Huskey v. Citimortgage, Inc. (In re Huskey), Bankruptcy No. 1:09–bk–14685.

• Decision Date: 14 August 2012
• Docket Number: Adversary No. 1:10–ap–01174.,Bankruptcy No. 1:09–bk–14685.
• Citation: 479 B.R. 827
• Parties: In re Rickey Lynn HUSKEY, and Telesa Huskey, Debtors. Rickey and Telesa Huskey, Plaintiffs/Counter–Defendants v. Citimortgage, Inc., Defendant/Counter–Claimant First National Bank Company, Mark T. McCarty, Third–Party Defendants.
• Court: U.S. Bankruptcy Court — Eastern District of Arkansas

479 B.R. 827

In re Rickey Lynn HUSKEY, and Telesa Huskey, Debtors.Rickey and Telesa Huskey, Plaintiffs/Counter–Defendants

v. Citimortgage, Inc., Defendant/Counter–ClaimantFirst National Bank Company, Mark T. McCarty, Third–Party Defendants.

Bankruptcy No. 1:09–bk–14685.

Adversary No. 1:10–ap–01174.

United States Bankruptcy Court,

E.D. Arkansas,

Batesville Division.

Aug. 14, 2012.

Joel G. Hargis, Jonesboro, AR, John A. Flynn, Cabot, AR, for Plaintiffs.

Arnold N. Goodman, Sammie P. Strange, Jr., Little Rock, AR, for Defendants.

Michelle C. Huff, Batesville, AR, for Third–Party Defendant.

Mark T. McCarty, Chapter 13 Trustee.

ORDER DENYING MOTION FOR SUMMARY JUDGMENT

AUDREY R. EVANS, Bankruptcy Judge.

Now before the Court is the Plaintiffs' Motion for Summary Judgment filed on February 1, 2012. On February 21, 2012, Citimortgage, Inc. (“Citi”) filed a Response in Opposition to Plaintiff's Motion for Summary Judgment, and on March 16, 2012, the Plaintiffs filed a Reply to Defendant's Response to Plaintiffs' Motion for Summary Judgment. The Court has reviewed all arguments and evidence submitted by the parties, and for the reasons stated herein, denies the Motion for Summary Judgment.

This Court has jurisdiction pursuant to 28 U.S.C. §§ 157(a) and 1334. This is a core proceeding within the meaning of 28 U.S.C. § 157(b)(2)(K).

SUMMARY JUDGMENT STANDARD

Rule 56 of the Federal Rules of Civil Procedure, as applied to these proceedings through Federal Rule of Bankruptcy Procedure 7056, provides that summary judgment shall be granted “if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to a judgment as a matter of law.” Fed.R.Civ.P. 56(a). A genuine issue of material fact exists if the evidence presented is such that a reasonable jury could find for the non-moving party. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 257, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). The burden is on the moving party to establish the absence of a genuine issue of material fact. See Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986); Burnette v. Dow Chemical Company, 849 F.2d 1269, 1273 (10th Cir.1988). The burden then shifts to the non-moving party to go beyond its pleadings to show, through affirmative evidence, that there is a genuine issue for trial. See Anderson, 477 U.S. at 249–50, 106 S.Ct. 2505. In determining whether a genuine issue of material fact exists, the Court must view the facts in the light most favorable to the non-moving party. Canada v. Union Electric Co., 135 F.3d 1211, 1212 (8th Cir.1997); In re Gilder, 225 B.R. 439, 448 (Bankr.E.D.Mo.1998) (citation omitted).

UNDISPUTED FACTS

Based on the evidence submitted, the Court finds the following facts are not in dispute:

1. In 2004, Rickey and Telesa Huskey (the “Plaintiffs”) agreed to purchase 65 acres of real property from Terry Sharp Decker (the “Seller”).

2. The Seller executed a deed to convey the property to the Plaintiffs. However, the legal description in the deed only included 45 acres (the “45 Acre Tract”) in the conveyance. The legal description specifically excluded the other 20 acres (the “20 Acre Tract”). At the time of the conveyance, the Plaintiffs believed they had received ownership of both the 45 Acre Tract and the 20 Acre Tract.

3. The Plaintiffs built a home on the 20 Acre Tract.

4. At some point between the years 2004 and 2007, the Plaintiffs executed a note and mortgage in favor of Ameriquest Mortgage Company (“Ameriquest”).

5. On April 13, 2007, the Plaintiffs refinanced their debt with Ameriquest by executing a note (the “Note”) and mortgage (the “Mortgage”) in favor of Gecko Mortgage, Inc. (“Gecko”).

6. The Mortgage was filed in the real property records for Independence County. The legal description on the Mortgage described only the 45 Acre Tract, and specifically excluded the 20 Acre Tract. The Mortgage states that the encumbered property is located in White County, but the encumbered property is actually located in Independence County.

7. The same day the Plaintiffs executed the Note, April 13, 2007, Gecko transferred the Note to Citi by signing an allonge (the “Allonge”). The Gecko representative's signature on the Allonge is purported to be the signature of “Charles Gabriel Keever.”

