In re Todd Stuart Payne And Zeta Gay Payne

• Decision Date: 31 March 2011
• Docket Number: Adversary No. 09–2467.,Bankruptcy No. 09–59437.
• Citation: 450 B.R. 711
• Parties: In re Todd Stuart PAYNE and Zeta Gay Payne, Debtors.Clyde Hardesty, Trustee, Plaintiff,v.The Huntington National Bank, et al., Defendants.
• Court: U.S. Bankruptcy Court — Southern District of Ohio

450 B.R. 711

In re Todd Stuart PAYNE and Zeta Gay Payne, Debtors.Clyde Hardesty, Trustee, Plaintiff,

v.The Huntington National Bank, et al., Defendants.

Bankruptcy No. 09–59437.

Adversary No. 09–2467.

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

March 31, 2011.

William Todd Drown, Mount Vernon, OH, for Trustee/Plaintiff (Electronic Service).Amelia A. Bower, Brian D. Wood, Columbus, OH, for Defendant The Huntington National Bank (Electronic Service).Mortgage Electronic Registration Systems, Inc., c/o CT Corporation System, Cleveland, OH.

MEMORANDUM OPINION ON TRUSTEE'S MOTION FOR SUMMARY JUDGMENT

C. KATHRYN PRESTON, Bankruptcy Judge.

I. Introduction

This cause came on for consideration of the Plaintiff Trustee's Motion for Summary Judgment (“Motion”) (Doc. No. 15) filed by Clyde Hardesty (“Trustee”), the Chapter 7 Trustee in the underlying bankruptcy case of Todd Stuart Payne and Zeta Gay Payne (collectively, “Debtors” or “Paynes”). The Trustee commenced this adversary proceeding against The Huntington National Bank (“Huntington”) and Mortgage Electronic Registration Systems, Inc. (“MERS”) to determine the extent of a mortgage on certain real property owned by the Debtors. Before the Court are the Motion, Huntington's brief in opposition (Doc. No. 16); ¹ and the Trustee's reply brief (Doc. 17). The Court, having considered the record and the arguments of the parties, makes the following findings of fact and conclusions of law.

The Court has jurisdiction over this matter pursuant to 28 U.S.C. §§ 157 and 1334 and the General Order of Reference entered in this District. This is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(A) and (K). Venue is properly before this Court pursuant to 28 U.S.C. §§ 1408 and 1409.

Before they commenced their bankruptcy case on August 18, 2009 (“Petition Date”), the Paynes granted a mortgage in favor of Huntington (“Mortgage”) on their real property located at 6321 Cimarron Road, Mount Perry, Ohio 43760 (“Property”). Because the Mortgage's certificate of acknowledgment identified both spouses as having acknowledged their signatures on the Mortgage, this adversary proceeding, unlike so many others, is not one in which the Trustee seeks to avoid a mortgage based on a blank and therefore defective certificate of acknowledgment. Rather, the Trustee contends that Mrs. Payne is not identified in the body of the Mortgage as a grantor or mortgagor—or, to use the terminology of the Mortgage, as a “Borrower”—and that her signing the Mortgage failed to convey a mortgage on her undivided one-half interest in the Property.² In response, Huntington argues that Mrs. Payne granted a mortgage on her interest in the Property in favor of Huntington.

For the reasons stated below, the Court concludes that the Mortgage does not encumber Mrs. Payne's undivided one-half interest in the Property. Accordingly, summary judgment on Count One (to the extent that Count One seeks a judgment that the Mortgage does not encumber Mrs. Payne's one-half interest in the Property) must be granted in favor of the Trustee and against Huntington.

II. Findings of Fact

The facts pertinent to the disposition of this matter are not disputed and can be summarized as follows. Prior to the Petition Date, the Paynes acquired title to the Property by a general warranty deed. Several years after the acquisition, in connection with a loan obtained from Huntington, both of the Paynes (again prior to the Petition Date) signed the Mortgage.³ It is undisputed that the Mortgage was delivered to, and accepted by or on behalf of, Huntington and that the Mortgage was properly recorded with the Office of the Perry County Recorder on February 8, 2005 (over four years prior to the Petition Date).

