Can I, like a bankruptcy trustee, sell a property free and clear of the disputed liens and work out later who is to get the proceeds from the sale?
By Davidson, Peter*
Q: I have a buyer for a piece of real property at a very good price. The title report shows an old deed of trust, which I have been told was paid off, and a deed of trust to the defendant’s mother that was recorded just prior to the lawsuit I was appointed receiver in. Can I, like a bankruptcy trustee, sell the property free and clear of the disputed liens and work out later who is to get the proceeds from the sale?
A: Yes. The ability of a bankruptcy trustee to sell property free and
clear of liens under 11 U.S.C. §363(f) is modeled after the old equity
practice in which counts of equity often authorized the sale of property
under their control free and clear of existing liens. Speckles v.
Spreckles Sugar Corp., 79 F. 2d 332 (2nd. Cir. 1935) where the court
points out that courts of equity have had the power to sell property free
and clear of liens, including taxes, from the earliest times. The Supreme
Court has held this power "must be implied from the general equity powers
of the court". Van Huffel v. Harkelrode, 284 U.S. 225 (1931).