Casbeer, In re

• Decision Date: 14 July 1986
• Docket Number: No. 85-1814,85-1814
• Parties: Bankr. L. Rep. P 71,239 In re G. Dwayne CASBEER, Debtor. G. Dwayne CASBEER, Plaintiff-Appellant, v. STATE FEDERAL SAVINGS & LOAN ASSOCIATION OF LUBBOCK, Defendant-Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 1436

793 F.2d 1436

Bankr. L. Rep. P 71,239

In re G. Dwayne CASBEER, Debtor G. Dwayne CASBEER, Plaintiff-Appellant, v. STATE FEDERAL SAVINGS & LOAN ASSOCIATION OF LUBBOCK Defendant-Appellee.

No. 85-1814.

United States Court of Appeals Fifth Circuit.

July 14, 1986.

Robert W. Biederman, Freytag, LaForce, Rubinstein & Teofan, Vernon O. Teofan, Dallas, Tex., for plaintiff-appellant.

Philip I. Palmer, Jr., Elizabeth A. Bates, Dallas, Tex., for defendant-appellee.

Appeal from the United States District Court for the Northern District of Texas.

Before GEE, POLITZ and GARWOOD, Circuit Judges.

GEE, Circuit Judge:

G. Dwayne Casbeer appeals from a district court order affirming a bankruptcy court judgment in favor of State Savings & Loan Association of Lubbock. We affirm in part, reverse in part, and remand.

FACTS AND LOWER COURT PROCEEDINGS

During the early 1980's, G. Dwayne Casbeer ("Casbeer") was a real estate developer, owning various properties in Texas. State Savings & Loan Association of Lubbock ("State Savings") held promissory notes aggregating more than $16 million secured by some of these properties. By mid-March 1984, Casbeer was in arrears on payments due State Savings on an office building located at 401 East Illinois in Midland, Texas. On April 2, Casbeer met with officials from State Savings for the purpose of avoiding foreclosure on that property. In a memorandum agreement on April 2, State Savings agreed that it would not foreclose on the 401 East Illinois property and, if certain conditions were met, would restructure Casbeer's obligation. In exchange, Casbeer agreed, among other things, to bring current the interest on the 401 East Illinois property within 30 days, to assign profits from six properties ¹ to State Savings, and to give deeds of trust on two additional properties. ² On April 27, Casbeer signed the documents reflecting the various assignments and deeds of trust, but only the profit assignment for Lone Star Plaza Midland Shopping Center was notarized in his presence.

Casbeer filed a petition for relief under Chapter 11 of the Bankruptcy Code, 11 U.S.C. Sec. 101 et seq., on March 4, 1985. In late March and early April 1985, State Savings filed separate motions to lift the stay imposed against foreclosure on eight of Casbeer's properties. ³ Before the hearing on these motions, State Savings filed motions seeking a temporary restraining order and temporary and permanent injunctive relief to restrain Casbeer from using rents from properties on which State Savings held deeds of trust containing rental assignment clauses. Casbeer's response to State Savings' motions to lift the stay included affirmative defenses asserting false acknowledgment of recorded deeds of trust, usury, and fraudulent transfers. Following hearings on the motions to lift the stay and for a preliminary injunction On expedited appeal to the district court, Casbeer argued that the bankruptcy court erred (1) in holding that the improperly executed acknowledgments on the deeds of trust provided constructive notice, (2) in granting State Savings a replacement lien for rent proceeds Casbeer used after filing his bankruptcy petition, and (3) in holding that State Savings did not exact usurious interest by having the deeds of trust and profit assignments executed in its favor. The district court affirmed on all issues. Casbeer then moved to stay the district court order and the bankruptcy court orders pending appeal to this Court. The district court denied that motion. We granted Casbeer's motion for an expedited appeal and ordered a partial stay of the district court and bankruptcy court orders. ⁶

the bankruptcy court entered its findings of facts and conclusions of law on August 26, 1985. The court found, among other things, that Casbeer acknowledged only the Lone Star Plaza Midland Shopping Center profit assignment and that a State Savings employee had notarized the remaining profit assignments and deeds of trust without Casbeer's acknowledgment. The court concluded that the deeds of trust and profit assignments looked "proper and correct," however, and that the documents provided constructive notice. In orders entered on August 26, September 4, and September 9, the bankruptcy court authorized State Savings to post three properties for immediate non-judicial foreclosure, ⁴ to post four properties for foreclosure in October, ⁵ and to foreclose on those properties if Casbeer failed to make certain interest payments. The court also awarded State Savings a replacement lien on funds that the debtor's estate received as commission for the sale of the Williamson County Property.

