Ch. 7. McCready owned the debtor LLC. In 2008, the debtor gave the Wikas a third deed of trust on its commercial property to secure a loan the Wikas had made to McCready to build a condo project at Alyeska. After the Wikas acquired this interest, Hebert advanced McCready more than $1 million for various purposes. In April of 2010, Hebert took assignment of the second deed of trust on the debtor’s commercial property, and the related note. The debtor filed its chapter 7 petition two months later.
The trustee believed he could sell the debtor’s commercial property for more than the total encumbrances. However, Hebert argued that his advances to McCready primed the Wikas’ interest and were secured by the property on account of a dragnet clause in the second deed of trust. The trustee disagreed and filed an objection to Hebert’s secured claim. The court considered the Alaska Supreme Court’s Lundgren v. NBA decision, and looked at cases from other jurisdictions that dealt with future advance clauses, and the Restatement (Third) Property, §§ 2.1-2.4. It concluded that the Alaska Supreme Court would restrictively treat the Hebert advances. The court held that the advances did not prime the Wikas’ interest because, when the advances were made, it was not within the reasonable contemplation of the parties that they would be covered by the second deed of trust. Summary judgment was granted to the trustee.
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