Bergerons V. Bergeron Case Summary

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Issue: The plaintiff, First Colonial Bank for Savings entered into an interpleader action in the District court to determine who was entitled to the surplus proceeds from the foreclosure sale. The foreclosed property belonged to the defendants, Robert H. and Sherrell L. Bergeron, and the codefendants, Ford Motor Credit Company, the junior mortgagee of the foreclosed property as a result of corporate restructuring Ford Consumer Finance Company was substituted as the defendant for Ford Motor Credit Company. Both the Bergerons and Ford filed motions for summary judgement as they both felt entitled to the surplus. The district court ruled in favor of Ford Motor Credit Company and denied the Bergerons motion. The Bergerons appealed the decision of the District Court because they argued that they filed for and were discharged from bankruptcy prior to the foreclosure sale, therefore they believed that the security interest granted to Ford prior to their petition does not carry over to the surplus funds received after filing the petition. Rule: …show more content…

It was found that the Bergerons’ reliance on provision 11 U.S.C Section 552 (a)1998 was misplaced and based on Federal law, Johnson v. Home State Bank, 501 U.S. 78,83 (1991), Dewsnup v. Timm, 112 S. Ct. 773, 778 (1992) a lien on real estate survives the bankruptcy unaffected by the debtor’s discharge in bankruptcy. Also, once First Colonial Bank for Savings foreclosed its first mortgage, it became the trustee of the surplus funds for the benefit of the junior mortgagees, which in this case was Ford Consumer Finance Company. Furthermore, the junior mortgagee is considered to be a successor or assignee of the mortgagor, therefore entitling them to surplus

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