McClatchey v. GMAC Mortg., LLC (In re Lacy)

• Decision Date: 29 November 2012
• Docket Number: Bankruptcy No. 09–62491.,Adversary No. 10–2075.
• Citation: 483 B.R. 126
• Parties: In re Charles Leroy LACY, Debtor. Larry J. McClatchey, Chapter 7 Trustee, Plaintiff v. GMAC Mortgage, LLC, et al., Defendants.
• Court: U.S. Bankruptcy Court — Southern District of Ohio

483 B.R. 126

In re Charles Leroy LACY, Debtor.Larry J. McClatchey, Chapter 7 Trustee, Plaintiff

v.GMAC Mortgage, LLC, et al., Defendants.

Bankruptcy No. 09–62491.

Adversary No. 10–2075.

United States Bankruptcy Court,

S.D. Ohio,

Eastern Division at Columbus.

Nov. 29, 2012.

Amelia A. Bower, Columbus, OH, for Defendants.

Larry J. McClatchey, Columbus, OH, Pro se.

Christy Prince, Kegler, Brown, Hill & Ritter, LPA, Columbus, OH, for Plaintiff.

Robin S. Stith, Columbus, OH, for Debtor.

MEMORANDUM OPINION ON TRUSTEE'S MOTION FOR SUMMARY JUDGMENT

JOHN E. HOFFMAN, JR., Bankruptcy Judge.

I. Introduction

Acting pursuant to a valid power of attorney, Gina Marie Iacuzzo (“Ms. Iacuzzo”) signed a mortgage on behalf of Charles L. Lacy (“Mr. Lacy”). Several years later, Mr. Lacy filed a Chapter 7 petition, and the trustee appointed in his bankruptcy case, Larry J. McClatchey (“Trustee”), commenced this adversary proceeding seeking to avoid the mortgage on the basis that the notary public failed to certify that Ms. Iacuzzo acknowledged her signature. In his motion for summary judgment (“Motion”) (Doc. 26), the Trustee contends that this failure rendered the recording of the mortgage ineffective to provide constructive notice to a subsequent bona fide purchaser, such as a trustee having the rights and powers conferred by 11 U.S.C. § 544(a)(3).¹ In response, GMAC argues that the certificate of acknowledgment substantially complied with the certification requirement of Ohio law.² For the reasons explained below, the Court concludes that there was not substantial compliance with the certification requirement and that the Trustee therefore is entitled to summary judgment.

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. This is a core proceeding. See28 U.S.C. § 157(b)(2).

III. Background

The material facts of this case are not disputed. On June 26, 2005, Mr. Lacy executed a special power of attorney (“Power of Attorney”) ³ appointing Ms. Iacuzzo as his attorney-in-fact for the purpose of purchasing and granting a mortgage on the real property located at 2303 Shrewsbury Road, Columbus, Ohio (“Property”).⁴ The Power of Attorney authorized Ms. Iacuzzo:

to sign, execute and deliver and acknowledge any and all documents necessary to purchase the [Property], including, but not limited to, the signing of real estate purchase contracts, HUD–1 forms, Affidavits, Closing Statements, Notes, Mortgages, or inspection reports.

Giving and granting unto [Ms. Iacuzzo] full power and authority to do and perform all and every act and thing whatsoever requisite and necessary to be done in and about the premises as fully to all intents and purposes as I/we might or could do if personally present, hereby ratifying and confirming that [Ms. Iacuzzo] shall lawfully do or cause to be done by virtue of these presents.

Power of Attorney at 1. Mr. Lacy signed and acknowledged the Power of Attorney before a notary public, and the Power of Attorney was recorded with the Franklin County Recorder (“Recorder”) on July 19, 2005. The Trustee has not challenged the validity of the Power of Attorney.

The Property was conveyed to Mr. Lacy by deed dated June 29, 2005. To finance the purchase of the Property, Mr. Lacy obtained a loan secured by a mortgage also dated June 29, 2005 (“Mortgage”).⁵ The Mortgage identified Mr. Lacy as the mortgagor:

IMAGE

Mortg. at 1.

Ms. Iacuzzo signed the Mortgage on Mr. Lacy's behalf and noted on the signature line that she was doing so:

IMAGE

Mortg. at 3.

On the next page, the certificate of acknowledgmenton the Mortgage (“Certificate of Acknowledgment”) states as follows:

IMAGE

Mortg. at 4. The Mortgage was filed with the Recorder on July 19, 2005, shortly after the Power of Attorney was recorded.⁶

IV. Legal Analysis

A. Summary Judgment Standard

Under Rule 56 of the Federal Rules of Civil Procedure (“Civil Rule(s)”), made applicable in this adversary proceeding by Rule 7056 of the Federal Rules of Bankruptcy Procedure, 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). ⁷ “On a motion for summary judgment, facts must be viewed in the light most favorable to the nonmoving party only if there is a genuine dispute as to those facts.” Ricci v. DeStefano, 557 U.S. 557, 129 S.Ct. 2658, 2677, 174 L.Ed.2d 490 (2009) (internal quotation marks omitted). A dispute is genuine only if it is “based on evidence upon which a reasonable[finder of fact] could return a [judgment] in favor of the non-moving party.” Gallagher v. C.H. Robinson Worldwide, Inc., 567 F.3d 263, 270 (6th Cir.2009). And a “factual dispute concerns a ‘material’ fact only if its resolution might affect the outcome of the suit under the governing substantive law.” Id.

