FOR THE NORTHERN DISTRICT OF CALIFORNIA
STEVEN P. WILSON, No. 1-86-01758
STEVEN P. WILSON,
v. A.P. No. 1-86-0219
ROBERTA LYNN WILSON,
ORDER SPECIFYING ISSUES
Plaintiff Steven Wilson and defendant Roberta Wilson were formerly married to each other. On July 31,
1986, the Humboldt County Superior Court entered a decree of dissolution of the marriage which awarded
all of the community property to Steven and gave Roberta a lien on all the former community property to
secure Steve's obligation to pay her $63,000.00, which was the value of her community interest. An
abstract of judgment reflecting the decree was recorded on August 18, 1986, which created a lien on
Steven's separate property as well as the former community property.
On November 5, 1986, Steven filed a Chapter 11 petition. Soon after, he commenced this adversary
proceeding seeking to avoid as preferences Roberta's interest in the former community property as well as
his separate property.
On May 1, 1987, this court entered an order intended to avoid as a preference any lien on Steven's
separate real property created by the recording of the abstract of judgment. However, this order did not
fully resolve the case, as Roberta still had a lien on the former community property. The court now deals
with the avoidability of this interest.
The debtor's position is that Roberta's lien on the fomer community real property was created on July
31 but not perfected until August 18, a date within the 90-day preference period. Since section
547(e)(2)(B) of the Bankruptcy Code provides that the transfer date is the date of perfection, the debtor
argues that a preference has been clearly established. While this theory is perfectly valid as to property in
which Roberta had no interest of record before August 18, it fails as to the rest of the property because
Roberta's interest in that property was perfected as of the date of the decree, not its recording, at least as
to her half.
Section 547(e)(1)(A) provides in pertinent part that a transfer of real property is perfected when a bona
fide purchaser of such property from the debtor could not acquire an interest superior to the transferee.
Thus, as to any property held jointly in the name of the debtor and Roberta, there was never a time when
a bona fide purchaser could have obtained rights from the debtor superior to those of Roberta. It matters
not that the public record named Roberta as a joint owner in fee when she had been turned into a lienholder;
any cloud on title, even if defective, is sufficient to perfect rights against subsequent purchasers. In re Elin
(Bkrtcy.D.N.J.1982) 20 B.R. 1012 (aff'd 707 F.2d 1400); In re Gurs
(9th Cir.BAP 1983) 27 B.R. 163.
The same rationale applies to property which may have been in Roberta's possession, even if she was not
a record title holder. Open possession is sufficient to perfect an interest in real property against subsequent
purchasers. In re Gulino
(9th Cir.1985) 779 F.2d 546.
As to real property neither in Roberta's name nor possession, the court finds that the contemporaneous
exchange exception of section 547(c)(1) does protect Roberta to the extent of her former community
interest, but not for the reasons she argues. Roberta's argument that her rights in the former community
property were cut off at exactly the same time she obtained her lien - on August 18 when the abstract was
recorded - has no validity. Her ownership rights were cut off on July 31, when the decree was entered;
her lien was perfected
on August 18. Nonetheless, delays in perfection of twenty days (In re Burnette
(Bkrtcy.E.D.Tenn.1981) 14 B.R. 795), thirty-three days (In re Arnett
(Bkrtcy.E.D.Tenn.1982) 17 B.R.
912), and even forty-five days (In re Martelle
(Bkrtcy.D.Colo.1982) 22 B.R. 649) have all been found to
be substantially contemporaneous. It is clear that the state court intended there to be a simultaneous
transfer of Roberta's rights from that of a co-owner to that of a lienholder; the court finds that the
transaction was a substantially contemporaneous exchange as to the real property notwithstanding the
eighteen-day delay in perfection. It should be noted, however, that Roberta gave up only her community
interest in exchange for the lien. Since section 547(c)(1) excepts transfers from avoidance only to the extent
new value is given, only Roberta's lien on her former interest in each property is unavoidable.
Applying the foregoing, it appears that Roberta has unavoidable liens as follows:
310 Crockett Crossing Road $5034.50
Hydesville property $8052.50
Sandy Prairie Road $25,817.50
Section 547(e)(2)(C) provides that a transfer is deemed to have been made on the day the case
commenced if it had not been perfected before that date. It is admitted that Roberta's security interest in
the personal property has never been perfected. The transfer date as to personal property not in Roberta's
name or possession is therefore November 5, 1986, taking it out of the contemporaneous exchange
exception and making her interest avoidable.
Roberta's argument that solvency is measured as of the date of the decree has no merit. Solvency is
measured as of the date of the transfer, at which time the debtor had a $63,000.00 debt to Roberta which
must be counted.
The above legal conclusions shall be deemed to be without substantial controversy pursuant to FRCP
56(d). Trial of the matter will be held on August 5, 1987, at 3:00 P.M. at Eureka, California, to apply the
above ruling to individual items of property, to the extent the parties cannot reach agreement, and to resolve
any remaining issues.
Dated: July 13, 1987 ________________________