In re Scott
| Decision Date | 02 March 2010 |
| Docket Number | Bankruptcy No. 08-52647.,Bankruptcy No. 07-57624.,Adversary No. 07-2915.,Adversary No. 08-2172.,Adversary No. 08-2086.,Adversary No. 08-2173.,Bankruptcy No. 08-52032.,Adversary No. 08-2255.,Bankruptcy No. 08-51382.,Bankruptcy No. 07-58047.,Bankruptcy No. 08-61545.,Bankruptcy No. 08-53550.,Bankruptcy No. 08-56072.,Adversary No. 08-2158.,Adversary No. 08-2085,,Adversary No. 07-2913.,Adversary No. 09-2087. |
| Citation | 424 B.R. 315 |
| Parties | In re Jamal T. SCOTT and Debra L. Scott, Debtors. William Todd Drown, Trustee, Plaintiff, v. Wells Fargo Bank, N.A., et al., Defendants. In re Amelia F. Bridgeforth, Debtor. William Todd Drown, Trustee, Plaintiff, v. Colony Mortgage Corp., et al., Defendants. In re Steven W. Walsh and Mandy A. Walsh, Debtors. William Todd Drown, Trustee, Plaintiff, v. America's Wholesale Lender, et al., Defendants. In re Steven W. Walsh and Mandy A. Walsh, Debtors. William Todd Drown, Trustee, Plaintiff, v. Countrywide Home Loans, Inc., et al., Defendants. In re John Thomas Hilliard and Amanda Lynn Hilliard, Debtors. William Todd Drown, Trustee, Plaintiff, v. Wells Fargo Bank, N.A., et al., Defendants. In re Gary Edward Warne and Karen Lynn Warne, Debtors. Clyde Hardesty, Trustee, Plaintiff, v. Small Business Administration, et al., Defendants. In re John J. Hynes and Janice L. Hynes, Debtors. Clyde Hardesty, Trustee, Plaintiff, v. Charter One Bank, N.A., et al., Defendants. In re Diane A. Rucker, Debtor. William Todd Drown, Trustee, Plaintiff, v. Aurora Loan Services, LLC, et al., Defendants. In re Dale A. Burnett and Tricia R. Burnett, Debtors. Clyde Hardesty, Trustee, Plaintiff, v. Option One Mortgage Corp., et al., Defendants. |
| Court | U.S. Bankruptcy Court — Southern District of Ohio |
William Todd Drown, Folland & Drown, LPA, Mount Vernon, OH, for Plaintiffs.
Maria C. Mariano Guthrie, Sikora Law LLC, Bethany Hamilton, United States Attorney's Office, Stephen A. Santangelo, Amelia A. Bower, Columbus, OH, Cynthia M. Fischer, Nathan L. Swehla, Cincinnati OH, Christopher W. Peer, Friedman Yaksic, Brooke Turner-Bautista, Cleveland, OH, Michael J. Sikora, III, Mentor, OH, Michelle Polly-Murphy, Wilmington, OH, Michael A. Northrup, Zanesville, OH, for Defendants.
Jeremy Dennis, Galloway, OH, pro se.
Christina R. Dennis, Galloway, OH, pro se.
Franklin County Treasurer, Columbus, OH, pro se.
Vicki J. Schumick, pro se.
David J. Schumick, pro se.
Barbara D. Lucas, pro se.
Timothy J. Lucas, pro se.
Patrick R. Lucas, pro se.
Prudence Lucas, pro se.
Estate of Martha L. Lucas, pro se.
Unknown Heirs and Spouses of Vicki J. Schumick (aka Vicki L. Schumick), David J. Schumick, Timothy J. Lucas, Barbara D. Lucas, Patrick R. Lucas, and Prudence Lucas, pro se.
David F. Miller, Pleasantville, OH, pro se.
Kathy R. Miller, Pleasantville, OH, pro se.
Quality Home Investment Group, Columbus, OH, pro se.
