLAHOMA

In re: )

)

Brenda Gail Neundorf ) Case No. 21-11599-JDL

) Ch. 7

)

Debtor. )

)

)

Susan Manchester, Trustee )

)

Plaintiff, )

V. ) Adv. No. 21-1067-JDL

)

Brenda Gail Neundorf, Eddie Dean )

Neundorf and Douglas N. Gould, )

Bankruptcy Trustee for Eddie Dean )

Neundorf )

)

Defendants. )

OPINION AND ORDER ON MOTION FOR SUMMARY JUDGMENT

|. Introduction

During their marriage, husband and wife held a tract of real property in Joint

Tenancy. When the husband and wife got divorced, the Divorce Decree did not award

property to either party, merely reciting that “all real and personal property was separated

and handled between the parties upon separation in July 2018.” The Divorce Decree was

never filed in the office of the County Clerk so as to give public notice of any transfer of

property. Apparently consistent with the agreement of the parties and the Divorce Decree,

the wife subsequently executed a Quit Claim Deed transferring her interest in the tract of

real property to her husband. After the husband and wife got divorced both of them filed

bankruptcy. Unfortunately for the husband, the Quit Claim Deed conveying the wife’s

undivided one-half interest in the property to him was not filed of record until after the wife

had filed bankruptcy.

The bankruptcy trustee for the ex-wife filed this adversary proceeding seeking the

use of her “strong-arm powers” under 11 U.S.C. § 544(a)(3)1 to avoid the ex-wife’s transfer

of her undivided one-half interest in the property to the husband and quiet title to the

property in the name of the Debtor/ex-wife. In short, the Trustee argues that because the

Debtor did not file of record either the Divorce Decree or the subsequent Quit Claim Deed

prior to bankruptcy, the Debtor (and hence the Trustee) still owned her one-half interest

in the real property at the time that bankruptcy was commenced. In response, the Trustee

for the Defendant ex-husband concedes that the Debtor’s Trustee is entitled to a judgment

determining that the Quit Claim Deed recorded subsequent to the filing of the bankruptcy

petition of the Debtor is avoidable; however, the ex-husband’s Trustee asserts that while

the avoidance of the Quit Claim Deed places legal title back to the Debtor, Eddie Neundorf

still retained his 100% equitable title to the property by virtue of the agreement of the

1 Unless otherwise noted, all statutory references are to sections of the United States

Bankruptcy Code. 11 U.S.C. § 101 et seq.

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parties and the Divorce Decree.

The ex-wife’s Trustee has moved the Court for summary judgment. Before the

Court for consideration are the following:

1. Trustee’s Motion for Summary Judgment [Doc. 17];

2. The Trustee for the ex-husband’s Objection to Trustee’s Motion for

Summary Judgment [Doc 20];

3. Debtors Objection to Trustee’s Motion for Summary Judgment

[Doc 23];

4. Trustee’s Reply to Defendants Trustee Douglas N. Gould’s and Eddie

Neundorf’s Objections to Trustee’s Motion for Summary Judgment [Doc.

24];

5. Supplement of Exhibit 1 of Trustee’s Reply to Defendants Trustee Douglas

N. Gould’s and Eddie Neundorf’s Objections to Trustee’s Motion for

Summary Judgment [Doc. 25]; and

6. Second Supplement to Include Exhibit 3 of Trustee’s Reply to Defendants

Trustee Douglas N. Gould’s and Eddie Neundorf’s Objections to Trustees

Motion for Summary Judgment [Doc. 26].2

The following Findings of Fact and Conclusions of Law are made pursuant to Federal Rule

of Bankruptcy Procedure 7052.3

2 The Trustee’s two Supplements [Docs. 25 and 26] contain evidence that the Debtor

continued to make payments for taxes and the mortgage for the subject property after there was

an apparent agreement between the parties (though not memorialized in either the Divorce Decree

or a Quit Claim Deed filed of record prior to both the Debtor’s and the Defendant ex-husband’s

bankruptcies). Presumably, such evidence is presented for the purpose of establishing that the

Debtor treated the property as if she continued to have a one-half interest therein notwithstanding

her ex-husband’s claim of a 100% equitable interest in the property and/or keeping her undivided

one-half interest free from liens and encumbrances in the event that her ex-husband failed to meet

his financial obligations. The Court does not regard such evidence as material to the determination

of the legal issue before the Court as to whether the Trustee can successfully exercise her “strong-

arm” powers to avoid any legal or equitable transfer.