8. Gecko also transferred the Mortgage to Citi by signing an Assignment of Mortgage (the “Assignment”). The Assignment was signed by Gecko's president and two witnesses. The signature of one of the witnesses is purported to be the signature of “Gabe Keever.”

9. The Assignment was filed in the real property records for Independence County. The Assignment states that the mortgaged property is located in White County.

10. On July 2, 2008, Seller conveyed the 20 Acre Tract to the Plaintiffs through a Warranty Deed.

11. On July 3, 2009, the Plaintiffs filed a Chapter 13 bankruptcy case.

12. The Plaintiffs filed a Chapter 13 Plan (the “Plan”) in their bankruptcy case. With regard to the 45 Acre Tract, the Plan proposed to pay Citi a maximum amount of $30,000 at 3.86% interest over 15 years to the extent Citi “is able to establish that it is a properly perfected secured creditor.” With regard to the 20 Acre Tract, the Plan proposed to pay Citi as an unsecured creditor.

13. On July 27, 2009, Citi filed a secured proof of claim for $150,410.65 in the Plaintiffs' bankruptcy case. Citi attached the Note, Allonge, Mortgage, and Assignment as support for its claim.

14. The Plan was confirmed on August 19, 2010.

15. Two days prior to confirmation, on August 17, 2010, the Plaintiffs filed an adversary proceeding requesting a determination as to the validity, priority, and extent of Citi's lien; seeking to avoid Citi's lien under 11 U.S.C. § 544; and objecting to Citi's proof of claim.

16. On February 1, 2012, the Plaintiffs filed this Motion for Summary Judgment in the adversary proceeding.

ADDITIONAL FINDINGS OF FACT AND CONCLUSIONS OF LAW

Although the Court ultimately denies this Motion for Summary Judgment, after reviewing the evidence presented, the Court makes the following findings of fact and conclusions of law:

1. From a visual comparison of Mr. Keever's signatures on the Allonge and the Assignment, the Court concludes that it is not possible that the same person signed the two documents. As a result, the Court finds that at least one of the two signatures is a forgery.

2. The legal description on the Mortgage specifically excluded the 20 Acre Tract. As a result, the Court finds that Citi does not presently have a lien on the 20 Acre Tract.

DISCUSSION

In their Motion for Summary Judgment, the Plaintiffs argue that Citi does not have the right to enforce the Note or the Mortgage. The Plaintiffs argue that Citi cannot enforce the Note because the Allonge was not properly endorsed, and failed to effectively transfer the Note from Gecko to Citi. The Plaintiffs argue that Citi cannot enforce the Mortgage because the Plaintiffs can avoid the Mortgage under 11 U.S.C. § 544, and because errors in the property description make the Mortgage invalid. Following a thorough review of the arguments and evidence, the Court denies the Plaintiffs' Motion for Summary Judgment. The Court discusses its determination with regard to each of the Plaintiffs' arguments in greater detail below.

The Note

The Plaintiffs assert that Citi does not have authority to enforce the Note because the Allonge (which purports to transfer the Note from Gecko to Citi) was not properly endorsed, and thus, failed to effectively transfer the Note to Citi. The Plaintiffs argue that the signature of the Gecko representative signing the Allonge, Charles Gabriel Keever, is a forgery. Mr. Keever's signature appears on the Allonge as the Gecko representative authorizing the transfer to Citi. Mr. Keever's signature also appears on the Assignment, although only as a witness to the Assignment, and not as the person actually authorizing the transfer to Citi. The Plaintiffs point out that Mr. Keever's signature on the Allonge and his signature as a witness to the Assignment are drastically different.

A visual comparison of the two signatures leaves no question that they cannot both be Mr. Keever's signature. From the stark discrepancy between the two signatures, the Court finds that at least one of the two signatures is a forgery. However,despite this fact, it remains possible that the signature on the Allonge is authentic, and only the signature on the Assignment is a forgery. Viewing the facts in the light most favorable to the non-moving party, as the Court must on summary judgment, there is a genuine issue of material fact as to whether the forgery is on the Allonge, the Assignment, or both. In order for the Court to make that determination, there will have to be a trial. Therefore, the Court denies the Plaintiffs' Motion for Summary Judgment with regard to the Note.

The Mortgage

The Plaintiffs assert that Citi does not have the right to enforce the Mortgage because the errors in the property description either (1) allow the Plaintiffs to avoid Citi's lien under 11 U.S.C. § 544, or (2) cause the property description to be so defective that the Mortgage is invalid. There are two errors on the Mortgage that form the basis of these arguments. The first is that the Mortgage states that the property is located in White County; it is actually located in Independence County. The second is that the property description specifically excludes the 20 Acre Tract from the Mortgage. Neither party disputes that these errors exist on the face of the Mortgage.

Standing Under § 544(a)(3)

Under the facts and circumstances of this case, the Plaintiffs do not have standing to avoid Citi's lien under § 544. Section 544(a)(3) states:

The trustee shall have, as of the commencement of the case, and without regard to any knowledge of the trustee or of any creditor, the rights and powers of, or may avoid any transfer of property of the debtor or any...