Baltimore Land Management, Inc., Baltimore, OH, pro se.
Charles Shane Stack, Fleming, OH, pro se.
Unknown Spouse of Charles Shane Stack, Fleming, OH, pro se.
Mortgage Electronic Registration Systems, Inc., Vienna, VA, pro se.
Chris Wigal Zanesville, OH, pro se.
Unknown Spouse of Chris Wigal, Zanesville, OH, pro se.
Ronald McCarty, Johnstown, OH, pro se.
Wendy McCarty, Johnstown, OH, pro se.
Before: CHARLES M. CALDWELL, JOHN E. HOFFMAN, JR. and C. KATHRYN PRESTON, Bankruptcy Judges.
Chapter 7 trustees William Todd Drown and Clyde Hardesty ("Trustees") seek to bring various parcels of real property located in Ohio into the respective estates of the debtors in the above-captioned cases ("Debtors") free and clear of mortgages the Debtors granted on the properties prior to the filing of their bankruptcy petitions. The Trustees contend that the deeds from the grantors ("Grantors") to the Debtors were defectively executed, that as a result the Debtors did not obtain title to the properties, and that the mortgages therefore are avoidable or void under 11 U.S.C. § 544(a). The adversary proceedings include (a) quiet title actions against the Grantors and (b) actions against the holders of the mortgages as well as Mortgage Electronic Registration Systems, Inc. ("MERS") (collectively, "Mortgagees")1 based on the Trustees' status as judicial lien holders under § 544(a)(1) and bona fide purchasers under § 544(a)(3).
The Trustees are seeking summary judgment against the Mortgagees based on the purported defects in the execution of the deeds.2 The Mortgagees do not concede that the deeds were defectively executed, but have agreed that the Court may presume them so for purposes of summary judgment. Assuming without deciding that the deeds were defectively executed, the Court concludes that, as a matter of Ohio law, (1) the Grantors conveyed equitable interests in the properties to the Debtors, (2) the Debtors granted liens on their equitable interests in the properties to the Mortgagees, (3) the Mortgagees obtained interests in the properties from the Debtors and (4) the interests obtained by the Mortgagees were perfected through the proper execution and recording of the mortgages. Under Ohio law, no one—including judicial lien holders and bona fide purchasers—can avoid or otherwise take free of perfected interests in real property. Thus, the Court concludes that the Trustees cannot prevail solely because of defects, if any, in the execution of the deeds.
The Court has jurisdiction to hear and determine these consolidated adversary proceedings pursuant to 28 U.S.C. §§ 157 and 1334 and the general order of reference entered in this district. These are core proceedings. See 28 U.S.C. § 157(b)(2)(K).
While participating in pre-trial conferences, the Trustees and the Mortgagees identified the legal issue of whether a trustee may avoid a mortgage on real property based solely on a defect in the execution of the deed by which the property was conveyed to a debtor ("Defective Deed Issue"). Because this legal issue is common to each of the adversary proceedings, the Court advised the litigants that, in the interest of judicial economy, it intended to consolidate the proceedings for the purposes of jointly conducting a hearing and ruling on the Defective Deed Issue. No party in interest objected to the proposed consolidation. By an order entered on January 21, 2009, the Court established a briefing schedule and set a date for oral argument.3
On March 17, 2009, the Trustees filed motions seeking summary judgment on the Defective Deed Issue. Certain of the Mortgagees—America's Wholesale Lender ("AWL"), Countrywide Home Loans, Inc. ("Countrywide"), MERS and Wells Fargo Bank, N.A. ("Wells Fargo")—also filed cross-motions for summary judgment. After the other adversary proceedings were consolidated, one of the Mortgagees, Option One Mortgage Corp. ("Option One"), agreed to consolidate its adversary proceeding (Adv. Pro. No. 09-2087) as well, and, on May 4, 2009, the Court entered an order consolidating it with the others for the sole purpose of hearing and deciding the Defective Deed Issue. The parties have not filed motions for summary judgment in Adv. Pro. No. 09-2087.
