Butner v. United States

Butner (plaintiff) held a second mortgage on real estate owned by Golden Enterprises, which filed for Chapter 11 bankruptcy; a court-appointed agent, and later a bankruptcy trustee (defendant), collected rents on the property during the proceedings, and by the time the property was eventually sold to Butner for less than his outstanding balance, the trustee held nearly $163,000 in accumulated rents. Butner sought to have that rental fund applied to his remaining unpaid balance, but the bankruptcy court ruled his claim to the rents was unsecured under North Carolina law since he had never taken possession of the property or otherwise perfected a rents interest before bankruptcy; the district court and court of appeals disagreed with each other on how North Carolina law applied, and Butner sought Supreme Court review of a broader circuit split over whether state or federal equitable principles should govern.

Whether state law governs the extent to which a security interest in bankruptcy estate property extends to rents and profits derived from that property.