In re Peed

• Decision Date: 27 March 2009
• Docket Number: Bankruptcy No. 07-58903.,Adversary No. 07-2938.
• Citation: 403 B.R. 525
• Parties: In re Robert D. PEED and Tonya C. Peed, Debtors. William Todd Drown, Chapter 7 Trustee, Plaintiff, v. Countrywide Home Loans, Inc., Defendant.
• Court: U.S. Bankruptcy Court — Southern District of Ohio

403 B.R. 525

In re Robert D. PEED and Tonya C. Peed, Debtors William Todd Drown, Chapter 7 Trustee, Plaintiff, v. Countrywide Home Loans, Inc., Defendant.

Bankruptcy No. 07-58903.

Adversary No. 07-2938.

United States Bankruptcy Court, S.D. Ohio, Eastern Division at Columbus.

March 27, 2009.

William Todd Drown, Mount Vernon, OH, pro se.

Amelia A. Bower, Columbus, OH, Mark R. Lembright, Felty & Lembright, Co., LPA, Cleveland, OH, for Defendant.

ORDER

JOHN E. HOFFMAN, JR., Bankruptcy Judge.

This document has been electronically entered in the records of the United States Bankruptcy Court for the Southern District of Ohio.

IT IS SO ORDERED.

MEMORANDUM OPINION ON MOTIONS FOR SUMMARY JUDGMENT

I. Introduction

On November 1, 2007 ("Petition Date"), Robert D. and Tonya C. Peed filed a voluntary Chapter 7 petition. Prior to the Petition Date, Robert D. Peed ("Robert") executed two mortgages in the presence of two witnesses, one of whom also acted in the capacity of a notary public. The notary public's certificates of acknowledgment contained in both mortgages, however, fail to identify Robert as the person who acknowledged signing the documents. In fact, the acknowledgments contain blanks in the place where the name of the person acknowledging the signing of the mortgages should have been identified. Contending that the blanks in the acknowledgment clauses render the mortgages deficient under Ohio Revised Code § 5301.01, and thus not capable of being recorded, the Chapter 7 Trustee, William Todd Drown ("Trustee" or "Plaintiff"), seeks to avoid the mortgages. Countrywide Home Loans, Inc. ("Countrywide") disputes that the mortgages are invalid, arguing that because one witness to each mortgage was also the notary public, the acknowledgments were proper. The Court concludes that the mortgages are invalid because the certificates of acknowledgment do not reflect that the notary public properly certified Robert's acknowledgment. Accordingly, the Court grants summary judgment in favor of the Trustee.

II. Jurisdiction

The Court has jurisdiction to hear and determine this adversary proceeding pursuant to 28 U.S.C. §§ 157 and 1334 and the general order of reference entered in this district. The adversary proceeding is a core proceeding. See 28 U.S.C. § 157(b)(2)(K).

III. Procedural and Factual Background

By the complaint he filed initiating this adversary proceeding ("Complaint"), the Trustee seeks to avoid, pursuant to 11 U.S.C. § 544(a)(3), a first and second mortgage (Count One) and to preserve the mortgages for the benefit of the Debtors' bankruptcy estate under § 551 (Count Two). Following a pretrial conference, the parties agreed to a determination of the issues by dispositive motion. The matter is now before the Court on: (1) Trustee's amended motion for summary judgment ("Motion") (Doc. 12) and supplement ("Supplement") (Doc. 15); (2) Countrywide's brief in opposition and cross-motion for summary judgment (Doc. 13); (3) Countrywide's brief in opposition as to the second mortgage and cross-motion for summary judgment (Doc. 14); and (4) the Trustee's reply to Countrywide's opposition briefs and cross-motions (Doc. 16).

The parties did not file a stipulation of facts, but the pleadings and the documents filed in the Debtors' bankruptcy case establish that the relevant facts are not in dispute. Robert is the owner in fee simple of real property located at 942 S. Ashburton Road, Columbus, Ohio ("Property"). He received the Property by way of a general warranty deed signed August 26, 2004 and recorded on September 1, 2004 as Instrument Number 200409010205126, in the Franklin County, Ohio Recorder's Office. See Complaint, Ex. A. Debtor Tonya C. Peed purportedly owns a dower interest in and to the Property by virtue of her marriage to Robert.

On the Petition Date, the Debtors filed their schedules of assets and liabilities. On Schedule A (Real Property), they listed the Property with a value on the Petition Date of $60,000. On Schedule D (Creditors Holding Secured Claims), the Debtors listed Countrywide as having a first mortgage in the amount of $54,000 and a second mortgage in the amount of $13,275.34.

