Rhiel v. Bank of N.Y. Mellon (In re Perry)

• Decision Date: 08 May 2019
• Docket Number: No. 16-8042,16-8042
• Citation: 600 B.R. 584
• Parties: IN RE: Vodrick Lee PERRY; Marcy Lynn Perry, Debtors. Susan L. Rhiel, Trustee, Plaintiff-Appellant, v. The Bank of New York Mellon, Defendant-Appellee.
• Court: U.S. Bankruptcy Appellate Panel, Sixth Circuit

600 B.R. 584

IN RE: Vodrick Lee PERRY; Marcy Lynn Perry, Debtors.

Susan L. Rhiel, Trustee, Plaintiff-Appellant,

v.The Bank of New York Mellon, Defendant-Appellee.

No. 16-8042

United States Bankruptcy Appellate Panel of the Sixth Circuit.

Decided and Filed: May 8, 2019

ON BRIEF: Kristin Radwanick, Susan L. Rhiel, Jeffrey M. Levinson, LEVINSON LLP, Cleveland, Ohio, for Appellant.Amelia A. Bower, PLUNKETT COONEY, Columbus, Ohio, for Appellee.

Before: DALES, HARRISON and OPPERMAN, Bankruptcy Appellate Panel Judges.

SCOTT W. DALES, Bankruptcy Appellate Panel Judge.

This appeal concerns a Complaint for Declaratory Judgment filed by chapter 7trusteeSusan Rhiel(the "Appellant") seeking a determination that a refinanced mortgage only encumbers the interest of the person specifically defined within the body of the mortgage as a "Borrower/Mortgagor."The bankruptcy court considered whether the co-debtor wife's signature and initials on a mortgage instrument that listed her as a "Borrower" in the signature block resulted in pledging to the lender her interest as a joint tenant with rights of survivorship, when the mortgage did not specifically name her as a "Borrower" within the text of document other than in the signature block.

The bankruptcy court regarded the mortgage as ambiguous under these circumstances, concluding that extrinsic evidence was necessary to determine the parties' intent and respective rights in the property.After a trial, the court entered a Memorandum Opinion and Order¹ and Judgment Order finding the property fully encumbered by the mortgage.The trustee appealed from this ruling.

During the appeal, the Panel certified two unsettled state law questions to the Ohio Supreme Court and held the appeal in abeyance pending the high court's answer.Because the Ohio Supreme Court has now answered the certified questions, and the parties have offered supplemental argument in light of the answers, the appeal is now ready for decision.

ISSUES ON APPEAL

The Appellant frames the issues on appeal as follows:

1.Did the Bankruptcy Court err in allowing parole [sic] evidence at trial regarding Debtor Marcy Lynn Perry's intent when signing the First Mortgage held by the Appellee The Bank of New York Mellon where the First Mortgage was unambiguous on its face?

2.Did the Bankruptcy Court err in determining that the Property is fully encumbered by the First Mortgage held by the Appellee The Bank of New York Mellon, including the interest of Marcy Lynn Perry where Marcy Lynn Perry is not defined as a "Borrower" in the First Mortgage?

JURISDICTION

The Panel has jurisdiction to decide this timely-filed appeal because the United States District Court for the Southern District of Ohio has authorized appeals to this Panel, and neither party has timely elected to have the district court hear this appeal.28 U.S.C. § 158(b)(6), (c)(1).Under 28 U.S.C. § 158(a)(1), a bankruptcy court's final order in an adversary proceeding may be appealed as of right.

For purposes of appeal, an order is final if it "ends the litigation on the merits and leaves nothing for the court to do but execute the judgment."

Midland Asphalt Corp. v. United States , 489 U.S. 794, 798, 109 S.Ct. 1494, 103 L.Ed.2d 879(1989)(citation omitted).The underlying adversary proceeding – the "judicial unit" -- was completely resolved on the merits after trial, making the bankruptcy court's order final and appealable.Ritzen Grp., Inc. v. Jackson Masonry, LLC(In re Jackson Masonry, LLC ), 906 F.3d 494(6th Cir.2018);Lyon v. Eiseman(In re Forbes ), 372 B.R. 321, 325(6th Cir. BAP2007).

FACTS

Vodrick and Marcy Perry(the "Debtors" together; "Vodrick" and "Marcy" separately) filed a joint chapter 7 bankruptcy petition on September 5, 2014(Case No. 2:14-bk-56316).As of the petition date, the Debtors were joint tenants with rights of survivorship with regard to real estate located in Reynoldsburg, Ohio (the "Property").The original purchase money mortgage encumbering the Property before the refinancing at issue in this case identified both Debtors as "Borrowers."The Debtors each signed and initialed the original mortgage in that capacity.

