In re Morgeson

• Decision Date: 25 July 2007
• Docket Number: No. 06-8070.,06-8070.
• Citation: 371 B.R. 798
• Parties: In re David MORGESON, Tina Morgeson, Debtors. Henry Menninger, Trustee, Plaintiff-Appellee, v. Accredited Home Lenders, Defendant-Appellant.
• Court: U.S. Bankruptcy Appellate Panel, Sixth Circuit

Page 798

371 B.R. 798

In re David MORGESON, Tina Morgeson, Debtors Henry Menninger, Trustee, Plaintiff-Appellee, v. Accredited Home Lenders, Defendant-Appellant.

No. 06-8070.

United States Bankruptcy Appellate Panel of the Sixth Circuit.

Argued: May 1, 2007.

Decided and Filed: July 25, 2007.

ARGUED: David A. Freeburg, McFadden & Freeburg Co. L.P.A., Cleveland, OH, for Appellant. Henry E. Menninger, Wood & Lamping LLP, Cincinnati, OH, for Appellee. ON BRIEF: David A. Freeburg, McFadden & Freeburg Co. L.P.A., Cleveland, OH, for Appellant. Henry E. Menninger, Wood & Lamping LLP, Cincinnati, OH, for Appellee.

Before: PARSONS, SCOTT, and WHIPPLE, Bankruptcy Appellate Panel Judges.

OPINION

MARY ANN WHIPPLE, Bankruptcy Appellate Panel Judge.

Accredited Home Lenders ("Accredited") appeals the entry of summary judgment by the bankruptcy court in favor of the Chapter 7 Trustee ("the Trustee") in an adversary proceeding in which the Trustee sought a determination of the validity and extent of Accredited's mortgage against the debtors' real estate, which was subject to the Ohio Land Registration Act. In granting summary judgment, the bankruptcy court found that Accredited's mortgage interest in the debtors' real estate ("the property") extends only to husband David Morgeson's one-half interest in the property, thereby reserving wife Tina Morgeson's one-half interest for the bankruptcy estate. For the reasons that follow, the bankruptcy court's decision is AFFIRMED.

I. ISSUES ON APPEAL

The issue presented is whether the bankruptcy court erred in granting summary judgment in favor of the Trustee and finding that Accredited's mortgage interest extends only to David Morgeson's one-half interest in the property, despite a memorial on the certificate of title noting its mortgage against the present owner.

II. JURISDICTION AND STANDARD OF REVIEW

The Bankruptcy Appellate Panel ("BAP") of the Sixth Circuit has jurisdiction to hear this appeal. The United States District Court for the Southern District of Ohio has authorized appeals to the BAP, and neither party has timely elected to have this appeal heard by the district court. 28 U.S.C. §§ 158(b)(6), (c)(1). "A final order `ends the litigation on the merits and leaves nothing for the court to do but execute the judgment.'" Belfance v. Bushey (In re Bushey), 210 B.R. 95, 98 (6th Cir. B.A.P. 1997) (quoting Midland Asphalt Corp. v. United States, 489 U.S. 794, 798, 109 S.Ct. 1494, 1497, 103 L.Ed.2d 879 (1989)). The bankruptcy court's grant of summary judgment to the Trustee is a final appealable order reviewed de novo. See In re Bushey, 210 B.R. at 98. Under a de novo standard of review, the reviewing court decides an issue independently of, and without deference to, the trial court's determination. Treinish v. Norwest Bank Minn., N.A. (In re Periandri), 266 B.R. 651, 653 (6th Cir. B.A.P. 2001).

Summary Judgment is appropriate when "[t]he pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986); Fed.R.Civ.P. 56(c). A material fact is that which is outcome-determinative. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986) ("Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment."). In order to prevail, the movant must prove all elements of the cause of action or defense. Taft Broad. Co. v. United States, 929 F.2d 240, 248 (6th Cir. 1991). Once that burden is met, however, the opposing party must set forth specific facts showing there is a genuine issue for trial. Liberty Lobby, 477 U.S. at 249-51, 106 S.Ct. 2505; 60 Ivy St. Corp. v. Alexander, 822 F.2d 1432, 1435 (6th Cir.1987). Inferences drawn from the underlying facts must be viewed in a light most favorable to the party opposing the motion. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586-88, 106 S.Ct. 1348, 1356, 89 L.Ed.2d 538 (1986).

