# Warfel, Jr. v. 21st Mortgage Corporation

> United States Bankruptcy Court, W.D. Wisconsin · August 9, 2023

URL: https://www.frixlaw.com/law-library/cases/10463468

## Case

- **Court:** United States Bankruptcy Court, W.D. Wisconsin
- **Decided:** August 9, 2023
- **Opinion:** 100trialcourt
- **Cited by:** 0 later opinions in the Frix Law Library

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## Opinion text

UNITED STATES BANKRUPTCY COURT
WESTERN DISTRICT OF WISCONSIN

In re:
Case Number: 20-11651-13
DAVID LESTER WARFEL, JR.,
and JEANNE MARIE WARFEL,

Debtor.

DAVID LESTER WARFEL, JR.,
JEANNE MARIE WARFEL, and
MARK HARRING,

Plaintiffs,
v.
Adversary Number: 21-00002
21ST MORTGAGE CORPORATION,

Defendant.

DECISION ON TRUSTEE’S COMPLAINT TO AVOID
DEFENDANT 21ST MORTGAGE CORPORATION’S
LIEN PURSUANT TO 11 U.S.C. § 544

David and Jeanne Warfel (“Plaintiffs”) filed a voluntary petition for relief
under Chapter 13 of the Bankruptcy Code on June 25, 2020. Jeanne Warfel
previously borrowed $129,703 from 21st Mortgage Corporation (“Defendant”) to
fund her purchase of a 28’ x 53’ manufactured home. She signed a promissory
note and granted Defendant a security interest. The home was delivered and
set in place on land Plaintiffs had purchased in a prior year.1 Defendant filed a
Proof of Claim asserting it had a perfected security in the manufactured home.

1 The land was purchased from another person in 2017 who financed it.
On January 11, 2021, Plaintiffs began an adversary proceeding against
the Defendant to avoid the lien on the manufactured home pursuant to 11
U.S.C. § 544(b)(1). A motion to dismiss the adversary proceeding was filed by
the Defendant. The motion alleged the Plaintiffs did not have standing to bring

an avoidance action under section 544(b)(1). Further that Defendant has a
properly perfected security interest in the manufactured home.
This Court denied the motion, concluding that the Plaintiffs did have
standing. A trial was held on the matter, and the Court granted judgment to
the Plaintiffs, ordering that the Defendant’s lien be avoided under section
544(b)(1).
Defendant appealed the decision to the District Court. The District Court
reversed this Court's order agreeing with the contention that “the Warfels don’t

have the right to file an adversary proceeding under § 544.” (ECF No. 56 p. 1).
Thus it was unnecessary for the District Court to consider whether the lien was
properly perfected or whether section 544 authorizes avoidance of an
unperfected lien. Id. It found that the Bankruptcy Code reserved this right to
the trustee. It also remarked that “one leading treatise suggested that the
debtor may name the trustee as a plaintiff to comply with § 544.” (citing Robert
E. Ginsberg, Robert D. Martin & Catherine J. Furay, Ginsberg and Martin on
Bankruptcy § 15.03[D]).

The case was remanded for further proceedings consistent with the
opinion of the District Court. At an initial status hearing after remand, the
possibility of amending the complaint was raised by the Plaintiffs. They asked
for a brief adjournment to confer with the Trustee about his willingness to be
named as a plaintiff. Defendant noted it would object to any amendment but
did not object to a brief adjournment.
A second status hearing occurred. The parties agreed that derivative

standing had been waived. The Trustee stated he would be willing to be added
as a plaintiff. Defendant was asked for argument. Counsel for Defendant
reiterated her view that joinder of the Trustee had been waived under any
alternative. Further that any claim by the Trustee would be barred by the two-
year statute of limitations.
The Court on its own ordered that the Trustee be joined under Fed. R.
Bankr. P. 7021 (incorporating Fed. R. Civ. P. 21), further noting he is an
indispensable party.2 Counsel for the Plaintiffs stated an amended complaint

could be prepared and sent to counsel for the Trustee within two weeks. The
Court ordered that it be filed by February 20, 2023.
An amended complaint was filed. The Trustee was named as the plaintiff.
The amended complaint claimed that the Defendant's lien is unperfected and
avoidable under section 544. Other than the joinder of the Trustee, the claims
and relief sought in the amended complaint are identical to the original
complaint. Defendant filed an answer restating its position that its lien was
properly perfected. It also asserted the claim of the Trustee was barred by a

2 Defendant filed a notice of appeal of this interlocutory decision. The District Court
denied the appeal as premature, noting that Defendant could request reconsideration
in the bankruptcy court. (ECF No. 73).
statute of limitations, and that the ability of the Plaintiffs to add or substitute
the Trustee had been waived.
A motion to reconsider joinder was filed by Defendant. It contained
extensive argument. A hearing on that motion was held.

