Rhiel v. Cent. Mortg. Co. (In re Kebe)
| Decision Date | 30 March 2012 |
| Docket Number | Bankruptcy No. 10–52667.,Adversary No. 10–2172. |
| Citation | 469 B.R. 778 |
| Parties | In re Mohamed KEBE, Debtor. Susan L. Rhiel, Plaintiff, v. Central Mortgage Company, et al., Defendants. |
| Court | U.S. Bankruptcy Court — Southern District of Ohio |
OPINION TEXT STARTS HERE
Treisa L. Fox, Columbus, OH, for Plaintiff.
Maria C. Mariano Guthrie, Carlile Patchen & Murphy LLP, Nathan L. Swehla, Cincinnati, OH, for Defendant, Central Mortgage Company.
Joseph M. Romano, The Romano Law Firm, Cleveland, OH, for Defendant, Mamadou Seye.
Susan L. Rhiel (“Trustee”), the trustee appointed in the Chapter 7 case of Mohamed Kebe (“Debtor”), commenced this adversary proceeding to obtain, among other things: (1) avoidance of the Debtor's mortgage on certain real property (“Mortgage”); (2) preservation of the lien represented by the Mortgage for the benefit of the Debtor's estate; and (3) sale of the co-owner's interest in the property. Pending before the Court is the Trustee's motion for summary judgment (“Motion”) (Doc. 23), as well as responses to the Motion filed by Mamadou Seye (“Seye”), the co-owner of the property (“Seye Response”) (Doc. 27), and Central Mortgage Company (“Central”), the holder of the Mortgage (“Central Response”) (Doc. 31).1
For the reasons explained below, the Court concludes that the Trustee is entitled to summary judgment on her claims for avoidance of the Mortgage under 11 U.S.C. § 544(a)(3) (Count Two of the Complaint) and preservation of the lien represented by the Mortgage for the benefit of the Debtor's estate pursuant to § 551 (Count Four). On the current state of the record, however, summary judgment on the request to sell Seye's interest in the property (Count Six) is not appropriate. The Court therefore denies summary judgment on Count Six. The Court also declines to grant summary judgment in favor of the Trustee on her remaining claims for relief.2
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).
The facts that are material to the issue of avoidance are undisputed. On March 11, 2010 (“Petition Date”), the Debtor filed a voluntary petition for relief under Chapter 7 of the Bankruptcy Code. On September 20, 2004, the Debtor granted the Mortgage on his interest in real property located at 6797 Sowers Drive, Canal Winchester, Ohio 43110 (“Property”).3 The Debtor owns the Property jointly with Seye.
The certificate of acknowledgment accompanying the Mortgage provides as follows:
In other words, the certificate of acknowledgment is blank in the place where the persons acknowledging the signing of the Mortgage should have been identified.4 This is the Trustee's sole factual basis for the avoidance of the Mortgage. See Mot. at 4.
According to Central, despite the blank certificate of acknowledgment, the Mortgage substantially complies with Ohio law. In support of its substantial-compliance argument, Central relies on the following undisputed facts:
1) Seye and Debtor [are both included] in the granting clause [of the Mortgage][ 5]; 2) Except for the signature page, Seye initialed every page of the Mortgage as follows, “MS and MK by MS,” including the page containing the [certificate of] acknowledgment ...; 3) their names were typed on the Mortgage below their signature; 4) Seye signed the Mortgage individually and as attorney in fact for Debtor; 5) the Notary's signature and stamp appear beneath the acknowledgment.
Central Resp. at 13–14.
According to Central, the Trustee cannot avoid the Mortgage because she had constructive notice of it as of the Petition Date. In support of its constructive-notice argument, Central relies on the following undisputed facts:
The Mortgage was recorded on September 24, 2004 in the Franklin County, Ohio Recorder's Office (“Recorder”). See id. at 2. The Mortgage was assigned to Central by means of an assignment dated November 7, 2008 and recorded on December 12, 2008 (“Assignment”). See id. at 2–3. The Assignment contains a legal description of the Property and also provides as follows:
FOR VALUE RECEIVED, Mortgage Electronic Registration Systems, Inc. (“MERS”) as nominee for Washtenaw Mortgage Company its successors and assigns, hereby assign[s] and transfer[s] to Central Mortgage Company its successors and assigns, all its right, title and interest in and to a certain mortgage executed by Mamadou Seye and Mohamed Kebe and bearing the date of the 20th day of September 2004 and recorded on the 24th day of September 2004 in the office of the Recorder of Franklin County, State of Ohio in Instrument # 200409240224049.
