Mullaney v. Bank of Am. (In re Mullaney)
| Decision Date | 11 April 2019 |
| Docket Number | CASE NO. 17-02594-5-SWH,ADVERSARY PROCEEDING NO. 17-00039-5-SWH |
| Court | U.S. Bankruptcy Court — Eastern District of North Carolina |
| Parties | IN RE: DAVID DUNN MULLANEY and ELISE HUMPHREYS MULLANEY, DEBTORS DAVID DUNN MULLANEY and ELISE HUMPHREYS MULLANEY, Plaintiffs, v. BANK OF AMERICA, N.A. and CITIMORTGAGE, INC., Defendants. |
The matters before the court are cross-motions for summary judgment filed by the chapter 11 debtors and plaintiffs, David Dunn Mullaney and Elise Humphreys Mullaney (D.E. 37), and by defendants Bank of America, N.A. and CitiMortgage, Inc. (D.E. 35). Both motions were filed on December 12, 2018, and responsive memoranda subsequently were filed by both plaintiffs (D.E. 47) and defendants (D.E. 48). A hearing was held in Wilmington, North Carolina on January 17, 2019, after which the court took the matter under advisement. On March 28, 2019, the court entered a short order which provided that for reasons to be more fully set forth in an opinion to follow, plaintiffs' motion for summary judgment on the 11 U.S.C. § 544(a) claims was denied and defendants' motion for summary judgment on the § 544(a) claims was allowed, which disposition mooted defendants' counterclaims. Those reasons are set forth below.
In May of 2006, David and Elise Mullaney (collectively, "plaintiffs") contracted to purchase real property located at 2109 Auburn Lane, Wilmington, North Carolina ("the Property"). At that time, plaintiffs were residents of Alexandria, Virginia. To fund the purchase, plaintiffs obtained two loans; one in the principal amount of $527,500.00 from ABN AMRO Mortgage Group ("ABN AMRO"), now held by defendants Bank of America, N.A. and CitiMortgage, Inc. as successors in interest to ABN AMRO (referred to herein as the "Bank of America loan"), and the other in the principal amount of $350,000.00 from Wells Fargo (the "Wells Fargo loan"). It is the deed of trust securing the Bank of America loan that is specifically at issue here. Preparation of the closing documents for the Property was handled by North Carolina attorney Steven Siegel, who compiled the documents for both loans, and then conveyed them to the plaintiffs' home in Alexandria.1
The Wells Fargo loan is evidenced by a note executed by both David and Elise Mullaney. Both Mullaneys are grantors on the deed of trust. The uncontested evidence, including the documents themselves (the "Wells Fargo documents"), is that both Mr. and Mrs. Mullaney signed and initialed these documents in the designated places. Their signatures were acknowledged in notarial certificates by Hyun Ah Park, who was at that time a notary licensed in the Commonwealth of Virginia, employed by SunTrust Bank. All of the initials or signatures affixed by Mr. and Mrs. Mullaney to the Wells Fargo documents are dated May 22, 2006, and Ms. Park's notarial acts in connection with the Wells Fargo documents are dated May 22, 2006. These acts consisted of affixing her notarial seal to the Borrowers' Affidavit, the Correction Agreement Limited Power of Attorney, and the Open-Ended Deed of Trust. D.E. 35-2 () at pp. 70-71 (Ex. 23), 72-73 (Ex. 24), 81-93 (Ex. 28). Each of the documents including the notarial certificate of acknowledgment by Ms. Park also includes the typewritten names of both David Mullaney and Elise Mullaney.
The Bank of America loan is evidenced by a note executed by only David Mullaney. Though Mr. Mullaney was the sole borrower on the loan, both Mullaneys were grantors on the Deed of Trust. As prepared by Bank of America, all of the loan documents evidencing the note and Deed of Trust included only Mr. Mullaney's name as a grantor, including the Signature Affidavit, which required the borrower to execute a signature affidavit and "AKA statement" and for the notary public to complete a notarized "Acknowledgment of Borrower Identity." Id. at 29 (Ex. 14). The signature and initials of Mr. Mullaney appear throughout the loan and related documents, all dated as of May 22, 2006. The signature and initials of Mrs. Mullaney also appear in some of these documents, including on the Deed of Trust, all dated as of May 22, 2006. Other than Mr.Mullaney's Signature Affidavit in connection with the underlying loan, the Bank of America documents required only one other signature page to be notarized, that being the final page (page 9) of the Deed of Trust.