Defendant confirmed:
 There was a final hearing on the original complaint in February
2022;
 Defendant had the opportunity to present all evidence about
whether the manufactured home was a fixture or a moveable;
 Defendant could not identify any newly discovered evidence that
could not have been presented at the trial; and

 There are no issues of fact about whether the lien is avoidable.
The parties agreed that the only issues to be decided were legal issues.
Specifically whether (1) joinder of the Trustee was proper; (2) whether a claim
by the Trustee is time barred by a statute of limitations; and (3) whether the
lien was avoidable.
A briefing schedule was set. Defendant has submitted its brief. The Court
has considered Defendant’s arguments.
DISCUSSION

I. Jurisdiction
Defendant argues that this Court improperly used Fed. R. Bankr. P.
7021 to join the Trustee in the adversary proceeding. It claims the use of the
Rule was improper because parties cannot be joined post-judgment. And it
says joinder had been forfeited by the Plaintiffs. Finally, joinder results in
undue prejudice to both the Defendant and to unsecured creditors according to
Defendant.
If joinder was proper, Defendant argues that the amended complaint

should be considered new. Defendant posits that if treated as a new complaint
it would be, therefore, barred by the statute of limitations under 11 U.S.C.
§ 546.
This Court has jurisdiction under 28 U.S.C. §§ 1334 and 157(a). Venue
is proper in this Court as provided in 28 U.S.C. § 1409. This is a core
proceeding under 28 U.S.C. § 157(b)(2). The Court may enter final judgment.
28 U.S.C. § 157(b)(1).
II. Joinder of Trustee is Proper

A. This Court has the Authority to Join the Trustee Under Federal Rule of
Bankruptcy Procedure 7021.

The Defendant argues that the Plaintiffs cannot join the Trustee under
Fed. R. Bankr. P. 7021 (incorporating Fed. R. Civ. P. 21). Rule 21 provides that:
Misjoinder of parties is not a ground for dismissing an action. On
motion or on its own, the court may at any time, on just terms, add
or drop a party.

Fed R. Civ. P. 21 (emphasis added). The Defendant argues that because the
Plaintiffs lacked standing when they filed the original complaint, they cannot
use Rule 21 to gain standing post judgment.
This is a mischaracterization of how the joinder occurred. Plaintiffs did
not file a motion. This Court ordered joinder of the Trustee on its own under
Rule 7021. As provided, Rule 21 may be invoked by the Court on its own. The
Trustee could not have been joined without an order from this Court, even if
Plaintiffs had filed a motion. 3 Moore’s Federal Practice § 21.02[3] (Matthew
Bender 3d ed.). So the necessary determination is whether the joinder order by
this Court on its own was proper.

Rule 21 itself dictates that it might be used “at any time.” It has been
established that courts have discretion to make orders under Rule 21 even
after judgment has been rendered. See Newman-Green, Inc. v. Alfonzo-Larrain,
490 U.S. 826, 832 (1989). The Defendant fails to make an argument showing
that despite this clear language, joinder is impermissible because the Plaintiffs
did not have standing when they filed the original complaint.
Their argument relies largely on invoking Cole v. James B. Nutter & Co.
(In re Cole), 563 B.R. 526, 530-31 (Bankr. W.D.N.C. 2017). That case is not

binding on this Court. And it fails to show why application of Rule 21 is
inappropriate given the facts here. In Cole, plaintiffs filed a complaint and
listed claims under sections 544(b), 547(b), and 548 only to find that they did
not have standing. Id. at 530. The court refused to order joinder of the trustee
to facilitate the continuation of the actions. Id.
But Cole involved the involuntary joinder of a trustee under Fed. R. Civ.
P. 19 (incorporated by Fed. R. of Bankr. P. 7019), not Rule 21. Id. at 531. The
court in Cole distinguished the circumstances in Cole from Wood v. Mize (In re

