Silagy v. U.S. Bank National Association, as Trustee

OCR transcription for search; preserved printed pages are authoritative

The court incorporates by reference in this paragraph and adopts as the findings and orders
of this court the document set forth below.

[S/ RUSS KEND

Russ Kendig
United States Bankruptcy Judge

UNITED STATES BANKRUPTCY COURT
NORTHERN DISTRICT OF OHIO

EASTERN DIVISION
In re: )
) CHAPTER 7
DINO BRIAN BURSON & )
) CASE NO. 09-62338
SHARON LYNN BURSON, )
) ADV. NO. 09-6111
Debtors. )
) JUDGE RUSS KENDIG
)
ANNE PIERO SILAGY )
)
Plaintiff, )
)
Vv. )
)
U.S. BANK NATIONAL ) MEMORANDUM OF OPINION
ASSOCIATION, AS TRUSTEE ) (NOT FOR PUBLICATION)
)
Defendant. )

On February 8, 2010, plaintiff and chapter 7 panel trustee Anne Piero Silagy (hereinafter
“trustee”) and defendant U.S. Bank National Association (hereinafter “U.S. Bank”) filed cross-
motions for summary judgment. These motions are now before the Court.

The Court has jurisdiction over this matter pursuant to 28 U.S.C. § 1334(b) and the
general order of reference entered in this district on July 16, 1984. This is a core proceeding
under 28 U.S.C. § 157(b)(2)(A)(K) and (O). Venue is appropriate under 28 U.S.C. § 1409. The

AUTHENTICATED
U.S. GOVERNMENT
INFORMATION
GPO

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following constitutes the Court’s findings of fact and conclusions of law pursuant to Federal Rule
of Bankruptcy Procedure 7052.

This opinion is not intended for publication or citation. The availability of this opinion, in
electronic or printed form, is not the result of a direct submission by the Court.

BACKGROUND

Debtors Dino Brian Burson and Sharon Lynn Burson (hereinafter “debtors”’) are owners
of record of real property identified as Stark County, Ohio Permanent Parcel No 01-09477 and
commonly known as 1552 Parkway Boulevard, Alliance, Ohio 44601. On June 6, 2005, debtors
executed a document entitled “Real Estate Mortgage” (hereinafter “mortgage’’) in favor of
Mortgage Electronic Registration Systems, Inc. (hereinafter “MERS”), as nominee for lender CIT
Group/Consumer Finance, Inc. The mortgage is attached to this opinion as Exhibit A. The
mortgage was recorded with the Stark County Ohio Recorder on June 20, 2005. On November 4,
2008, MERS assigned its interest in the debtors’ mortgage to U.S. Bank.

On October 12, 2009, the trustee filed a complaint seeking to avoid the mortgage
pursuant as to 11 U.S.C. § 544, Ohio Rev. Code § 5301.01(A) and Ohio Rev. Code §
5301.25(A). According to the trustee, the mortgage is avoidable because of a defective

acknowledgment.

The mortgage contains the following acknowledgment at the bottom of the first page:

s pent ACKNOWLEDGMENT
Stare of Chic
Camyof “SWogWe

Before me, « notary public in and for the above County, personally appeared the above named MORTGAGOR
wha acknowledged that (he-she-they) did sign the foregoing instquefictih, and thar the same is (his-her-their} free act and deed
In testimony whepiot.

ssertbed rey mame at

HIS PROS nna Ons
on the 14 . e gO ; . apes
ed eee" Rotary Public)
This iagtrument was prepared by THE CIT GROUP/CONSUMER FINANCE, INC,
(Eype Narne)
A survey af this property was made by _ None ; o . ct
(Type Kane)

\ ANGELA COCK
aj | _ Motury Pubic - Stats of Onto
My Commission Expees 123-2007 Page fof t

BING BRAY BUREOW
SENG ayadt tat?

S-TURLA BOD Cite Pint Martwape

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Three other features of the mortgage are relevant to the parties’ arguments. First, the
names and address of the debtors appear in the upper-left-hand corner of the mortgage as
follows:

“BING BRIAN BERSON

SHAKON LYNN BURSON
1452 PARKWAY BLVD
ALLIANCE, OH 44601

Marta! Saws: HUSBAND AND WIFE
ain 1002631 95007870050

Second, the signatures of the debtors appear as follows:

a :

OZ): A AAA (Seal) deal)
INO BRIAN BURSON

. : Yyze mare ce wean a Pune rate st Mirggager?

we

Xf the> z AA MA Sex! ee (Seal)
SHARON LY

Tiope coure so? Morigageel CEppe seace: 2? Morgegee!

Third, the mortgage defines “I,” “me” and “my” to include the plural.

ISSUES PRESENTED

The cross-motions for summary judgment raise two issues. First, the parties disagree
whether the acknowledgment is “substantially compliant” with Ohio law. Second, the parties
disagree whether a defective acknowledgment allows the trustee to avoid the mortgage.