Several provisions of the Mortgage are pertinent to the instant adversary proceeding. The Mortgage begins with a “Definitions” section. The prelude to this section states in part that “[w]ords used in multiple sections of this document are defined below....” Mortg. at 1. One word that appears in multiple sections of the Mortgage—and the primary word relevant to the outcome of this adversary proceeding—is “Borrower.” Its definition is as follows:

(B) “Borrower” is

TODD S PAYNE, MARRIED

Borrower is the mortgagor under this Security Instrument.⁴ Mortg. at 1. Thus, the first page of the Mortgage defines Borrower to include only Mr. Payne and further states that, as the Borrower, he is the mortgagor under the Security Instrument. The Definitions section also defines “Note”—a term used in a later relevant section of the Mortgage (Section 13)—to mean “the promissory note signed by Borrower and dated January 24, 2005 [.]” ⁵

The provision of the Mortgage designed to effectuate a transfer of an interest in the Property—the granting clause—appears immediately after the Definitions in a section entitled “Transfer of Rights in the Property.” In pertinent part, that section provides as follows:

TRANSFER OF RIGHTS IN THE PROPERTY

This Security Instrument secures to Lender: (i) the repayment of the Loan ⁶, and all renewals, extensions and modifications of the Note; and (ii) the performance of Borrower's covenants and agreements under this Security Instrument and the Note. For this purpose, Borrower does hereby mortgage, grant and convey to MERS (solely as nominee for Lender and Lender's successors and assigns) and to the successor and assigns of MERS the following described property located in the

TOGETHER WITH all the improvements now or hereafter erected on the property, and all easements, appurtenances, and fixtures now or hereafter a part of the property. All replacements and additions shall also be covered by this Security Instrument. All of the foregoing is referred to in this Security Instrument as the “Property.”

....

BORROWER COVENANTS that Borrower is lawfully seized of the estate hereby conveyed and has the right to mortgage, grant and convey the Property and that the Property is unencumbered, except for encumbrances of record. Borrower warrants and will defend generally the title to the Property against all claims and demands, subject to any encumbrances of record. ....

Mortg. at 3 (emphasis added). In short, only the “Borrower” granted a mortgage on the Property pursuant to the section of the Mortgage in which the granting clause appears.

Approximately ten pages of covenants follow the granting clause. Huntington contends that Mrs. Payne granted a mortgage on her interest in the Property in Paragraph 13, entitled “Joint and Several Liability; Co-signers; Successors and Assigns Bound.” This covenant—which the Court will refer to as the “Co-signers Provision” or “Paragraph 13”—provides as follows:

Borrower covenants and agrees that Borrower's obligations and liability shall be joint and several.⁷ However, any Borrower who co-signs this Security Instrument but does not execute the Note (a “co-signer”): (a) is co-signing this Security Instrument only to mortgage, grant and convey the co-signer's interest in the Property under the terms of this Security Instrument; (b) is not personally obligated to pay the sums secured by this Security Instrument; and (c) agrees that Lender and any other Borrower can agree to extend, modify, forbear or make any accommodations with regard to the terms of this Security Instrument or the Note without the co-signer's consent.

Mortg. at 10.

Immediately after the conclusion of the covenants the Mortgage provides that “BY SIGNING BELOW, Borrower accepts and agrees to the terms and covenants contained in this Security Instrument and in any Rider executed by Borrower and recorded with it.” Mortg. at 14. Immediately below this statement there is a signature line over the preprinted name Todd S Payne and the preprinted word Borrower. Mr. Payne placed his signature on that line. Below his signature are four signature lines with the preprinted word Borrower but no preprinted names. Mrs. Payne handwrote her name on the first of the additional lines under which the word Borrower appears and then placed her signature on the line above her handwritten name. On the next page appears the certificate of acknowledgment (with which the Trustee has raised no issue); after the certificate of acknowledgment there are two pages of legal description. Both of the Paynes initialed the Mortgage on each of its pages (other than the signature page and the legal description).

III. Conclusions of Law

A. Standard of Review for Motions for Summary Judgment

Rule 56 of the Federal Rules of Civil Procedure 56, made applicable to adversary proceedings by Federal Rule of Bankruptcy Procedure 7056, provides that a court “shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a).⁸ The party seeking summary judgment bears the initial burden of “informing the ... court of the basis for its motion, and identifying those portions of the [record] which it believes demonstrate the absence of a genuine issue of material fact.” Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986).

If the movant satisfies this burden, the nonmoving party must then assert that a fact is genuinely disputed and must support the assertion by citing to particular parts of the record. See Fed.R.Civ.P. 56(c)(1). The mere allegation of a factual dispute is not sufficient to defeat a motion for summary judgment; to prevail, the non-moving party must show that there exists some genuine issue of material fact. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247–48, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). When deciding a motion for summary judgment, all justifiable inferences must be viewed in a light most favorable to the non-moving party. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986); Anderson, 477 U.S. at 255, 106 S.Ct. 2505.

The Sixth Circuit...