3 All future references to “Rule” or “Rules” are to the Federal Rules of Bankruptcy

Procedure, unless otherwise indicated.

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II. Jurisdiction

This Court has jurisdiction over this matter pursuant to 28 U.S.C. §§ 1334(b), and

157(a) and the Order of Reference of the United States District Court for the Western

District of Oklahoma as Local Rule LCvR 81.4(a). This matter of the trustee seeking the

avoidance of the transfer of property so as to include it as property of the estate is a core

proceeding under 28 U.S.C. § 157(b)(2)(O) over which this Court has authority to enter a

final order. Furthermore, Plaintiff and Debtor/Defendants have consented to the

jurisdiction of this Court and its ability to enter a final order pursuant to Rules 7008 and

7012. [Adv. Doc. 5, ¶ 3; Adv. Doc. 14; Adv. Doc. 24, ¶ 7]. Venue is proper pursuant to 28

U.S.C. § 1409(a).

III. Findings of Fact

The determination of whether a motion for summary judgment is to be granted is

based upon whether there are any material issues of fact which are undisputed and entitles

the moving party to judgment as a matter of law. The Court finds the following material

facts to be undisputed:

1. Debtor, Brenda Gail Neundorf (“Debtor”), and Defendant, Eddie Dean Neundorf

were husband and wife, having been married on October 17, 2002. [Adv. Doc. 20, Ex. 1,

¶ II]. During the course of their marriage, Debtor and Eddie acquired by Joint Tenancy

Warranty Deed the following described real property:

The South Half (S/2) of the North Half (N/2) of the Northeast

Quarter (NE/4) of the Southeast Quarter (SE/4) of the

Southeast Quarter (SE/4) of Section Twenty-Two (22),

Township Fourteen (14) North, Range Two (2) West of the

Indian Meridian, Oklahoma County, Oklahoma.

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(hereinafter the “Property”) [Adv. Doc. 17, Ex. A. Joint Tenancy Warranty Deed filed with

the Oklahoma County Clerk on April 26, 2006, in Book 10089, at Page 520].

2. On December 17, 2019, Debtor filed a Petition for Dissolution of Marriage

(“Divorce Petition”) against Eddie Neundorf in the District Court of Oklahoma County,

Oklahoma. [Adv. Doc. 20, Ex.1]. Paragraph VII of the Divorce Petition stated the following:

That during the marriage of the parties hereto, they have

acquired certain real and personal property and the parties

have incurred certain financial debts and obligations, all of

which were amicably divided and distributed more than twelve

(12) months ago. Petitioner will remain in the family home

located at 605 Fox Hunt Lane, Edmond, OK 73003 Terrace

and will be responsible for the debt/mortgage owed on the

family home. Respondent will receive the following real estate:

The South Half (S/2) of the North Half (N/2) of the Northeast

Quarter (NE/4) of the Southeast Quarter (SE/4) of the

Southeast Quarter (SE/4) of Section Twenty-Two (22),

Township Fourteen (14) North, Range Two (2) West of the

Indian Meridian Oklahoma County, Oklahoma, consisting of

approximately Two and One-Half (2.5) acres of land and will be

responsible for debt owed on same. Respondent will also

receive any and all farm products, including crops, cattle and

farm equipment and will also be solely responsible for any debt

associated therewith equipment.