LAW AND ANALYSIS

A. This Matter is Ripe for Summary Judgment.

The procedure for granting summary judgment is found in Federal Rule of Civil
Procedure 56(c), made applicable to this proceeding through Federal Rule of Bankruptcy
Procedure 7056, which provides in part:

The judgment sought shall be rendered forthwith if the pleadings,
depositions, answers to interrogatories, and admissions on file, together
with the affidavits, if any, show that there is no genuine issue as to any
material fact and that the moving party is entitled to a judgment as a matter
of law.

Whether a mortage is avoidable because of a defective certificate of acknowledgment is a
matter of law. See Drown v. Greenpoint Mortgage Funding, Inc. (In re Leahy), 376 B.R. 826, 828

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(Bank. S.D. Ohio 2007). No material facts are in dispute. Thus, summary judgment is
appropriate.

B. The Acknowledgment Does not Substantially Comply with Ohio Law.

Ohio Rev. Code § 5301.01(A) establishes the requirements for a properly executed
mortgage:

A deed, mortgage, land contract . . . or lease of any interest in real property
and a memorandum of trust .. . shall be signed by the grantor, mortgagor,
vendor or lessor... . The signing shall be acknowledged by the grantor,
mortgagor, vendor, or lessor, or by the trustee, before a judge or clerk of a
court of record in this state, or a county auditor, county engineer, notary
public, or mayor, who shall certify the acknowledgement and subscribe the
official's name to the certificate of the acknowledgement.

Ohio Rev. Code §§ 147.53 establishes the contents of a properly executed
acknowledgment. Section 147.53(A) provides that “[t]he person taking the acknowledgment
shall certify that . . . [t]he person acknowledging appeared before him and acknowledged that he
executed the instrument.” Thus, the acknowledgment clause must identify the mortgagor.
Gevgan v. World Savings Bank (In re Nolan), 383 B.R. 391, 396 (BAP 6th Cir. 2010); Terlecky
v. Countrywide Home Loans, Inc. (In re Bauch), 2009 Bank. LEXIS 608, *21 (Bankr. $.D. Ohio

2009).

The acknowledgment in this case is not strictly compliant with section 147.53(A). The
word “MORTGAGOR” does not identify the debtors as individuals. Furthermore,
“MORTGAGOR” is singular, and the plural pronouns in the acknowledgment clause are not
circled.

However, under Ohio law an acknowledgment will not be invalidated if it is in
“substantial compliance” with the applicable statutes. Menninger v. First Franklin Fin. Corp. (In
re Fryman), 314 B.R. 137, 138 (Bankr. S.D. Ohio 2004). The test for substantial compliance is
whether or not “the instrument supplies within itself the means for making the correction.” Id.
(quoting Dodd v. Bartholomew, 5 N.E. 866, 867 (Ohio 1886)). Thus, in considering whether the
acknowledgment sufficiently identifies the debtor, the Court looks at the acknowledgment in the
context of the mortgage as a whole.

Several cases address substantial compliance in the context of the identity requirement.
Where the acknowledgment clause is blank as to the mortgagor’s name, courts have found the
acknowledgment not to be substantially compliant. Geygan, 383 B.R. at 396 (citing cases). In
Fryman v. First Franklin Fin. Corp., 314 B.R. 137 (Bankr. S.D. Ohio 2004), the court found
substantial compliance where one out of two mortgagors was listed in the acknowledgment, and
the listed mortgagor’s name was modified by the plural pronouns “they” and “their.” In Hinde’s
Lessee v. Longworth, 24 U.S. 199 (1826), the United States Supreme Court held that under Ohio
law, an acknowledgment that contained the name of only one of the two grantors and a singular

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pronoun was defective.

The Court finds that this case most resembles Hinde’s Lessee. When read in the context
of the entire document, “MORTGAGOR” is clearly singular. The name and address section in
the upper left corner begins with “Mortgagor(s).” This usage distinguishes between the singular
“Mortgagor” and the plural “Mortgagors.” Furthermore, “Mortgagor” appears below the
signature of each debtor. U.S. Bank contends that “Mortgagor” and the pronouns “he” and “she”
are defined to include the plural. But this is not true. The only singular words defined to include
the plural are “I,” “me,” and “my.” This only reinforces the conclusion that other singular words
are not intended to include the plural. Thus, like the acknowledgment clause in Hinde’s Lessee,
the acknowledgment clause in this case can only be read to refer to one of the two mortgagors.

The Court believes that the holding of Hinde’s Lessee is still good law. In Gregory v.
Ocwen Fed. Bank (In re Biggs), 377 F.3d 515, 519 (6th Cir. 2004), the Sixth Circuit explained
that the “the authentication of a deed of trust is not a purposeless formality.” Rather, the
requirement exists to provide a fraud-free system for the identification of true property owners.
Id. This purpose cannot be fulfilled if, viewing the mortgage as a whole, it is clear that all of the
mortgagors have not acknowledged the mortgage. Accordingly, the Court finds that the
acknowledgment clause is deficient under section 147.53(A).