Wood), 301 B.R. 558, 562 (Bankr. W.D. Mo. 2003). The court in Wood allowed a
Chapter 13 trustee to be joined as an indispensable party plaintiff after finding
that the debtors did not have independent standing to pursue a claim under
§ 547. See id., 301 B.R. at 562–63. It remarked that:
In this Court's view, the trustee is an indispensable party within the
context of this proceeding because he is the only person with
standing to bring the action and full relief cannot be accorded the
creditors of the estate without his joinder.

Wood, 301 B.R. at 562.
The court in Cole distinguished between the cases because there was no
indication in Wood that the trustee resisted joinder, while the plaintiffs in Cole
were requesting that the court join the trustee under protest. Id.; Cole, 563
B.R. at 531. The Defendant is therefore incorrect when it interprets Cole to
mean that voluntary parties cannot be joined to a complaint if the original filer
lacked standing. See id.
The Defendant fails to draw a parallel between Cole and the present case.
Cole involved a motion by debtor under Rule 19, but this case involves use of
Rule 21 by the Court. The trustee in Cole was resisting joinder, while the
Trustee in this case willingly participates in the action. This case is more like
Wood: the Trustee is an indispensable party, without whom the action cannot
continue, and the Trustee was joined willingly. Wood, 301 B.R. at 562.
Therefore, application of these cases would suggest that joinder of the Trustee
was proper here. Given these considerations, the Defendant’s use of Cole
cannot overcome the plain meaning of Rule 21, which allows joinder “at any
time.”
The Defendant also contends that the District Court was wrong to rely on
Ginsberg and Martin in suggesting that the debtor may name the trustee as a
plaintiff to comply with section 544. Ginsberg and Martin states that “[i]n the
appropriate case, naming the trustee as a party plaintiff may solve the standing

issue.” Ginsberg and Martin on Bankruptcy § 15.03[D]. The Defendant bases its
assertion on the fact that Ginsberg and Martin relies on Montgomery v. Dennis
Joslin Co. II, LLC (In re Montgomery), 262 B.R. 772, 776 (B.A.P. 8th Cir. 2001).
It is true that Montgomery does not directly apply here. It decided that
the avoidability of a lien should not be considered when determining whether
the court should grant relief from stay under section 362. Montgomery, 262
B.R. at 775-76. The correct process to argue avoidance would have been an
adversary proceeding, and the plaintiff would either need to invoke derivative

standing or join the Chapter 13 trustee as a plaintiff. See id. There was no
adversary.
This does not mean that Ginsberg and Martin is wrong. Other courts
have allowed a Chapter 13 trustee to be named as a party plaintiff in an
amended complaint to pursue a Chapter 5 recovery. In Gardner v. Tyson (In re
Gardner), 218 B.R. 338, 342–44 (Bankr. E.D. Pa. 1998), the court permitted a
Chapter 13 debtor to maintain a fraudulent transfer action by adding the
Chapter 13 trustee as a party plaintiff. That same court later distinguished

voluntary and involuntary joinder, ruling that a trustee could not be joined
involuntarily to an action under section 544 given the requirements of Rule 19.
See Funches v. Household Fin. Consumer Discount Co. (In re Funches), 381 B.R.
471, 487 (Bankr. E.D. Pa. 2008). Courts in multiple other jurisdictions have
ruled similarly. See, e.g., Portuesi v. Bank of New York Mellon Trust Co. (In re
Portuesi), No. 19-11275, Adv. No. 20-2018, 2021 WL 2189014, at *4 (Bankr.
M.D.N.C. May 28, 2021) (allowing debtors to file an amended complaint naming

Chapter 13 trustee as plaintiff to use section 544 avoiding power); Bank of New
York v. Sheeley (In re Sheeley), No. 08-32316, Adv. No. 11-3028, 2012 Bankr.
LEXIS 1374 (Bankr. S.D. Ohio Apr. 2, 2012) (adding Chapter 13 trustee as an
indispensable party in amended complaint under Rule 19).
Thus, this Court finds that joinder of the Trustee was a proper
application of Rule 21, as a lack of standing when the original complaint was
filed does not render joinder improper.
B. Joinder is Not Precluded by “Undue Prejudice” to the Defendant or
Unsecured Creditors.

