In re Duncombe

William Little invested in distressed real estate. Damon Duncombe (debtor) owned a home facing foreclosure under a deed of trust. Little sought to purchase Duncombe’s home at the foreclosure sale, scheduled for 11:00 a.m. Duncombe sought to avoid losing his home by filing for bankruptcy. Duncombe had planned to file for bankruptcy before 11:00 a.m. on the day of the foreclosure but failed to make it to the bankruptcy court in time. Little purchased the home at the foreclosure at approximately 11:00 a.m., triggering a race between Little and Duncombe to record documents that would protect their respective interests. Little, with some pressure, managed to convince the trustee under the deed of trust to rush production of the foreclosure deed, which Little secured at approximately 3:00 p.m. Little then went immediately to the county recorder’s office and filed his deed at 4:01 p.m. Duncombe, for his part, went directly from the foreclosure to the bankruptcy filing office. After struggling to find parking and waiting in a long line, Duncombe obtained a certified copy of his petition to file for bankruptcy a little before 2:00 p.m. Duncombe then went to the county recorder’s office and filed notice of his bankruptcy case at 3:21 p.m. Before the bankruptcy court, Duncombe argued that he could avoid the foreclosure sale under the Bankruptcy Code. Little argued that, because Duncombe had actual notice of the sale before filing for bankruptcy and because Little filed his deed as quickly as possible, Duncombe should not be allowed to avoid the sale.