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Section 544 Trustee as lien creditor and as successor to certain creditors and purchasers (Judge Mott)

Munoz et al v. James B. Nutter. et al (Feb. 22, 2011)

Issue: Whether Plaintiffs (Debtors) can set aside prepetition foreclosure sale of their real property using §522(h), §544(a)(3) and/or §549(a) of the Bankruptcy Code. Alternatively, whether Plaintiffs can seek recovery against Defendants for violations of the automatic stay under §362(k)(1). Holding: Plaintiffs attempt to set aside foreclosure under §544 denied as a hypothetical purchaser on date of Plaintiffs' bankruptcy filing would not have "bona fide purchaser" status under §544(a)(3) and Texas state law. Plaintiffs are not entitled to set aside foreclosure as an "unauthorized" post-petition transfer under §549(a) as the foreclosure sale was complete prepetition. Plaintiffs also failed to prove any violations of the automatic stay and provided no evidence of damages.