It has been established that if joinder would create “prejudice, expense or
delay,” the court may deny joinder under Rule 21. Chavez v. Illinois State
Police, 251 F.3d 612, 632 (7th Cir. 2001). But the Defendant fails to show how
issuing the joinder order prejudices them so “unduly” that a reversal of the
joinder order is warranted.
The Defendant argues it has experienced prejudice because this Court
failed to join the Trustee earlier. It claims that the Court should be looking at
“whether joinder will force a defendant to change a litigation strategy in pursuit
of which resources have already been expended.” Aigeltinger v. Target Corp.,
No. 5:21-CV-745, 2022 U.S. Dist. LEXIS 206679, at *8 (N.D.N.Y. Nov. 15,
2022) (internal quotation omitted). It alleges that this is how they have been
prejudiced, pointing to their added efforts to litigate this matter since the
joinder order. But the merits of the claim were fully litigated before the joinder
order. None of the litigation efforts following joinder have dealt with the merits

of the dispute. Instead, Defendant has simply been focused on avoiding the
merits.
Plaintiffs are correct that in exercising its discretion courts must
consider “principles of fundamental fairness” and judicial efficiency. Intercon
Research Assocs., Ltd. v. Dresser Indus., Inc., 696 F.2d 53, 58 (7th Cir. 1982). If
a party is forced to investigate new facts or allegations because of a joinder
order, and this would be laborious enough to become prejudicial, a court could
decline to make an order under Rule 21. See id.; Moore’s at 21.02[4].

But the Defendant does not state how the joinder order has forced it to
change its litigation strategy. It admits it has not been forced to investigate new
facts or claims. The substantive issues have already been tried. There are no
new facts or arguments about whether the manufactured home is a fixture or
whether there was proper perfection. No further investigation was required.
Other than the identity of the Plaintiff, there are no new allegations to be
investigated. Even if the Trustee had been joined earlier, the arguments and
facts presented at trial would have been the same.

Essentially, the Defendant is arguing that joinder prejudices them
because this litigation has been allowed to continue to decision on the merits
rather than being dismissed on a technicality. As the case they cite says,
prejudice factors in when a party is forced to expend resources to change their
litigation strategy after claims or parties are added. See Aigeltinger, No. 5:21-
CV-745, 2022 U.S. Dist. LEXIS 206679, at *8.
Not only do courts have wide discretion to act under Rule 21, but the

rule itself dictates that “misjoinder of parties is not a ground for dismissing an
action.” Chavez, 251 F.3d at 632. For this reason, it is erroneous to suggest
that this Court’s use of Rule 21 to correct misjoinder is improper because it
prevented dismissal of this action. Correction of misjoinder was precisely what
occurred here: the Trustee was joined because the Court found he was the
appropriate plaintiff and so was an indispensable party. Without the Trustee,
the action could not continue.
Use of Rule 21 to prevent statute of limitations consequences is a valid

and sometimes obligatory use of the rule. See Lee v. Cook Cnty., 635 F.3d 969,
971–72 (7th Cir. 2011) (“[The judge’s] order dismissing the original suit and
directing [plaintiffs] to file new actions violated Rule 21 . . . . [t]here’s a reason
why Rule 21 reads as it does: When a federal civil action is dismissed without
prejudice, the statute of limitations runs continuously.”); see also Elmore v.
Henderson, 227 F.3d 1009, 1012 (7th Cir. 2000) (it is improper for the district
court to dismiss misjoined claims when there is a risk of “statute of limitations
consequences”).

