Posted on Wednesday, July 15th, 2009.
Bankruptcy: A Case Study Involving Security Interests, Insurance Proceeds, and Transferred Collateral
An interesting analysis from a writer at the Orange County Bankruptcy Forum of a strange Bankruptcy case involving security interests, insurance proceeds, and transferred collateral. The summary and analysis, after the jump:
“Wells Fargo Bank v. Courson (In re Courson), 2009 WL 1871494 (Bankr.E.D.Wash., June 24, 2009, Adv. No. A04-00247)
This is a fight between Wells Fargo, which financed the debtor’s purchase of a boat and trailer, and a subsequent owner, lender and insurance company. The parties were fighting over the proceeds of a policy covering destruction of the boat and trailer. The Debtor (Courson) purchased the boat and trailer with funds lent by Wells Fargo. He sold the boat to Buxton, who financed his purchase with money lent by Geso Credit Union (Geso). Buxton took out an insurance policy from Safeco and named Geso as an additional loss payee/mortgagor. Neither Buxton, nor Geso, nor Safeco were aware of Wells Fargo’s interest in the property at the time of their transaction. Wells Fargo’s security interest in the boat was perfected. Geso’s was not, and even if it had been, it would have been junior to Well Fargo. When the boat was destroyed Safeco paid Geso the amount due under the policy. Wells Fargo sued everyone on numerous theories.
In a separate opinion, the Bankruptcy Court found Courson’s debt to Wells Fargo non-dischargeable, presumably under 11 U.S.C.