On this appeal, Casbeer presents three issues for our review: First, whether the district court erred in holding that under Texas law a false acknowledgment of real estate documents can impart constructive notice to a subsequent purchaser. Second, whether the district court erred in holding that State Savings perfected its claim to rents from various Casbeer properties and, if so, whether the court erred in granting State Savings a replacement lien. And third, whether the district court erred in holding that the deeds of trust and profit assignments that Casbeer granted to State Savings were not usurious. ⁷

FALSE ACKNOWLEDGMENT

The first issue in this case is whether the deeds of trust Casbeer signed and sent to State Savings on April 27, 1984 were perfected before Casbeer filed for bankruptcy. If the deeds of trust were perfected, Casbeer cannot avoid them in his capacity as a debtor-in-possession.

Section 544(a) of the Bankruptcy Code provides that, upon the commencement of a case, a trustee or debtor-in-possession assumes the status of a hypothetical lien creditor or bona fide purchaser of real property. In that capacity, the trustee or debtor-in-possession may avoid any transfer of the debtor's property if the conveyed interest was not perfected when the case began. 11 U.S.C. Sec. 544 (1979 &amp This case presents us with the question of whether a deed of trust has been perfected when, although it has been recorded ⁹ and has a genuine signature, the signer did not properly acknowledge the deed of trust before the notary public. As the bankruptcy court found, a State Savings employee notarized the two deeds of trust after Casbeer sent them to State Savings on April 27, 1984. ¹⁰ In affirming the bankruptcy court on the acknowledgment issue, the district court held that a false notarization is a latent defect and, when the issue of forgery is not raised, the recorded deed provides constructive notice. Casbeer contends on this appeal that a false notarization is not a latent defect but that, even if it is, State Savings cannot avail itself of the benefits of the latent defect because it had knowledge of the defect.

                1986 Supp.). 8   State law determines whether an interest in property has been perfected, Butner v. United States 440 U.S. 48, 55, 99 S.Ct. 914, 918, 59 L.Ed.2d 136 (1979), and in Texas a deed of trust is void as to a creditor or subsequent purchaser not a party to the instrument if the deed has not been recorded, Tex.Prop.Code Ann. Sec. 13.001 (Vernon 1984).  A deed of trust may not be recorded unless the grantor has signed and acknowledged the instrument "in the presence of two or more credible subscribing witnesses" or the instrument has been "acknowledged before and certified by an officer authorized to take acknowledgments."    Tex.Prop.Code Ann. Sec. 12.001 (Vernon 1984).
                

Aside from cases involving conveyances by married women, the rule in Texas has long been that "where the defect in an acknowledgment does not appear on the face of the certificate, a record of the instrument is effectual as constructive notice ...." 1 Tex.Jur. Acknowledgments Sec. 16 at 425 (1929). Hill v. Provine, 260 S.W. 681, 684 (Tex.Civ.App.--El Paso 1924, writ dism'd) (fact that notary was interested was not apparent on face of document, hence record was effective for all purposes for which recording is intended); Southwestern Mfg. Co. v. Hughes, 24 Tex.Civ.App. 637, 60 S.W. 684, 687 (Tex.Civ.App.--5th Dist. 1900, writ ref'd) (where nothing on face of acknowledged instrument showed that notary was disqualified, the record provided notice); Titus v. Johnson, 50 Tex. 224, 240 (1878) (fact that notary was interested and did not notarize document in a county for which he was authorized was not apparent on certificate, hence record gave notice); Peterson v. Lowry, 48 Tex. 408, 412 (1877) (a certificate regular on its face that has been recorded is not rendered invalid as notice because the deed was acknowledged by a notary outside his authorized county). "Thus, at least in those cases in which an acknowledgment is not essential to the validity of the instrument, an attack upon the sufficiency of a record that is not defective upon its face may not be made by a subsequent purchaser by showing that the officer taking the The false notarizations here do not prevent the recorded deeds of trust from giving constructive notice. Casbeer testified that his signatures were genuine, and he does not challenge the bankruptcy court's conclusion that the recorded deeds look "proper and correct." His persistent reliance on cases involving a married woman's conveyance of the homestead is misplaced. In those cases, acknowledgment was a requirement for the validity of the conveyance--indeed, it was her conveyance--and if it was defective the conveyance was void. 1 Tex.Jur.3d Acknowledgments Sec. 84 at 298 (1979) (and cases cited therein). No such requirement exists on our facts today.

acknowledgment" was somehow disqualified. 1 Tex.Jur. Acknowledgments Sec. 39 at 449-50 (1929).

Casbeer's alternative argument that state law somehow estops State Savings from enforcing the deeds of trust is also without merit. Even if the deeds of trust had not been recorded, they would have been binding on the parties to the deeds. Tex.Prop.Code Ann. Sec. 13.001(b) (Vernon 1984)...