As a result, this Court finds that use of Rule 21 to correct misjoinder is
proper, and the continuance of this action does not “unduly prejudice” the
Defendant.
a. There is No Prejudice to Unsecured Creditors.
The Defendant also argues that the joinder of the Trustee and the
avoidance of its lien prejudices the unsecured creditors. They contend that
because of the Plaintiffs’ failure to provide for payment of what it considers to

be the value of its lien into the plan, “all unsecured creditors will be prejudiced
by not receiving what they are entitled to under the Plan.”
This argument is flawed for two reasons. First, consideration of prejudice
under Rule 21 focuses on the parties in the litigation, not on nonparties.
Second, the effect of avoidance on general unsecured creditors is a plan
confirmation issue under section 1325, not whether there is an avoidable lien.
Whether the Plan is in the best interests of creditors is something that
must be determined at a plan confirmation hearing. The parties agreed that a

decision on avoidance of the lien needed to be decided before any hearing on
objections to confirmation of a plan. So trial on the avoidability of the lien is
separate from the decision on the sufficiency of proposed plan payments even
though it may directly affect that decision. As a result, the value—if any—of the
asserted lien is irrelevant to whether the Trustee can be joined in the adversary
proceeding. Objections to the Plaintiffs’ plan do not belong in the adversary and
will be addressed in the main bankruptcy case.
The argument emphasizes a misunderstanding of the interest of general

unsecured creditors. If the lien is not avoided, then payment would be required
to Defendant. None of the value would be paid to unsecured creditors. And
payment to Defendant would limit any funds available for unsecured creditors.
The actual plan confirmation standard is whether the unsecured creditors
would be paid at least as much as they would receive in a Chapter 7.
It is undisputed that Debtors could bring a lien avoidance action in their
own name in a Chapter 7. If avoided, they would also have a right to claim any

equity exempt up to the allowable statutory limits. The amount that would then
be available for unsecured creditors—including Defendant—would be
calculated. That is the proper measure of whether unsecured creditors are
receiving what is required under 11 U.S.C. § 1325(a)(4). The measure is not
whether the purported full value of the lien is paid to unsecured creditors.
C. Joinder Was Not Forfeited Because the Plaintiffs Failed to Raise it
Before This Court’s Trial Decision.

The Defendant argues that the Plaintiffs forfeited any joinder argument
by failing to raise it before trial.3 The Plaintiffs did not move to join the Trustee,
nor do they have the power to independently join a party under Rule 21, which
“may be invoked only by court order.” Moore’s at 21.02 [3]. It has been
established that Rule 21 can be used “at any time,” even after judgment or on
appeal. Newman-Green, Inc., 490 U.S. at 832. Application of joinder should
reflect principles of “fundamental fairness,” but otherwise courts are given wide
discretion when it comes to permissive joinder. See Chavez, 251 F.3d at 632;
Intercon Research Associates, Ltd., 696 F.2d at 58.
The Defendant points to cases that refer to (1) forfeiture of an argument
by failing to develop it or cite any case law to support it and (2) an incarcerated

3 Defendant also argues that derivative standing has been forfeited, but this point is
irrelevant because this Court and Plaintiffs are in agreement.
appellant not being able raise unrelated issues on remand that could have
been raised in his first appeal. See NeuroGrafix v. Brainlab, Inc., No. 12 C 6075,
2020 U.S. Dist. LEXIS 172920, at *22-23; United States v. Parker, 101 F.3d
527, 527–28 (7th Cir. 1996). The question is not whether new claims and

arguments would be forfeited at this point. No new claims or arguments have
been raised.
The question is whether this Court properly issued a joinder order post
judgment. When all of the facts relevant to a decision on the merits remain
unchanged and were fully tried, fundamental fairness dictates joinder to
correct the misjoinder and permit a decision of the actual claim. The Defendant
has not provided a reason as to why failure to raise “any joinder/ substitution
[argument]” can result in joinder by the Court on its own being forfeited. For

these reasons, this Court concludes that joinder has not been forfeited.
III. The Complaint is Not Time Barred by the Statute of Limitation Under 11
U.S.C. § 546.

