Case Summary:
Debtor sought to obtain credit to continue the operations of a ballroom. He eventually turned to Action Mortgage and its manager, Robert Call, for a loan. Following a strange transaction, debtor ended up the confused owner of a mortgage on a house he had never offered to purchase. Debtor also gave Action Mortgage a security interest in some construction equipment and vehicles which he owned. Debtor was unable to maintain payments on the mortgage and quitclaimed the house to Robert Call. Mr. Call took possession of the house and collected rents from the lessees who occupied it, but did not credit any amount to debtor's obligation to Action Mortgage. Debtor filed for chapter 13 relief and objected to the validity of Action Mortgage's claim against him alleging that the claim was obtained by fraud. Debtor further objected to the amount of Action Mortgage's claim arguing that the quitclaim terminated all or a significant portion of his debt. Mr. Call, on behalf of Action Mortgage, disagreed with debtor's contention and testified that the quitclaim did nothing to alter the original terms of the loan. Action Mortgage further alleged that its claim against debtor had risen to include accrued interest and filed a proof of claim in that amount. Action Mortgage also obtained a default judgment in state court for replevin of specified equipment against debtor and sought relief from the automatic stay to enforce its judgment. Debtor objected to Action Mortgage's claim and his testimony supported his allegations of fraud. He also called into question the amount owed to Action Mortgage in light of the quitclaim. The final burden of persuasion rested upon Action Mortgage to prove its claim. Action Mortgage did not present evidence sufficient to carry this burden. Debtor's objection to Action Mortgage's claim was sustained and Action Mortgage's motion for relief from stay was denied.

Statute/Rule References:
11 U.S.C. § 362(g)(1)
11 U.S.C. § 502 -- Allowance of Claims
11 U.S.C. § 523(a)(2)(A) -- Nondischargeability - Fraud
11 U.S.C. § 547 -- Preferences
Fed R. Evid. 1002 -- Requirement of Original
Fed R. Evid. 1003 -- Admissibility of Duplicates
Fed R. Evid. 1004 -- Admissibility of Other Evidence of Contents
Fed. R. Bankr. P. 3001(d)
Fed. R. Bankr. P. 3001(f)

Key Terms:
Adequate Protection
prima facie Evidence
Security Interests - Perfection