On February 6, 2007, Vodrick refinanced the purchase money mortgage, executing and delivering a promissory note (the "Note") to America's Wholesale Lender.Marcy did not sign the Note, nor was she listed as a "Borrower" anywhere within the document.On that same day and in connection with the refinancing, the Debtors executed a mortgage (the "Mortgage") with America's Wholesale Lender, which was recorded in March 2007 and subsequently assigned to the Bank of New York Mellon (the "Appellee").The definition of "Borrower" set forth in the main body of the Mortgage (as opposed to the signature block) named Vodrick as the only "Borrower"(Mortgage at 4, Adv.No. 2:14-ap-02312, ECF No. 1-1, Exh. C).Marcy, however, signed the signature page at the end of the Mortgage as "Borrower" within the signature block, and she initialed each page of the Mortgage.(Id. at 18).

On November 17, 2014, shortly after the order for relief, Appellant filed a two-count Complaint for Declaratory Judgment ("Complaint,"Adv. No. 14-02312 ECF No. 1) seeking a declaration that the Mortgage did not encumber Marcy's interest in the Property because her name did not appear in the body of the Mortgage (where Vodrick alone was named as "Borrower"), even though she signed the Mortgage as "Borrower" without qualification on the signature page and placed her initials on each page.On cross-motions for summary judgment, the bankruptcy court found that the Mortgage was ambiguous, and that the court would have to consider parol evidence (at trial) to determine the intent of the Debtors and the refinancing mortgagee before declaring the parties' respective interests in the Property.After trial, the bankruptcy court entered a Memorandum Opinion and Order and Judgment Order finding that the Mortgage fully encumbered both Debtors' interests in the Property.The Appellanttrustee appealed.

Given the conflicting opinions among federal courts and Ohio state courts,² and because the Ohio Supreme Court had not squarely addressed the issues presented on appeal, the Panel certified two unsettled questions of Ohio law to the state's highest court pursuant to Rules of Practice, Supreme Court Ohio9.01(A), and held this appeal in abeyance pending the high court's response.More specifically, the Panel asked the Ohio Supreme Court to answer two state-law questions:

1.[W]hether an individual who is not identified in the body of a mortgage, but who signs and initials the mortgage, is a mortgagor of his or her interest; and

2.Is a mortgage signed and initialed by an individual whose name is not identified in the body of the mortgage, but whose signature is properly acknowledged pursuant to Ohio Revised Code § 5301, invalid as a matter of law such that parol evidence is not admissible to determine the intent of the individual in signing the mortgage?

See Memorandum of Opinion and Order of Certification of Questions of Law to the Supreme Court of Ohio, dated June 20, 2019("Opinion Re: Questions of Law" BAP Case No. 16-8042 ECF No. 19).³

On December 20, 2018, the Supreme Court of Ohio answered the certified questions by stating that the failure to identify a signatory by name within the body of the mortgage instrument did not render the agreement unenforceable against the signatory's in rem rights as a matter of law.Bank of New York Mellon v. Rhiel , Slip Opinion No. 2018-Ohio-5087, at 1, 122 N.E.3d 1219.Additionally, Ohio's high court held that when a mortgage is properly signed, initialed and acknowledged by a signatory who is not named within the document itself, the mortgage is not invalid as a matter of law.Id. at 6.Thus, parol evidence is always admissible to determine intent when ambiguities within the mortgage instrument are present.To reach this conclusion, the high court looked to both the formal elements of creating a valid mortgage under Ohio statutory law, e.g. , Ohio Rev. Code Ann. § 5301.01 et seq. , and the familiar substantive requirements under general contract law.Bank of New York Mellon v. Rhiel , No. 2018-Ohio-5087, 122 N.E.3d 1219, 1224–27, 2018 WL 6778145 at *4-5(Dec. 20, 2018).

The Supreme Court of Ohio stated that, under Ohio Rev. Code Ann. § 5301.07, any mortgage is presumed to pledge the mortgagor's entire interest in the property unless there is language within the document itself that states otherwise.Under Ohio Rev. Code Ann. § 5301.01(A), a mortgagor must sign a mortgage instrument and officially acknowledge it before an authorized official (including a notary public) affirming that she signed the document in question for the purpose stated within the mortgage ( Ohio Rev. Code Ann. § 147.541(C)(1) ).Finally, Ohio's highest court said, "as long as a mortgagor's signature is legible, the mortgagor's name need not appear elsewhere in the writing in order to be valid for purposes of recording."Rhiel , 122 N.E.3d at 1225, 2018 WL 6778145 at *4.

Under general principles of contract law, there must be a meeting of the minds regarding essential, clear, and certain terms within the contract including but not limited to the identity of the parties to the contract.

Kostelnik v. Helper , 96 Ohio St.3d 1, 2002-Ohio-2985, 770 N.E.2d 58, 61-62, ¶ 16-17(Ohio 2002).When it comes to intent, various aspects of Ohio case law, as well as Ohio Rev. Code Ann. § 1335.05, emphasize that the signature of a party itself makes a contract enforceable, rather than other methods of identification within the contract itself.⁴Additionally, the high court observed:

The primary goal in construing any contract is to ascertain and give effect to the intention of the parties.We presume that the intent of the parties to a written contract is found in the writing of the contract itself.Generally speaking, a contracting party's signature manifests the party's intent to be bound to a

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