The Defendant also argues that the current action is time-barred by the
statute of limitations under 11 U.S.C. § 546. It is correct that commencing a
new action under section 544 at the time the amended complaint was filed
would be time-barred under section 546(a)(1)(B). Defendant claims that the
amended complaint should be considered new because the Trustee could not
be properly joined under Rule 21. But, use of Rule 21 is found to be proper, as
discussed above.
So we now turn to whether the claim was properly amended under Fed.
R. Civ. P. 15. “Rule 15 allows a party to amend despite the running of an
applicable state statute of limitations when parties are sufficiently on notice of
the facts and claims that gave rise to the proposed amendment.” Moore’s at
§ 15.19[1]. The purpose of this is to allow meritorious claims to continue
despite technical difficulties. See Woods v. Indiana Univ.-Purdue Univ., 996 F.2d

880, 883 (7th Cir. 1993). To protect parties from prejudice, Rule 15(c) requires
that a claim sufficiently “relate back.” By only allowing claims that “relate
back,” courts ensure that parties maintain all notice and protection that the
statute of limitations requires. See id.; Moore’s at § 15.19[1].
The pivotal consideration is whether “the amendment asserts a claim or
defense that arose out of the conduct, transaction, or occurrence set out—or
attempted to be set out—in the original pleading.” Fed. R. Civ. P. 15(c)(1)(B). In
determining whether an amended pleading meets this requirement, courts

should look to whether the defendant had notice of the claim the plaintiff is
now asserting, whether the same kind of evidence supports the new claim, and
if unfair surprise to the defendant could result if the court allowed the
amendment to relate back. Moore’s at § 15.19[2].
As has been noted already, the amended complaint contains no new
arguments. The evidence is identical. The Defendant has been on notice of all
these assertions of facts and law since the filing of the original complaint. The
only difference between the original and amended complaints is naming the

Trustee as Plaintiff. This level of consistency is more than enough to find that a
pleading relates back: new theories for relief can even be added as an
amendment, so long as they arise from the same factual basis as the original
count, giving the parties notice. Newman v. Kruszynski (In re Kruszynski), 150
B.R. 209, 211 (Bankr. N.D. Ill. 1993).
Here both the factual basis and theory are unchanged. Thus, this Court
finds that the amended complaint sufficiently “relates back” to the original. The

Defendant had notice, the evidence is identical, there is no new theory, and
there is no indication of prejudice.
IV. Defendant’s Lien is Avoidable Under 11 U.S.C. § 544.
The Defendant continues to allege that its lien is properly perfected, and
accordingly cannot be avoided under section 544(b)(1). It maintains that the
manufactured home is moveable, and thus its security interest is perfected
under Wis. Stat. Ch. 101 Subchapter V, “Manufactured and Mobile Homes.”
Plaintiffs purchased vacant land intending to build a home. When the

time to build would take longer than expected, they considered buying a trailer
to use while the house was being built. When looking at a used trailer, the
manager of Quality Homes introduced them to manufactured homes.
The manufactured home would be faster and “it didn’t do anything that a
. . . stick-built home would not have done . . . .” (ECF No. 46, p. 17, lines 4-6).
Plaintiffs understood either a basement or a concrete slab was required as a
permanent foundation for the home they picked. (Id., lines 4-8). Metal arms
drilled into the concrete were needed to affix the house to the concrete. (Id.,

lines 15-17).
Because they decided they did not need a basement, additional planning
and coordination was needed for the slab. Plaintiffs had to put in a well and
septic. Sleeves for both had to be inserted in the slab before it dried. (Id., p. 16,
lines 9-17).
Options for financing were given to Plaintiffs by Quality Homes. They
selected Defendant. To qualify, they were told they had to own the land, so

their land contract was converted to a note and mortgage. A copy of the deed
was sent to Defendant. Jeanne asked whether Defendant had a title report that
would show the deed but was told Defendant’s didn’t require those or title
insurance. She asked whether there would be a title company for closing. The
answer was no. Instead, Quality Homes would handle the closing.
Plaintiffs signed a purchase contract that said Quality Homes would
deliver and set the house. At the closing, various other documents were
presented—a note and security agreement and powers of attorney. While the

note and security agreement say under Other Terms and Conditions that the
manufactured home was and would remain personal property, there are also
contradictory terms in the documents. The documents also refer to a mortgage
or deed of trust. No one reviewed or explained the documents to Plaintiffs. They
were left to assume they understood the documents. After closing there was an
application for a certificate of title. It was signed by Quality Homes. Plaintiffs’
signature was inserted using the power of attorney.
Plaintiffs’ home cannot move under its own power. It had to be

transported from the manufacturing facility to Plaintiffs’ land. It complied with
the HUD Code—a national building code. It is built on a steel frame using an
automated building system. The floor is then attached and the home is
constructed on that frame. The frame stays with the HUD-coded manufactured
home. (ECF No. 46, pp. 78-79).
In order to transport the home on an interstate highway, it must be
delivered in halves. Axles, tires, and hitches are attached for the transport.