A. Mortgage I

On or about August 26, 2004, Robert, then unmarried, executed a promissory note and Mortgage ("Mortgage I") in favor of America's Wholesale Lender encumbering the Property. Countrywide admits that it is the current holder of the promissory note and Mortgage I. See Countrywide Answer (Doc. 4) ¶ 5. Mortgage I was recorded on September 1, 2004 as Instrument Number 20040901205140 in the Franklin County, Ohio Recorder's Office. Page 14 of 15 of Mortgage I bears the signature of Robert as the borrower and includes the signatures of two witnesses.¹ One of the witness's signatures purports to be that of John P. Stapleton ("Stapleton"); the Court is unable to decipher the other witness's signature. Mortgage I contains the following notary public acknowledgment on page 15 of 15:

This instrument was acknowledged before me this 26 of Aug, 2004, by

[blank].

The notary public acknowledgment bears the signature of Stapleton as a Notary Public for the State of Ohio. See Supplement, Ex. D.

B. Mortgage II

On or about August 26, 2004, Robert, then unmarried, executed a promissory note and an Open-End Mortgage (Line of Credit) ("Mortgage II") in favor of Countrywide Bank, a Division of Treasury Bank, N.A., encumbering the Property. Countrywide admits that it is the current holder of the promissory note and Mortgage II. See Countrywide Answer (Doc. 4) ¶ 8. Mortgage II was recorded on September 1, 2004 as Instrument Number 20040901205141 in the Franklin County, Ohio Recorder's Office. Mortgage II bears the signature of Robert as the mortgagor and includes the signatures of two witnesses. One of the witness's signatures purports to be that of Stapleton, and the other witness's signature is that of an individual named Sandra Weisner. Mortgage II contains the following notary public acknowledgment:

This instrument was acknowledged before me this 26 of Aug 2004, by

[blank]

The notary public acknowledgment bears the signature of Stapleton as a Notary Public for the State of Ohio. See Supplement, Ex. E.

IV. Arguments of the Parties

The Trustee contends that he is entitled, as a hypothetical bona fide purchaser under § 544(a)(3), to avoid Mortgage I and Mortgage II. In support of his position, the Trustee argues that the signing of the mortgages was not properly acknowledged by the notary public, pointing out that each of the mortgages contains a certificate of acknowledgment that omits any identification of the person acknowledging the documents. The Trustee maintains that the mortgages were not properly certified, do not comply with the requirements of Ohio Revised Code § 5301.01(A) and, consequently, are defective. He submits that Mortgages I and II are invalid under Ohio law, not capable of being recorded, and thus, subject to avoidance.

Countrywide initially asserts that the Trustee is not entitled to summary judgment because he failed to attach to his motion either the originals or copies of Mortgage I or Mortgage II as is required under Fed.R.Evid. 902. The Court notes, however, that Countrywide attached a copy of Mortgage I and Mortgage II to its cross-motions. And the Trustee corrected this evidentiary defect by supplementing the Motion and providing the Court with certified copies of both mortgage documents. See Supplement, Exs. D and E. Countrywide has not disputed the authenticity of the certified copies supplied by the Trustee. See, e.g., Geygan v. Chase Manhattan Mortgage Corp. (In re Thomas), 2008 Bankr.LEXIS 1679 at *2 n. 1 (Bankr. S.D.Ohio May 29, 2008) ("Chase argues that the copies of the mortgages attached to the Trustee's summary judgment motion are unauthenticated. However, Chase attached identical copies to its summary judgment motion. Therefore, the Court does not deem authentication to be a material issue."). Thus, the Court deems this point moot.

Countrywide's second argument—that Mortgage I and Mortgage II are valid— rests on the Ohio Supreme Court case of Wayne Building & Loan Co. v. Hoover, 12 Ohio St.2d 62, 231 N.E.2d 873 (1967). According to Countrywide, under Hoover, when a notary public also acts as a witness to the signing of a mortgage, as is the case here, he essentially acknowledges the signing for purposes of § 5301.01. Countrywide urges the Court to find that the mortgages were capable of being recorded, provided adequate notice to third parties, and therefore may not be avoided by the Trustee.

V. Legal Analysis

A. Summary Judgment Standard

Under Fed.R.Civ.P. 56(c), made applicable in this adversary proceeding by Fed. R. Bankr.P. 7056, summary judgment is appropriate where "the pleadings, discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c); see also Novak v. MetroHealth Med. Ctr., 503 F.3d 572, 577 (6th Cir.2007). In reviewing a motion for summary judgment, the Court views the evidence, all facts, and any inferences drawn therefrom, in the light most favorable to the nonmoving party. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986); Novak, 503 F.3d at 577; Skowronek v. Am. S.S. Co., 505 F.3d 482, 484 (6th Cir.2007) (the court "must draw all reasonable inferences in favor of the nonmoving party").

"`[A]s to materiality, the substantive law will identify which facts are material. Only disputes over facts that might affect the outcome of the suit under governing law will properly preclude the entry of summary judgment.'" Niecko v. Emro Mktg. Co., 973 F.2d 1296, 1304 (6th Cir. 1992) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986)). "Entry of summary judgment is appropriate `against a party who fails to make a...