A copy of the Divorce Petition was not filed in the office of the County Clerk of Oklahoma

County.

3. On May 20, 2020, a Decree of Dissolution of Marriage (“Divorce Decree”) was

entered in the divorce case. [Adv. Doc. 20, Ex. 2]. The fourth grammatical paragraph on

Page 2 of the Divorce Decree states: “THAT during the marriage of the parties hereto, they

acquired both real and personal property. All real and personal property was separated

and handled between the parties upon separation in July 2018.” The Divorce Decree did

not identify any real property nor make an award of such property to either party.

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4. A copy of the Divorce Decree was not filed in the office of the County Clerk of

Oklahoma County.

5. On June 10, 2021, the Debtor filed her Petition for Relief under Chapter 7. At

the time of filing her bankruptcy, the Debtor included in her Schedule A/B (Real and

Personal Property) [BK # 21-11599, Doc.1] that she owned an undivided one-half (½)

interest in the Property, consisting of 3 acres.

6. On July 13, 2020, the Debtor executed a Quit Claim Deed conveying the

Property to Eddie Neundorf. The Quit Claim Deed stated that the consideration for the

transfer of the Property was “the sum of Ten and more dollars in hand paid and also

pursuant to agreements made within the Oklahoma County District Court Divorce Case

Number FD-2019-3757.” [Adv. Doc. 17, Ex. B].

7. The Quit Claim Deed was filed in the office of the County Clerk of Oklahoma

County on August 5, 2021, in Book 14847 at page 718. [Adv. Doc. 17, Ex. B].

8. On August 9, 2021, Eddie Neundorf filed his Petition for Relief under Chapter 7.

[BK # 21-12165, Doc. 1]. In his Schedule C, Eddie Neundorf claimed the Property as his

exempt homestead. Id.

IV. Summary Judgment Standards

It is appropriate to grant a motion for summary judgment when the pleadings and

other materials in the record, together with supporting affidavits, if any, demonstrate that

there is no genuine dispute with respect to any material fact and that the moving party is

entitled to judgment as a matter of law. See Fed.R.Civ.P. 56(a), made applicable to this

adversary proceeding by Rule 7056. “[A] party seeking summary judgment always bears

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the initial responsibility of informing the . . . court of the basis for its motion, and . . . [must]

demonstrate the absence of a genuine issue of material fact.” Celotex Corp. v. Catrett,

477 U.S. 317, 323, 106 S.Ct. 2548 (1986). Courts must review the evidentiary material

submitted in support of the motion for summary judgment to ensure that the motion is

supported by evidence. If the evidence submitted in support of the summary judgment

motion does not meet the movant’s burden, then summary judgment must be denied.

Hearsay evidence cannot be considered on a motion for summary judgment. Wiley v.

United States, 20 F.3d 222, 226 (6th Cir. 1994). When considering a motion for summary

judgment, the court views the record in the light most favorable to the party opposing

summary judgment. See Deepwater Investments, Ltd. v. Jackson Hole Ski Corp., 938 F.2d

1105, 1110 (10th Cir. 1991) (the court “must view the record in a light most favorable to the

parties opposing the motion for summary judgment.”); Harris v. Beneficial Oklahoma, Inc.

(In re Harris), 209 B.R. 990, 995 (10th Cir. BAP 1997).

Denial of summary judgment requires existence of genuine material issues that “can

be resolved only by a finder of fact because they may reasonably be resolved in favor of

either party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250, 106 S.Ct. 2505 (1986).

No genuine issue of fact exists if a rational fact finder, when viewing the record as a whole,

could not find for the party opposing the summary judgment. See Matsushita Elec. Indus.

Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348 (1986) (“Where the

record taken as a whole could not lead a rational trier of fact to find for the non-moving

party, there is no ‘genuine issue for trial.’”). “[T]he nonmoving party may not rest on its

pleadings but must set forth specific facts showing that there is a genuine issue for trial as

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to those dispositive matters for which it carries the burden of proof.” Vitkus v. Beatrice Co.,

11 F.3d 1535, 1539 (10th Cir. 1993).

It is well established that the Trustee has the burden of proof when seeking the

“strong-arm power” of § 544(a)(3) to establish bona fide purchaser status. E.g. In re Jones,

308 B.R. 223, 228 (E.D. Pa. 2003); Fink v. Tower Bank & Trust Co. (In re Fink), 2005 WL

2756731 at *5-6 (N.D. Ind. 2005); In re Munoz, 2011 WL 710501 at *13 (Bankr. W.D. Tex.

2011). Here the Court must search the record to determine whether there exists any

disputed issue of material fact with regard to the Trustee’s claims against Eddie Neundorf

and/or his bankruptcy trustee to avoid summary judgment.

V. The Interplay Between Bankruptcy Code §§ 541(d) and 544(a)(3)

Section 541 broadly defines property of the estate subject to specific interests that

are excluded from estate property. In the present case, the subsections pertinent for

defining property of the bankruptcy estate are § 541(a)(1) and (3) which state:

(a) The commencement of a case under section 301, 302, or

303 of this title creates an estate. Such estate is comprised of

all the following property, wherever located and by whomever

held:

(1)Except as provided in subsections (b) and

(c)(2) of this section, all legal or equitable

interests of the debtor in property as of the

commencement of the case.

***

(3) Any interest in property that the trustee

recovers under section 329(b), 363(n), 543, 550,

553 or 723 of this title.

11 U.S.C. § 541(a)(1) and (3).

While § 541(a)(1) includes all of a debtor’s legal or equitable interests as property

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of the estate, § 541(d) operates to exclude those equitable interests of which a debtor

holds only bare legal title. Section 541(d) provides, in pertinent part:

Property in which the debtor holds, as of the commencement

of the case, only legal title and not an equitable interest, ...

becomes property of the estate under subsection (a)(1) or (2)

of this section only to the extent of the debtor’s legal title to

such property, but not to the extent of any equitable interest in

such property that the debtor does not hold.

Thus, § 541 determines what property interests constitute estate property. In order

for the Trustee to accomplish her duties to bring property into the estate, she has been

granted several powers by the Bankruptcy Code, including those found in § 544, also

known as the “strong-arm provision” powers. “Section 544 gives a bankruptcy trustee, as

of the petition date, the status of a judicial lienholder, a creditor with an unsatisfied

execution, and a bona fide purchaser of real property.” Vineyard v. McKenzie (In re Quality

Holstein Leasing), 752 F.2d 1009, 1012 (5th Cir. 1985). “The purpose of § 544 is to arm

the trustee with sufficient powers to gather in the property of the estate.” Kapila v. Atlantic

Mortgage & Investment Corp. (In re Halabi), 184 F.3d 1335, 1337 (11th Cir. 1999). In the

present case, the Trustee’s argument for summary judgment rests, in part, on subsection

544(a)(3), which provides, in pertinent part, as follows:

(a)The trustee shall have, as of the commencement of the

case, and without regard to any knowledge of the trustee or of

any creditor, the rights and powers of, or may avoid any

transfer of property of the debtor or any obligation incurred by

the debtor that is voidable by-

****

(3) a bona fide purchaser of real property, other

than fixtures, from the debtor, against whom

applicable law permits such transfer to be

perfected, that obtains the status of a bona fide

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purchaser and has perfected such transfer at the

time of the commencement of the case, whether

or not such a purchaser exists.

Under this section, as of the filing of the bankruptcy case, the trustee assumes the

rights and powers of a hypothetical bona fide purchaser of real property from the debtor.