When it arrives at the building site, it is put in place and the axles, tires, and
hitch are removed. The halves are bolted together and a ridge plate is installed.
It is bolted to the concrete slab. Utilities—water, septic, electricity—are
connected. In sum, there is physical annexation to the land. It is adapted to the
purpose to which the land is devoted. And it met the intention of the Plaintiffs
to make a permanent accession to the land.
This Court found that the manufactured home is properly classified as a
“good that is to become a fixture” under Chapter 409 of the Wisconsin

Statutes. The Court concluded that the Plaintiffs intended to use the
manufactured home as their permanent residence. That intention was known
to the manufactured home dealer when the order was placed and the
arrangements for financing were made. It was also obvious to Defendant.
Factors which played a part in this determination included:
● The manufactured home was placed on real property.
● The real property address served as the Debtor’s residence.
● The temporary axles and wheels used to transport the manufactured
home were removed.

● The manufactured home sits on concrete blocks that are set on a full
concrete slab.

● It is anchored to the concrete slab, and bolted into a receiving plate
bolted into the concrete slab.
● Plaintiffs intended to make the manufactured home a permanent
home.

● The manufactured home provided everything a stick-built house
would provide.

● This manufactured home has never again operated on or over the
highways as a motor vehicle.

State law determines the standards for determining when personalty
becomes affixed to real property. The Wisconsin law applies a three-part test:
1) Actual annexation to the realty
2) Application or adaptation to the use or purpose to which the realty
is devoted

3) Intention of the person making annexation to make a permanent
accession to the freehold.

Premonstratensian Fathers v. Badger Mut. Ins. Co., 175 N.W.2d 237, 46 Wis. 2d
362, 367 (Wis. 1970). The application of these tests leads to a determination of
whether an item, otherwise considered personal property, constitutes a
common law fixture. The home is integral to the real property. It is clearly
adapted to and used for a residence. There is no dispute that the unerring
intention of the Debtors was for this to be their permanent home.
Simply because it would be physically possible to move this
manufactured home does not change the conclusion it became a fixture. The
fact the home could be removed from the slab, utilities disconnected, and once
separated in half that axles, wheels, and a hitch could be temporarily added for
transport doesn’t change it from a fixture to a moveable. It is bolted to a
required permanent slab. A well was drilled and septic installed. Connections
to utilities were made. It was intended and has been used as a permanent
alternative to a stick-built home. And the very size and difficulty in
transporting it further confirms the fact it was intended to be placed in one
position and used as a permanent home.

Defendant urges a restrictive interpretation of section 101.9218(1), Wis.
Stats., that says the method of perfecting security interests in a mobile or
manufactured home in that section is exclusive. That ignores section
101.9218(2). It provides that the method Defendant relies on does not apply to
a manufactured home that is a fixture to real estate or to a manufactured
home that when acquired the owner intends to permanently affix to the owner’s
land.
Because the manufactured home was intended and considered to be a

fixture, the Defendant had two options for perfecting its lien: (a) file a financing
statement, or (b) file a fixture filing. Wis. Stat. § 101.9213. It did neither and its
lien was found to be not properly perfected.
The Defendant offers no new evidence or legal argument for this Court to
consider. So it is the conclusion of the Court that the lien was not properly
perfected. The lien is avoidable under section 544.
CONCLUSION
For the above reasons, this Court finds that the Trustee was properly

joined under Fed. R. Bankr. P. 7021. And the complaint relates back to the
original and therefore this action does not violate the statute of limitations
under section 546 and is properly brought before this Court.
The Court finds that the Defendant’s lien is also avoidable under section
944. This matter has been fully tried on all the evidence contained in the
current action.
This decision shall constitute findings of fact and conclusions of law
pursuant to Bankruptcy Rule 7052 and Rule 52 of the Federal Rules of Civil
Procedure.
A separate order and judgment consistent with this decision will be
entered.
Dated: August 9, 2023
BY THE COURT:

U.S. Bankruptcy Judge

21

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/10463468. Public record. Not legal advice.