B. The Requirements for the Proper Execution of a Mortgage

Section 5301.01(A) of the Ohio Revised Code establishes the requirements for the proper execution of a mortgage: The mortgagor must sign the mortgage and acknowledge the signature before an authorized public official, such as a notary public, and the official must certify the acknowledgment and subscribe his or her name to the certificate of acknowledgment. See Rhiel v. Huntington Nat'l Bank (In re Phalen), 445 B.R. 830, 839 (Bankr.S.D.Ohio 2011). Shane Dryden, a notary public, subscribed his name to the Certificate of Acknowledgment, satisfying the subscription requirement.⁸ Acting in accordance with the Power of Attorney, Ms. Iacuzzo signed the Mortgage on behalf of Mr. Lacy, satisfying the signature requirement. See Drown v. Nat'l City Bank (In re Ingersoll), 403 B.R. 505, 510 (Bankr.S.D.Ohio), aff'd,420 B.R. 414 (6th Cir. BAP 2009), aff'd,433 Fed.Appx. 367 (2011) (explaining the statutory bases under Ohio law for concluding that the signature requirement is satisfied if a mortgage identifies the principal as the mortgagor and the mortgage is signed by the attorney-in-fact pursuant to a properly executed power of attorney that was recorded prior to the recording of the mortgage).

That leaves two requirements: acknowledgment of the signature and certification of the acknowledgment. In the case of a mortgage granted pursuant to a power of attorney, it is the attorney-in-fact who must acknowledge his or her signature. See id. (“[The] signature [of the attorney-in-fact] was the only one that needed to be acknowledged....”). See alsoOhio Rev.Code Ann. § 147.541(C)(4) (West 2012) (defining the words “acknowledged before me” to mean that, in the case of a “person acknowledging as principal” through an attorney-in-fact, the acknowledgment is made by the attorney-in-fact); Ohio Rev.Code Ann. § 147.55(D) (providing in the statutory short form of acknowledgment for an individual acting as principal by an attorney in fact that the “[t]he foregoing instrument was acknowledged before me this (date) by (name of attorney in fact) as attorney in fact on behalf of (name of principal).”) (emphasis added); Rogan v. CitiMortgage, Inc. (In re Hurt), 2011 WL 1300051, at *3 (Bankr.E.D.Ky. Mar. 31, 2011) (recognizing that the attorney-in-fact who signed the deed of trust, rather than the principals on whose behalf she signed it, was the one who acknowledged the deed of trust).⁹

In order to satisfy the acknowledgment requirement, Ms. Iacuzzo must either have: (1) signed the Mortgage in the presence of the notary public, see Wayne Bldg. & Loan Co. v. Hoover, 12 Ohio St.2d 62, 231 N.E.2d 873, 874 (syllabus ¶ 1) (1967) (“In the absence of evidence to the contrary, one who signs his name to a document in the presence of another thereby acknowledges his signing thereof to such other.”); or (2) informed the notary public that she signed it. See Harwood v. Pappas & Assoc., Inc., 2005 WL 1177877, at *3 (Ohio Ct.App. May 19, 2005). Although the Trustee does not concede that Ms. Iacuzzo acknowledged her signature, he seeks summary judgment based only on the notary public's purported failure to certify any acknowledgment that Ms. Iacuzzo in fact made.

To satisfy the certification requirement, a notary public must certify two things: (1) that “[t]he person acknowledging appeared before him and acknowledged he executed the instrument[,]” Ohio Rev.Code Ann. § 147.53(A); and (2) that “[t]he person acknowledging was known to the person taking the acknowledgment, or that the person taking the acknowledgment had satisfactory evidence that the person acknowledging was the person described in and who executed the instrument.” Ohio Rev.Code Ann. § 147.53(B). The notary public may accomplish the certification in part by using the words “acknowledged before me” or their substantial equivalent, seeOhio Rev.Code Ann. § 147.54(C) or, as authorized in § 147.54(A) of the Ohio Revised Code, by using one of the statutory short forms of acknowledgment, each of which contains the phrase “acknowledged before me.” SeeOhio Rev.Code Ann. § 147.55.¹⁰ When used in the context of an acknowledgment by an attorney-in-fact, this phrase means that:

(A) The person acknowledging appeared before the [notary public];

(B) He acknowledged he executed the instrument; (C) [i]n the case of ... (4) [a] person acknowledging as principal by an attorney in fact, he executed the instrument by proper authority as the act of the principal for the purposes therein stated ... [and] (D) [the notary public] either knew or had satisfactory evidence that the person acknowledging was the person named in the instrument or certificate.

Ohio Rev.Code Ann. § 147.541. The notary public also “must fill in the blank in a certificate of acknowledgment with the name or other identification of the person who is acknowledging the signature” on the mortgage. Phalen, 445 B.R. at 844.

C. The Substantial Compliance Standard

It is well settled that the failure to satisfy the...