First Wis. Nat'l Bank v. Fed. Land Bank

849 F.2d 284 (7th Cir. 1988)

 

RULE:

When reviewing the decision of the bankruptcy court, the district court must accept the bankruptcy court's findings of fact unless they are clearly erroneous.

FACTS:

Defendant bank executed a promissory note with debtor and received a mortgage on real property. Debtor also borrowed money from plaintiff bank and purchased cranberry vines and secured a real estate mortgage and a Farm Security Agreement. Defendant foreclosed its mortgage with debtor. Defendant named plaintiff bank in its foreclosure action. Plaintiff did not respond to defendant's complaint nor did it attempt to claim any rights against the defendant by third-party complaint. Plaintiff filed a cross-claim and third-party complaint against all junior lienholderrs. Judgment of foreclosure was entered for defendant and for plaintiff subject to defendant's judgment. Debtor filed for bankruptcy. The lower court's ruling that the cranberry vines became a fixture of the real estate was not clearly erroneous and was upheld. Since the cranberry vines had become fixtures, and part of the realty, defendant's mortgage gave defendant an interest in the vines. Since plaintiff had notice of defendant's foreclosure proceeding and was named in that proceeding and did not respond, plaintiff was estopped from asserting a prior purchase money security interest in the vines.

ISSUE:

Did the bankruptcy court erred in finding that the cranberry vines had become fixtures on the foreclosed real estate?

ANSWER:

No.

CONCLUSION:

The district court's order that awarded ownership of the cranberry vines to the defendant was affirmed because the bankruptcy court's finding that the vines were fixtures was not clearly erroneous and as fixtures the vines became part of the property subject to defendant's mortgage and plaintiff was estopped from asserting its rights because it did not respond to defendant's foreclosure action.

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