Watkins v. Watkins, 922 F.2d 1513, 1514 (10th Cir. 1991); Soulé v. Gragg (In re Harrison),

503 B.R. 835, 842 (Bankr. N.D. Okla. 2013). This includes the right to obtain title to

property free of certain unrecorded legal or equitable interests. Id.; Morris v. Kasparek (In

re Kasparek), 426 B.R. 332, 343-44 (10th Cir. BAP 2010). The question in the present case

is whether the Trustee is entitled to the status of a “bona fide purchaser of real property”

entitling her to treat the one-half legal interest of the Debtor in the Property that had been

conveyed under the Quit Claim Deed to Eddie Neundorf as property of the estate and

under the Divorce Decree, although not clearly designated.

VI. The Trustee’s Bona Fide Purchaser Status

The actual rights and powers acquired by the trustee, although vested through

federal bankruptcy law, is governed entirely by the substantive law of the state in which the

property in question is located, which in this case is Oklahoma law. Butner v. United

States, 440 U.S. 48, 55, 99 S.Ct. 914 (1979); Hamilton v. Washington Mutual Bank FA (In

re Colon), 563 F.3d 1171, 1174 (10th Cir. 2009); Morris v. Kasparek (In re Kasparek), 426

B.R. 332 (10th Cir. BAP 2010). The extent of a trustee’s rights as a bona fide purchaser,

vis-à-vis third parties under § 544(a)(3) does not transform the trustee into a super-priority

creditor or grant the trustee powers not available to it as an actual purchaser under state

law.

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Under Oklahoma law, the Trustee’s position as a bona fide purchaser is subject to

the state’s constructive notice law. Goddard v. Heldt (In re Heldt), 528 Fed.Appx. 779, 780

(10th Cir. 2013); Watkins v. Watkins, 922 F.2d 1513, 1514 (10th Cir. 1991) (a bankruptcy

trustee is considered a BFP of a debtor’s real estate under § 544(a)(3), though interpreting

Oklahoma law as applying a constructive notice standard to determine BFP status under

that section); Mashburn v. Arzarte (In re Arzarte), 618 B.R. 535 (Bankr. W.D. Okla. 2020);

Soulé v. Gragg (In re Harrison), 503 B.R. 835, 842 (Bankr. N.D. Okla. 2013); Big Four

Petroleum Co. v. Quirk, 755 P.2d 632, 634 (Okla. 1988) (to obtain status of a BFP under

Oklahoma law, a purchaser must take the property with the “absence of notice, actual or

constructive, of outstanding rights of others”). In Oklahoma, “[c]onstructive notice is notice

imputed by the law to a person not having actual notice.” Title 25 O.S. § 12.

As stated in Harrison, 503 B.R. at 843:

“The rule is well established in [Oklahoma] that in the transfer

of real estate in the absence of actual or constructive notice of

a previous conveyance or of matters which would put a

purchaser on inquiry, a bona fide purchaser for value will take

good title to the property. However, ‘[u]nder Oklahoma law, a

purchaser of land takes the property with constructive notice of

whatever appears in the conveyances as constituting his chain

of title.’ Therefore, Oklahoma law charges the trustee with

constructive notice of any interests in property that could be

gleaned from an inspection of the state’s title recording system

as of the moment of the filing of the bankruptcy case.

(Citations omitted).

In Oklahoma, constructive notice is provided by the proper execution and filing of

record with the office of the County Clerk of the county in which the real property is located.

Unrecorded deeds are not valid against third-parties, here the Trustee. Title 16 O.S. § 15

provides as follows:

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Except as hereinafter provided, no acknowledgment or

recording shall be necessary to the validity of any deed,

mortgage, or contract relating to real estate as between the

parties thereto; but no deed, mortgage, contract, bond, lease,

or other instrument relating to real estate other than a lease for

a period not exceeding one (1) year and accompanied by

actual possession, shall be valid as against third persons

unless acknowledged and recorded as herein provided. No

judgment lien shall be binding against third persons unless the

judgment lienholder has filed his judgment in the office of the

county clerk as provided by and in accordance with Section

706 of Title 12 [12-706] of the Oklahoma Statutes.