On the Deed of Trust, attorney Seigel's office added Mrs. Mullaney's name as a grantor by typing it into the document in four places, three of which also required her accompanying signature: On the first page (page 1 of 9) as a "Borrower," and on the last page (page 9 of 9), along with a (seal) signature line; on the appended Planned Unit Development Rider (page 2 of 2), along with a (seal) signature line, and on the appended Adjustable Rate Rider (page 3 of 3), also with a (seal) signature line. Id. at 40, 48, 50, 53 (Ex. 19). Mrs. Mullaney's signature appears on all three signatures lines, and she testified in her deposition that the signatures on the Deed of Trust and appended documents are, in fact, her signatures. Mr. Mullaney's name appears in these same places, along with his signature.2
In a nutshell, Mrs. Mullaney's deposition testimony simply confirms that she and Mr. Mullaney borrowed money to effectuate the purchase of the Property, pursuant to which it was necessary to sign many documents. She testified that she has no specific recollection of physically signing any of the documents necessary to close on either of the two loans, but has no reason to believe she did not sign the appropriate documents. Instead, to the contrary, Mrs. Mullaney testified that she "absolutely" believes that she did sign them. D.E. 35-6 at 11-12, 17-18.
The catalyst for the instant motion is the omission of Mrs. Mullaney's name on page 9 of the Deed of Trust, within the notarial certification block itself, which is set out below the typed names and signatures of both David and Elise Mullaney. The uppermost part of that block indicates the state in which the certification is made, and in it, Mr. Seigel's office made a correction by typing over/crossing through the words "North Carolina" and replacing them with the word "Virginia." Within the block itself, an additional reference to the "State of North Carolina" appears. This was not corrected by Mr. Seigel's office, and instead has been marked through by hand, with the word "Virginia" written underneath. The block includes underlined and otherwise blank spaces in which the notary, Hyun Ah Park, entered her name, the county (Arlington), and the date (May 22, 2006). Mr. Mullaney's name was typed into the block by ABN AMRO as the individual who "personally appeared before" the notary. Mrs. Mullaney's name is not typed into the block (there is no additional space in proximity to Mr. Mullaney's name in which to do so), nor was it written in or otherwise added to the notary block. Mr. Mullaney's typewritten name is almost obscured by application of the notarial seal. The notarial certificate otherwise includes the same information as the notarizations in the Wells Fargo documents; i.e. Ms. Park's name and signature, the date, the county and state, the expiration of her commission, and the notarial seal.
The signed documents were returned to Mr. Seigel, all monies were deposited and disbursed per the agreements, and the Mullaneys completed their purchase of the Property. Both deeds of trust were recorded. The Wells Fargo deed of trust was recorded on May 23, 2006, in the New Hanover County Registry at Book 5025, Page 1652-1655. The Bank of America deed of trust (the "Deed of Trust") also was recorded on May 23, 2006, in the New Hanover County Registry, at Book 5025, Page 1656-1670. Subsequently, the Mullaneys borrowed additional funds in the principal amountof $454,000, as evidenced by a promissory note in favor of Citibank, N.A., dated March 24, 2008. That obligation is secured by a deed of trust (the "2008 deed of trust") on the Property, recorded on April 10, 2008 in the New Hanover County Registry, at Book 5300, Page 1230.
On August 12, 2015, Mr. Mullaney filed a voluntary petition under chapter 7 of the Bankruptcy Code. Mr. Mullaney listed the Property on his Schedule A, and in Schedule D, he listed CitiBank, N.A., represented by Bank of America, N.A., as the holder of a deed of trust and home equity line of credit on the Property, securing a note with a balance as of the petition date of $453,410.72. In addition, Mr. Mullaney listed defendant CitiMortgage, Inc. as the holder of the Deed of Trust on the property in the amount of $430,413.00. Bankr. Case No. 15-04409-5-SWH, D.E. 1 at 29 (Schedule D). Mr. Mullaney did not challenge the validity of the Deed of Trust in that case, and instead indicated his intention to retain the property and continue to make payments as to both obligations. Id. at 31 (Chapter 7 Individual Debtor's Statement of Intention). CitiMortgage did not file a claim, though it did file a motion for relief from stay, which it later withdrew. Mr. Mullaney received a discharge on October 11, 2016, and a final decree was entered in the chapter 7 case on February 14, 2017.
On May 26, 2017, Mr. and Mrs. Mullaney filed a joint petition under chapter 11 and also initiated this adversary proceeding. In the bankruptcy case, the Mullaneys listed the Property as being held as a joint tenancy by the entireties with a present value of $849,700. Defendant CitiMortgage, the servicer of the Deed of Trust as of the petition date, is listed as having a disputed claim secured by the property in the amount of $491,250.15. In their Schedule D, plaintiffs noted that Bankr. Case No....
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