On May 12, 2009, Judges Caldwell, Hoffman and Preston heard oral argument on the Defective Deed Issue. Present at the oral argument were the following attorneys: William Todd Drown ("Drown") and Nancy Willis for the Trustees; Amelia Bower for Aurora Loan Services, LLC ("Aurora"), Charter One Bank, N.A. ("Charter One"), Colony Mortgage Corp. ("Colony"), Option One and Wells Fargo; Maria Guthrie for AWL, Countrywide, MERS and the Small Business Administration ("SBA"); Michelle Polly-Murphy for AWL, MERS and Wells Fargo; Stephen Santangelo for Irwin Union Bank and Trust Company; and Brittany Griggs for AWL, Countrywide and MERS.
Following oral argument, each of the parties identified above, as well as Citimortgage, Inc. ("Citimortgage")—an intervenor in Adv. Pro. No. 07-2915 along with MERS4—filed post-hearing briefs even though the Court had taken the matter under advisement without establishing a post-hearing briefing schedule.5 In their initial post-hearing brief, the Trustees for the first time argued that the mortgages were recorded outside their chain of title— as hypothetical bona fide purchasers of the properties—and that the Trustees therefore lacked constructive notice of the Mortgagees' interests. See Doc. 36 in Adv. Pro. No. 08-2085 at 14-16. Because the Trustees had not previously made this argument, the Court entered orders in the various adversary proceedings providing the Mortgagees until August 5, 2009 to file briefs addressing the argument and the Trustees until August 15, 2009 to file their reply briefs.
In support of their request for summary judgment, the Trustees rely on § 544(a), which states:
(a) 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 obligation incurred by the debtor that is voidable by—
(1) a creditor that extends credit to the debtor at the time of the commencement of the case, and that obtains, at such time and with respect to such credit, a judicial lien on all property on which a creditor on a simple contract could have obtained such a judicial lien, whether or not such a creditor exists;
(2) a creditor that extends credit to the debtor at the time of the commencement of the case, and obtains, at such time and with respect to such credit, an execution against the debtor that is returned unsatisfied at such time, whether or not such a creditor exists; or
(3) a bona fide purchaser of real property, other than fixtures, from the debtor, against whom applicable...
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In re Lee
...fide purchaser, the creditor would still have an equitable interest therein as against the mortgagor. Drown v. Wells Fargo Bank (In re Scott), 424 B.R. 315, 327 (Bankr.S.D.Ohio 2010); In re Wright Indus., 93 F.Supp. 58, 63 (D.Ohio 1950). Appellee clearly had standing to seek dismissal of De......
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In re Lee
...fide purchaser, the creditor would still have an equitable interest therein as against the mortgagor. Drown v. Wells Fargo Bank (In re Scott), 424 B.R. 315, 327 (Bankr. S.D. Ohio 2010); In re Wright Indus., 93 F. Supp. 58, 63 (D. Ohio 1950). Appellee clearly had standing to seek dismissal o......
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In re Weatherspoon
...re Wengerd , 453 B.R. 243, 247 (6th Cir. BAP 2011), using the same methodology that it would use, Drown v. Wells Fargo Bank, N.A. (In re Scott) , 424 B.R. 315, 330 (Bankr. S.D. Ohio 2010), aff'd , 2011 WL 1188434 (S.D. Ohio Mar. 29, 2011). In making the required prediction, the Court may re......
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Miller v. Johnson (In re Miller)
...Simon v Chase Manhattan Bank (In re Zaptocky), 250 F.3d 1020, 1024, 1026-27 (6th Cir. 2001) ; Drown v. Wells Fargo Bank, N.A. (In re Scott), 424 B.R. 315, 328-29 (Bankr. S.D. Ohio 2010) (citations omitted), aff'd 2011 WL 1188434, 2011 U.S. Dist. LEXIS 38090 (S.D. Ohio 2011). Ohio Rev. Code ......