There is no dispute that neither the Quit Claim Deed nor the Divorce Decree were

recorded in the County Clerk’s office prior to the Debtor’s bankruptcy so as to provide

Trustee with constructive notice under the filing statute; however, in addition to recording,

as a general rule, under Oklahoma law a transferee or purchaser of property is deemed

to have constructive notice of the rights of anyone in actual physical possession of the

property.4 There is an exception to that general rule where the person in possession is,

as a matter of record, a co-tenant of the property but is claiming to have acquired the title

or interest of his co-tenant.

In Harrison v. Crume, 236 P. 388 (Okla. 1925) the Oklahoma Supreme Court held

as follows:

A person dealing with one of two tenants in common is not

charged with notice of an adverse claim by the other tenant in

common who is in possession. The possession of one tenant

in common is the possession of all, and a deed from one to the

4 The only document in the divorce proceedings which described the Property was the

Divorce Petition. A Petition cannot determine rights or ownership to property. It might be arguable

that if the Divorce Petition was filed with the office of the County Clerk it could constitute a notice

of lis pendens constituting constructive notice of Eddie Neundorf’s interest and defeating the

Trustee from successfully exercising her strong-arm avoidance powers. However, the Divorce

Petition was not filed with the County Clerk.

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other, who is in possession of the common property, of the

undivided interest, which is not delivered and not recorded,

cannot affect the rights of a subsequent purchaser relying on

the record title.

Similarly, in Bader v. Bader, 1953 OK 8, 252 P.2d 427, the Oklahoma Supreme

Court stated as follows:

The possession of one tenant in common of real estate is the

possession of all, and a person dealing with one of two tenants

in common is not charged with notice of an adverse claim by

the other tenant in common, who is in possession.

****

Herein, under the record of title, the plaintiff and Waldo Bader

were tenants in common of the property. The possession of

the plaintiff was the possession of Waldo Bader. It follows that

the possession of the plaintiff was no notice to the defendant

bank, a purchaser of the interest of Waldo Bader, of any right,

title or interest which the plaintiff claimed in and to the property

other than the right, title and interest which his tenancy in

common gave him and as accorded with the record title.

Id. at 429-30. See also, Burgess v. Independent School District No. 1, 336 P.2d 1077,

1081 (Okla. 1959) (holding that 25 O.S. § 13, related to constructive notice, imposed a

duty on a purchaser to inquire as to the rights of anyone other than the record owner in

possession of real property); Schlegel v. Kinzie, 12 P.2d 223, 225 (Okla. 1932) (“[I]f there

is a deed upon record running to the person in possession, and apparently sufficient to

explain the fact of possession, then the possession may be referred to such deed, and a

subsequent purchaser is not affected with notice of any other undisclosed title or interest

which the occupant may have.”).

After analyzing the above Oklahoma decisions, this Court concluded in Arzate, 618

B.R. at 547 (quoting Harrison, 503 B.R. at 843-844, but including omitted citations):

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The trustee is also charged with a duty to inquire of any party

in possession of the property at the time of the bankruptcy

filing, if that person is anyone except the debtor. Bell v.

Protheroe, 188 P.2d 868 (Okla. 1948). The trustee is held to

have constructive notice of any facts he or she would have

gleaned had such inquiry been made regarding the rights of

any party in possession. Wade v. Burkhart, 167 P.2d 357, 358

(Okla. 1946) (“A purchaser of realty is charged with notice of

whatever rights persons in actual possession may possess.”).

Such an inquiry will reveal if the party in possession has a

claim to the property that is adverse or inconsistent with record

title. Where such a claim is adverse or inconsistent with

record title, a bona fide purchaser is charged with constructive

notice of this fact, triggering a duty to make additional inquires

regarding title to the property. Kasparek, 426 B.R. at 347-48.

(Emphasis added).

