United States Court of Appeals 

for the Fifth Circuit 

No. 22-30092 

Azby Fund, 

Appellant, 

versus

Wadsworth Estates, L.L.C.; Joseph Young, Jr., 

Appellees. 

Appeal from the United States District Court 

for the Easter District of Louisiana 

USDC No. 2:21-CV-1230 

Before Higginbotham, Duncan, and Engelhardt, Circuit Judges.

Per Curiam:*

After Wadsworth Estates (“Wadsworth”) declared Section 11 

bankruptcy, one of its creditors, Azby Fund (“Azby”), moved under 

11 U.S.C. § 506 to determine its creditor status. Wadsworth, as the debtor in 

possession, objected to the motion, claiming that Azby had failed to timely 

reinscribe its 2006 mortgage and thus had lost its secured status under 

*

 This opinion is not designated for publication. See 5th Cir. R. 47.5. 

United States Court of Appeals 

Fifth Circuit 

FILED 

December 12, 2022 

Lyle W. Cayce 

Clerk 

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No. 22-30092 

2 

Louisiana law. The bankruptcy court and district court both agreed with 

Wadsworth that Azby had lost its secured status. We affirm. 

I. 

 On March 28, 2006, Azby loaned Wadsworth $400,000. The loan was 

secured by a Multiple Indebtedness Mortgage (the “2006 Mortgage”) on a 

parcel of land, known as the Wadsworth Tract, in St. Tammany Parish, 

Louisiana. The 2006 Mortgage was recorded in the St. Tammany Parish 

mortgage office on March 29, 2006. In 2013, Azby and Wadsworth amended 

the 2006 Mortgage by executing an Amended and Restated Note (the 

“Amended Note”). The Amended Note was accompanied by a First 

Amendment to Multiple Indebtedness Mortgage, which was recorded in the 

public records on August 5, 2013 (the “Amended Mortgage”). The 

Amended Mortgage did not create a new mortgage or encumber additional 

property; rather, it merely changed a section concerning the obligations 

secured by the 2006 Mortgage and provided that “all of the other terms of 

the [2006] Mortgage remain as set forth in the [2006] Mortgage.”1

 In 2020, Wadsworth filed a voluntary petition under Chapter 11 of the 

Bankruptcy Code. Because the bankruptcy court never appointed a trustee, 

Wadsworth obtained, and still maintains, debtor in possession status. Four 

other creditors claim secured status over the Wadsworth Tract: (1) First 

American Bank and Trust, which recorded a mortgage on March 29, 2006; 

(2) Beverly Construct Co., LLC, which recorded a mortgage on October 8, 

2009; (3) Joseph Young, Jr., an appellee here, who recorded a mortgage on 

1

 Specifically, the amendment replaced this phrase in the 2006 Mortgage—

“Mortgagor’s promissory note dated March 27, 2006, in the principal amount of 

$400,000”)—with the following: “Mortgagor’s promissory note dated March 27, 2006, 

in the principal amount of $400,000, as amended by the Amended and Restated Note dated 

____________, 2013 . . . .”

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June 16, 2017; and (4) First National Bankers Bank, which recorded a 

mortgage on February 27, 2018. Combined, the five creditors have secured 

debt of about $17 million on the Wadsworth Tract, which far exceeds its 

undisputed $9 million fair market value. Indeed, Young’s secured debt alone 

($9.3 million) exceeds the fair market value. 

 On April 14, 2021, Azby moved for a Determination of Secured Claim 

under 11 U.S.C. § 506(b), which generally permits a creditor whose claim is 

secured by property of a value greater than the claim to recover interest, fees, 

costs, or charges. Wadsworth objected to Azby’s motion, and Azby 

responded, arguing that Wadsworth lacked standing to object and that its 

objection was in any event meritless. On June 11, 2021, the bankruptcy court 

ruled against Azby, finding that Azby’s failure to reinscribe the 2006 

Mortgage had caused Azby to lose its priority status—relegating Azby to fifth 

in line. Azby appealed to the United States District Court for the Eastern 

District of Louisiana. Wadsworth and Young filed a single opposition brief.2

The district court rejected Azby’s standing argument and affirmed the 

bankruptcy court’s decision on the merits. 

II. 

In appeals arising from a district court’s order affirming the final 

judgment of a bankruptcy court, we apply the same standard of review as the 

district court. Furlough v. Cage (In re Technicool Sys., Inc.), 896 F.3d 382, 385 

(5th Cir. 2018). Accordingly, we review the district court’s decisions on 

standing and statutory interpretation de novo. St. Paul Fire & Marine Ins. Co. 

v. Labuzan, 579 F.3d 533, 538 (5th Cir. 2009). 

2

 The parties dispute whether Young properly objected to Azby’s § 506(b) motion.

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III. 

A. 

We first address Azby’s argument that Wadsworth lacks prudential 

standing to contest the § 506(b) motion. In addition to Article III standing, a 

party in a bankruptcy proceeding must demonstrate its prudential standing 

to challenge a bankruptcy court’s order. Labuzan, 579 F.3d at 539. Typically, 

“[t]o determine whether a party has standing to appeal a bankruptcy court 

order, this court uses the ‘person aggrieved’ test.” Dean v. Seidel (In re 

Dean), 18 F.4th 842, 844 (5th Cir. 2021) (citation omitted); In re Coho Energy, 

Inc., 395 F.3d 198, 202–04 (5th Cir. 2004) (applying test in Chapter 11 

proceeding). This requires an appellant to show it is “directly, adversely, and 

financially impacted by a bankruptcy order.” In re Dean, 18 F.4th at 844 

(citation omitted). 

