On remand from the district court, the Court ruled in favor of the Warfels and avoided 21st Mortgage’s lien. The Court first determined that joinder of the standing trustee under Fed. R. Bankr. P. 7021 was proper. Second, the Court found that the trustee’s joinder was not precluded by undue prejudice to 21st Mortgage or unsecured creditors. There was no prejudice to 21st Mortgage because it was aware of all the facts and legal arguments that would be presented by the Debtors and had already litigated the issues at trial. There also wasn’t prejudice to unsecured creditors because they were still receiving at least as much as they would in a hypothetical chapter 7 liquidation. Third, the Court found that the complaint was not time barred by section 546 because the Trustee was simply being joined as a party, and the amended complaint adding him sufficiently related back to the original complaint. Finally, since no new facts were presented, the Court reiterated its original finding that 21st Mortgage’s lien was avoidable under section 544. The Court highlighted important facets of the evidence that indicated that the home was intended to be a permanent homestead and not moveable.
11 U.S.C. § 544(b) – Lien Avoidance
11 U.S.C. § 546 – Limitations on Avoiding Powers
Fed. R. Bankr. P. 7021 – Misjoinder and Non-Joinder of Parties
Fed. R. Civ. P. 21 – Misjoinder and Nonjoinder of Parties
Wis. Stat. § 101.9218(1), (2) – Applicability of manufactured home security provisions