In the United States Bankruptcy Court

for the Northern District of Iowa


CAROLINE A. DRAHN Bankruptcy No. 08-01197
Debtor(s). Chapter 7

SHERYL L. SCHNITTJER, Trustee Adversary No. 08-09103
Plaintiff(s)
vs.
BURKE CONSTRUCTION CO.
Defendant(s)

ORDER RE: MOTION TO ALTER OR AMEND JUDGMENT


Trustee filed a Motion to Alter or Amend Judgment on April 29, 2009. She seeks to amend the Court’s Order to require Burke Construction to turn over $10,762.12 to Trustee. According to Trustee’s Motion, the Court erred by recognizing Burke Construction’s security interest in Debtor Caroline A. Drahn’s mobile home. Trustee asserts Burke Construction failed to satisfy the requirements of 11 U.S.C. § 550(e)(1) or § 549(c) and failed to assert that it had a security interest in the mobile home.

In an Order filed April 29, 2009, this Court ruled that Debtor’s post-petition sale of her mobile home violated § 549(a). In re Drahn, No. 08-09103, slip op. at 7 (Bankr. N.D. Iowa Apr. 29, 2009). The Court ordered Burke Construction to return a $850 sales commission it received from Debtor from the proceeds of the sale, but allowed Burke Construction to retain $9,912.10, the value of its security interest. Id.

CONCLUSIONS OF LAW

Trustee filed a motion to alter or amend judgment under Federal Rule of Bankruptcy Procedure 9023 and Federal Rule of Bankruptcy Procedure 59(e). This Court addressed the relevant law regarding motions to alter or amend judgment in In re Smith, No. 05-05398, 2007 WL 2570409, at *1 (Bankr. N.D. Aug. 30, 2007), as follows:

The limited function of a motion for reconsideration is to correct manifest errors of law or fact or to present newly discovered evidence. DeWit v. Firstar Corp., 904 F. Supp. 1476, 1495 (N.D. Iowa 1995). Rule 59(e) is not intended to allow parties to introduce new evidence that was subject to discovery prior to trial, tender new theories, or raise arguments which could have been offered or raised prior to judgment. Innovative Home Health Care, Inc. v. P.T.-O.T. Assocs., 141 F.3d 1284, 1286 (8th Cir. 1998).

The bankruptcy court has broad discretion in determining whether to grant a motion to alter or amend judgment. Hagerman v. Yukon Energy Corp., 839 F.2d 407, 414 (8th Cir. 1988).

A motion made pursuant to Rule 59 affords relief only in extraordinary circumstances. But the rule allows the bankruptcy court "to correct its own errors, sparing the parties and appellate courts the burden of unnecessary appellate proceedings." In re Crystalin, L.L.C., 293 B.R. 455, 465 (B.A.P. 8th Cir. 2003) (citations omitted).

ANALYSIS

Trustee characterizes the Court’s Order as a “grant” to Burke Construction of a lien on the mobile home (Pl.’s Mot. to Alter or Amend J. at 3). However, the Court did not grant but merely recognized Burke Construction’s existing security interest. Prepetition, Debtor owned the mobile home subject to Burke Construction’s security interest. The mobile home remained encumbered after Debtor filed her Chapter 7 bankruptcy petition. Therefore, the bankruptcy estate held the mobile home subject to Burke Construction’s security interest. The Court’s April 29, 2009 Order granted Trustee judgment for the value of the bankruptcy estate’s interest in the mobile home.

Trustee asserts that Burke Construction is not entitled to a security interest since it never argued that it held a perfected security interest. Both parties stated in their filings that Burke Construction claimed a security interest. On page 9 of Burke Construction’s Answer: “Burke Construction Co. admits Paragraph 9 of the [Trustee]’s adversary complaint that it claimed a security interest in the mobile home sold to [Debtor].” Burke Construction asserted that it either owned the mobile home or retained a security interest in the mobile home in the Joint Pre-Trial Statement on page 2 and in its Objection to Plaintiff Trustee’s Motion for Summary Judgment and Cross-Motion for Summary Judgment on page 2.

Trustee’s Trial Brief includes several references to Burke Construction’s security interest. On page 5 of the Brief, Trustee states: “Therefore, by retaining the title, Burke retained nothing more than a security interest” and “The document conveying the mobile home to Debtor is titled a ‘Bill of Sale and Security Agreement’ and specifically endows Burke with the rights of a secured party under Iowa law.” On page 6 of the Brief, Trustee states: “Burke sold the mobile home to the Debtor and retained a security interest and nothing more and that is not an executory contract.”

The Court highlighted the issue in its Order Re: Summary Judgment (Doc. 28), filed January 21, 2009, on page 3: “The Court is also interested in the circumstances surrounding the transaction between Debtor and Burke which Trustee identifies as a sale with a retention of an unperfected security interest. . .”

Trustee raised the issue of perfection in her Complaint (Pl.’s Br. at 2-3). The Court addressed the issue in its Order when considering the extent of the bankruptcy estate’s property rights. It found that retention of title was sufficient to perfect a security interest in a mobile home. Drahn, No. 08-09103, slip op. at 2-3. Trustee does not contest this legal conclusion in the Motion to Alter or Amend Judgment.

In summary, the Court concludes that Trustee has not established that the Court’s Order was legally or factually inaccurate. The Court recognized the existence of Burke Construction’s security interest and granted Trustee judgment for the bankruptcy estate’s $850 interest in the mobile home.

WHEREFORE, Trustee’s Motion to Alter or Amend Judgment is DENIED.

Dated and Entered: May 8, 2009



Paul J. Kilburg
Chief Bankruptcy Judge