In cases such as this, where the parties have filed cross-motions for summary judgment, the court must consider each motion separately on its merits, since each party, as a movant for summary judgment bears the burden to establish both the nonexistence of genuine issues of material fact and that party's entitlement to judgment as a matter of law. Lansing Dairy v. Espy, 39 F.3d 1339, 1347 (6th Cir.1994); Markowitz v. Campbell (In re Markowitz), 190 F.3d 455, 463 n. 6 (6th Cir.1999). That both parties simultaneously argue there are no genuine issues of material fact does not in itself establish that a trial is not necessary, and that one party has failed to sustain its burden under Federal Rule of Civil Procedure 56 does not automatically entitle the opposing party to summary judgment. See 10A Charles Alan Wright, Arthur R. Miller, & Mary Kay Kane, Federal Practice and Procedure: Civil 3d § 2720 (1998).

III. FACTS

On August 31, 1999, husband and wife David and Tina Morgeson were granted a certificate of title to the real property commonly known as 9684 Kelso Court, Cincinnati, Ohio 45231, certifying that they are the owners in fee simple of the property as joint tenants with rights of survivorship. The property is situated in Hamilton County, Ohio, and is subject to Ohio's Land Registration Act. The certificate of title was properly registered on the Torrens Land Title Register of Hamilton County.

On May 24, 2002, the Morgesons executed a mortgage in favor of Accredited Home Lenders, Inc. The mortgage document provides that "`Borrower' is David M. Morgeson and Tina M. Morgeson, husband and wife" and further provides that "Borrower is the mortgagor under this Security Instrument." (J.A. at 77.) David Morgeson signed the mortgage document, granting a mortgage on his full one-half interest in the property. Tina Morgeson also signed the document. Below Tina Morgeson's signature, however, was a notation stating "spouse, signing only to release her dower interest." The certificate of acknowledgment contained the same language, stating that Tina Morgeson was signing only to release her dower interest in the property.

The signed and acknowledged mortgage document was filed for record with the Hamilton Country Recorder and, thereafter, the Hamilton County Recorder placed a notation on the certificate of title for the property, as is required by Ohio Revised Code § 5309.48. This notation indicates that Accredited is the holder of a $106,200 mortgage against the "present owner" of the property.¹ The county recorder did not note on the certificate of title that Tina Morgeson had released only her dower interest.

On July 15, 2004, the Morgesons filed a voluntary petition for Chapter 7 relief in the United States Bankruptcy Court for the Southern District of Ohio. An order for relief was entered and, thereafter, the Trustee, Appellee herein, filed a complaint against Accredited seeking to avoid Accredited's purported mortgage against Tina Morgeson's one-half interest in the property and to determine the validity and extent of Accredited's mortgage lien. Although brought under 11 U.S.C. §§ 544 and 547, the prayer for relief in the complaint asks for "such other and further relief as the court might deem to be just and proper." (J.A. at 11.) The parties filed cross motions for summary judgment. On August 31, 2006, the bankruptcy court granted the Trustee's motion for summary judgment and denied Accredited's motion for summary judgment.

The court found that Tina Morgeson's intent was to convey only her dower interest, and that the county recorder erred in noting on the certificate of title that both Morgesons were mortgagors. The bankruptcy court further found that the underlying mortgage document must be given effect despite the notation on the certificate of title. The bankruptcy court then concluded that Accredited's mortgage interest extended only to David Morgeson's interest in the property. Having found that no mortgage against Tina Morgeson's one-half interest was ever granted to Accredited, the bankruptcy court did not address whether a mortgage on her one-half interest was avoidable under § 544.

IV. DISCUSSION

The Ohio Land Registration Act, also known as Torrens law, creates a system by which title to land is registered, not recorded as under traditional recording laws. See Weyandt v. Davis, 112 Ohio App.3d 717, 720, 679 N.E.2d 1191 (1996). Under the Torrens system, the owners of registered land are issued a certificate of title, which contains a description of the registered parcel, along with memorials noting all liens, encumbrances and charges that bind the land.

The purpose of the Ohio Land Registration Act was "to create an absolute presumption that the certificate of registration in the registrar's office at all times speaks the last word as to the title, thus doing away with secret liens and hidden equities" and creating an indefeasible title, excepting only those claims and encumbrances noted therein. Curry v. Lybarger, 133 Ohio St. 55, 58, 11 N.E.2d 873 (1937). The certificate of title to registered land purports to show the exact state of title, and any liens or encumbrances not noted on the certificate of title are deemed unenforceable as to a bona fide purchaser. See Kincaid v. Yount, 9 Ohio App.3d 145, 147, 459 N.E.2d 235 (1983); Ohio Revised Code § 5309.28. If a lien or encumbrance is not noted on the certificate of title, the bona fide purchaser takes the property free of the encumbrance. Land registration is designed to provide notice to bona fide purchasers, not to notify owners of encumbrances against their land. See Amrich v. Boyle, 136 Ohio St. 325, 326, 25 N.E.2d 850 (1940). With this background in mind, the Panel addresses...