Central Resp. Ex. A–4.
On December 9, 2008, Central filed a foreclosure complaint against the Debtor and Seye in the Franklin County, Ohio Court of Common Pleas (“State Court”), Case No. 08 CVE 12–17508 (“Foreclosure Action”). The Foreclosure Action sought a judgment on the promissory note (“Note”) executed by the Debtor and Seye and sought foreclosure of their interests in the Property. In paragraph 3 of the State Court complaint, Central stated that the Mortgage was a good and valid first lien upon the Property. On February 19, 2009, Central filed a motion for default judgment against Seye and the Debtor. On that same day, Janice Davis, the Vice President of Central, filed an affidavit in the Foreclosure Action (“Davis Affidavit”) asserting Central's interest in the Property and identifying the Note and the Mortgage. On February 23, 2009, the State Court granted Central default judgment against Seye and the Debtor (“Judgment Entry”). The Judgment Entry was never vacated, released or satisfied. On March 31, 2009, Central voluntarily dismissed the Foreclosure Action without prejudice. See Central Resp. at 4–5.
Central did not file a certificate of judgment with the Recorder, and records contained on a website maintained by the Recorder show that no such document was filed in those records. Likewise, records contained on a website maintained by the Franklin County Clerk of Courts (“Clerk”) show that no certificate of judgment was filed with the Clerk, and Central does not contend that it did so.
In support of its objection, Central filed the Affidavit of Dow T. Voelker (“Voelker Affidavit”). Dow T. Voelker (“Voelker”) is an attorney and a title examiner. In the Voelker Affidavit, Voelker states that he examined the documents filed of record with the Recorder and the Clerk with respect to the Property. He also states that “[a]s a title examiner, who has examined real estate records for twenty-five (25) years, I would have inquired and found [the Mortgage, the Assignment, the Foreclosure Action and the Davis Affidavit]” and that “[a]s a title examiner who would issue a title insurance policy on the Property, I would not have ignored the [the Mortgage, the Assignment, the Foreclosure Action and the Davis Affidavit][,] and I would have identified Central's interest in the Property.” Voelker Aff. ¶¶ 14 & 15.
As explained below, the facts relevant to the Trustee's request to sell the Property free of Seye's interest are disputed:
1. The Trustee's Allegations
The Trustee has attached to the Motion an affidavit (“Trustee Affidavit”) stating that:
Judging from my knowledge and experience, partition of the [Property] is impracticable.... A sale of the estate's undivided one-half interest in the Property would realize significantly less for the estate than a sale of the Property free of the interest of Mamadou Seye.... The benefit to the estate of a sale of the Property free of the interest of Seye outweighs the detriment, if any, to Seye.... To the best of my knowledge, the Property is not used [in] the ... production, transmission, or distribution[,] [for sale] [,] of electric energy or of natural or synthetic gas for heat, light, or power.
2. Seye's Allegations
Seye responded to the Trustee's allegations with statements set forth in the Seye Response.6 First, Seye alleges that the Debtor owns little, if any, of the equitable interest in the Property:
As of the date of this Response, Seye has made all the monthly payments and has paid for all maintenance and upkeep of the Property. The Debtor has not made any payments.
....
... Seye maintains the Property as his primary residence and has paid all of the monthly payments due on the Note, all of the insurance premiums for the Property, and all of the maintenance and upkeep of the Property. The Trustee provides no evidence that Debtor has contributed any money for or...
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...constructive notice of the mortgage's existence because they are outside the chain of title); see also Rhiel v. Central Mortg. Co. (In re Kebe), 469 B.R. 778, 788 (Bankr.S.D.Ohio 2012) (“[I]f a mortgage is defectively executed in contravention of Ohio Revised Code § 5301.01, the reference t......
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