Azby contends Wadsworth lacks prudential standing because the 

Wadsworth Tract is valued at less than the amount of the creditors’ secured 

claims. Accordingly, Wadsworth stands to gain nothing from the sale of the 

property because nothing will be left after the secured creditors take their 

share. Wadsworth counters that, as a debtor in possession, it is vested with 

the rights, powers, and duties of a bankruptcy trustee. As such, Wadsworth 

has a statutory duty to protect the estate by objecting to Azby’s § 506(b) 

motion, which gives it prudential standing.

We agree with Wadsworth. As the district court correctly found, 

Azby’s argument ignores Wadsworth’s fiduciary duties as a debtor in 

possession. Under the Bankruptcy Code, a debtor in possession is vested with 

the same rights, powers, and duties as a bankruptcy trustee. 11 U.S.C. 

§ 1107(a). Among other duties, a trustee “shall . . . examine proofs of claims 

and object to the allowance of any claim that is improper.” 11 U.S.C. 

§ 704(a)(5). Thus, a debtor in possession, like a trustee, takes on fiduciary 

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responsibilities to all creditors. See In re CoServ, LLC, 273 B.R. 487, 497 

(Bankr. N.D. Tex. 2002). “Implicit in the duties of a Chapter 11 trustee or a 

debtor in possession as set out in Sections 1106 and 704 of the Bankruptcy 

Code is the duty of such a fiduciary to protect and preserve the estate . . . .” 

In re CoServ, 273 B.R. at 497; see also Ford Motor Credit Co. v. Weaver, 680 

F.2d 451, 461 (6th Cir. 1982) (“[A] debtor in possession has the duty to 

protect and conserve the property in his possession for the benefit of 

creditors.”). Consequently, as a debtor in possession, Wadsworth has 

prudential standing to contest Azby’s § 506(b) motion.3

B. 

We turn to the merits. Azby argues that the recordation of the 

Amended Mortgage in 2013 initiated a new ten-year inscription period. 

Wadsworth counters that, under applicable Louisiana law, the duration of the 

effect of a mortgage’s recordation turns on the date the mortgage is created 

and, if applicable, the date the mortgage is reinscribed. See La. Civ. Code 

Ann. arts. 3357, 3361–65. Azby’s Amended Mortgage qualified as neither 

and so, according to Wadsworth, did not commence a new ten-year period.

In these bankruptcy proceedings, Louisiana law governs the validity 

and scope of a secured interest. See Butner v. United States, 440 U.S. 48, 54–

55 (1979). The general rule is that the effect of a recorded mortgage lasts for 

ten years from the date of the instrument. See La. Civ. Code Ann. art. 

3357 (“Except as otherwise expressly provided by law, the effect of 

recordation of an instrument creating a mortgage or pledge or evidencing a 

privilege ceases ten years after the date of the instrument.”).4

 If the mortgage 

3

 Because Wadsworth has standing, we need not address whether Young properly 

objected to Azby’s motion. 

4 See also id., rev. cmt. (b) (referring to the “general rule that the effect of an 

inscription ceases ten years after the date of the document evidencing the mortgage, pledge, 

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is reinscribed before the effect of recordation ceases, it continues for an 

additional ten years from the date of the recorded notice of reinscription. See 

id. art. 3364. The Louisiana Civil Code (“Code”) prescribes an “exclusive” 

method of reinscription. See id. arts. 3362, 3363. It also specifies that an 

“amendment” of a mortgage instrument does not constitute a 

“reinscription” of the mortgage. Id. art. 3363. Thus, if a mortgage interest is 

not properly reinscribed, junior security interests will become senior to it. See 

Am. Nat’l Ins. Co. v. Heller Fin., Inc., 989 F.2d 854, 856 (5th Cir. 1993); La. 

Civ. Code Ann. art. 3365 (explaining that cessation of an original 

recordation period causes the security interest to lose its seniority status). 

These principles support the district court’s conclusion that Azby’s 

Amended Mortgage failed to commence an additional ten-year inscription 

period in 2013. Azby concedes, as it must, that the amendment did not 

constitute a reinscription under articles 3362 and 3363. Consequently, under 

article 3357, the effect of the original mortgage ceased on March 29, 2016. 

Azby nonetheless argues that, under article 3347, recording the 

Amended Mortgage provided sufficient notice to third parties and 

established its own primacy date. We disagree. Article 3347 says nothing of 

the sort: the article generally makes an instrument’s recordation effective 

upon filing,5

 but it does not address the specific questions of mortgage 

duration covered by articles 3357 through 3364. The district court’s 

conclusion was therefore correct: “Azby does not cite any authority to 

or privilege”). The effect of recordation is extended for an additional six years if the 

instrument describes any secured obligation that “matures nine years or more after the date 

of the instrument.” Id. art. 3358. 

5

 “The effect of recordation arises when an instrument is filed with the recorder 

and is unaffected by subsequent errors or omissions of the recorder. An instrument is filed 

with a recorder when he accepts it for recordation in his office.” La. Civ. Code Ann.

art. 3347. 

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support its argument that the recordation of the Amended Mortgage, which 

did not create a mortgage but merely amended the terms of an existing 

mortgage, triggered the start of a new inscription period.” 

* * * 

The district court’s judgment is AFFIRMED. 

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