In the present case, as of the time of the Debtor’s filing of bankruptcy there was

nothing in the public record, i.e., the office of the County Clerk of Oklahoma County,

neither the Divorce Decree nor the Quit Claim Deed, that would put the Trustee on

constructive notice of any defect in the Debtor’s undivided one-half interest in the

Property. Furthermore, Eddie Neundorf’s possession at the time of the Debtor’s

bankruptcy was not inconsistent with the record title which showed the Property in the

names of both Debtor and Eddie Neundorf jointly, and thus there was no duty on the part

of the Debtor’s Trustee to make inquiry concerning Eddie Neundorf’s claim of a 100%

equitable interest in the property. Therefore, the Trustee did not have constructive notice,

either by the record of title or by Eddie Neundorf’s possession of the property, so as to

defeat bona fide purchaser status.

Eddie Neundorf’s Trustee “concede[s] that Trustee is entitled to a judgment

determining that the quit claim deed recorded subsequent to the filing date of the

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bankruptcy petition of Brenda Neundorf is avoidable ....[h]owever, Gould asserts that the

avoidance of the deed places legal title back to the Debtor and Eddie Neundorf but does

not transfer equitable title to the property to Brenda Neundorf.” [Doc. 20, page 3]. Eddie

Neundorf’s Trustee cites no authority in support of such a proposition. Such an argument

ignores the well-established law cited above that a bona fide purchaser, here the Trustee,

takes free of any unrecorded interest, legal or equitable, of which he does not have either

actual or constructive notice.

Consistent with this Court’s decision, other bankruptcy courts faced with the issue

as to a bankruptcy trustee’s avoidance powers as a bona fide purchaser for value verses

the rights of an ex-husband claiming equitable interests created by a divorce decree or

quit claim deed not filed of record have found in favor of the trustee. See e.g. In re

Claussen, 387 B.R. 249 (Bankr. D. S.D. 2007) (holding that the ex-husband and debtor’s

redistribution of equity in the marital home under an unrecorded, pre-petition divorce

agreement and divorce decree is subordinate to a trustee’s hypothetical lien powers under

§ 544(a)(1)); In re Kelley, 304 B.R. 331 (Bankr. E.D. Tenn. 2003) (holding the trustee’s

strong-arm rights in debtor’s former property, in which debtor still had record one-half

interest at the time of her bankruptcy petition was filed, despite existence of unrecorded

divorce decree awarding home to debtor’s former spouse and directing debtor to execute

a quitclaim deed in ex-spouse’s favor, was superior to ex-spouse’s interest pursuant to

the unrecorded divorce decree, such that debtor’s interest was included in “property of the

estate”); In re Brannon, 584 B.R. 417 (Bankr. N.D. Ga. 2018) (interest of debtor’s former

husband in property awarded to him by divorce court was avoidable by Chapter 7 trustee

15

in exercise of strong-arm powers of hypothetical bona fide purchaser, where no lis

pendens was filed and divorce decree was not recorded in real property records).

VII. Conclusion

The Trustee has the burden of proof when seeking the “strong-arm power” of §

544(a)(3) to establish bona fide purchaser status. E.g. In re Jones, 308 B.R. 223, 228

(E.D. Pa. 2003). Under the undisputed facts presented to the Court, the Trustee has met

that burden and qualifies as a bona fide purchaser under Oklahoma’s constructive notice

law. Therefore on the date of the Debtor’s filing of bankruptcy the Debtor’s Bankruptcy

Trustee on behalf of her Bankruptcy Estate took the Debtor’s recorded undivided one-half

interest in the Property under § 544(a)(3) free of any equitable interest asserted by her ex-

husband. The Court recognizes that this is a harsh result; however, clearly established

Oklahoma and bankruptcy law mandates the outcome. Accordingly, Trustee’s Motion for

Summary Judgment [Doc. 17] is hereby Granted.

Pursuant to Fed.R.Bankr.P. 7058, a separate judgment consistent with this Opinion

and Order is entered concurrently herewith.

# # #

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