The acknowledgment clause is also not substantially compliant with section 147.53(B),
which requires the notary to certify 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.” The acknowledgment in the mortgage certifies neither of these things. Furthermore,
U.S. Bank does not explain, and the Court cannot find, any way in which the document as a
whole supplies this information. Thus, the Court finds that the acknowledgment is not
substantially compliant with section 147.53(B).

C. The Trustee Can Avoid the Mortgage

11 U.S.C. § 544(a)(3) provides that a trustee can avoid liens by stepping into the shoes of
a bona fide purchaser:

The trustee shall have, as of the commencement of the case, and without
regard to any knowledge of the trustee or of any creditor, the rights and
powers of, or may avoid any transfer of property of the debtor . . . that is
voidable by a bona fide purchaser of real property ....

US. Bank argues that the trustee cannot avoid the mortgage despite the fact that the
acknowledgment clause is defective. However, the case law is unanimous is finding that a trustee
standing in the shoes of a good faith purchaser can avoid a defective mortgage. E.g., Geygan, 383
BR. at 397; Fryman, 314 B.R. at 138 (“Under Ohio law, only properly executed mortgages take
priority over a bona fide purchaser.”).

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Accordingly, the Court finds that the trustee can avoid the mortgage.

An order will issue simultaneously with this opinion.

#t # #

SERVICE LIST:

Dino Brian Burson
1552 Parkway Blvd
Alliance, OH 44601

Sharon Lynn Burson
1552 Parkway Blvd
Alliance, OH 44601

Anne Piero Silagy, Esq
Canton

220 Market Ave S
#900

Canton, OH 44702

Thomas J Tangi
2040 S Union Ave
Alliance, OH 44601

John J Rutter

Roetzel & Andress, LPA
222 S. Main Street
Akron, OH 44308

Bruce R Schrader, I
Roetzel & Andress
222 S Main St

Suite 400

Akron, OH 44308

U.S. Bank National Association, as Trustee

c/o U.S. Bancorp
800 Nicollet Mall
Minneapolis, MN 55402-7014

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Clay Keller

Buckingham, Doolittle & Burroughs, LLP
4518 Fulton Drive, NW

P.O. Box 35548

Canton, OH 44735-5548

Justin S. Greenfelder
4518 Fulton Dr NW
Canton, OH 44735-5548

Mia L. Conner

120 E. 4th St.

PO Box 5480
Cincinnati, OH 45202

Richard J Lolli

4518 Fulton Dr NW
Canton, OH 44735-5548

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When Recardes Return This Document To

Capital Land Title Agency, Inc.
224 S, Prospect Street, Suite B

Ravenna, OH 44266

rive No: CSO lo
REAL ESTATE MORTGAGE
This Mortgage is made pursuant to the provisions of Charter 1343 of the Ohio Revised Code,
except that it is also subject to the Depository Institutions
Deregulation and Monetary Control Act of 1980 with respect to the interest rate and any points charged.

Name and Addsess of Mort ‘s}: Lender:
BING SHAN BURSON THE CIT GROUP/CONSUMER FINANCE, INC.
SHARON LYNN BURSON 2 SUMMIT PARK DRIVE
1552 PARK WAY BLVD SUITE 105
ALLIANCE, OH 44601 | INDEPENDENCE OH 44131
gaget: MIERS
Macital Status: HUSBAND AND WIFE P.O. BOX 2026
in: 100263195007870650_ FLINT, MI 48501-2026
Loan Number Date Date Final Payment Due ; Principal Balance
9500787065 | 06/14/05 07/01/35 | $ 411,150.00

The words °I," "me" and "my" refer to all Mortgagors indebted on the Note secured by this Mortgage. The words "you" and
"your" refer to Lender and Lender's assignee if this Mortgage is assigned. MERS is a separate corporation that is acting solely
as a nomince for Lender and Lender's successors and assigns MERS is the mortgagee under this Mortgage. MERS is
organized and existing under the laws of Delaware. and has an address and telephone number of PO Box 2026, Flint, MI
48501-2026, tel. (888) 679-MERS.

MORTGAGE OF REAL ESTATE

To secure payment of a Note I signed today promising to pay you the Principal Balance as shown above together with interest
at the rate set forth in the Note secured by this Mortgage, each of the persons signing thts Mortgage mortgages. and confirms to
MERS and its successors and assigns, (solely as nominee for Lender and Lender's successors and assigns) the real estate described
below, and all present and future improvements on the real estate, which is located in Ohio. County of

STARK . (the "Premises")

SEE ATTACHED LEGAL DESCRIPTION ’EXHIBIT A’

il

at
of

iq gg

P:
Riok Campbel} 3:
Stark County Recorder 128050028058

___ family dwelling only

These Premises are improved by a S__

Property Address: 1552 PARKWAY BLVD, ALLIANCE, OH 44601

Prior instrument reference: Vol. 134 .Page 407

Borrower understands and agrees that MERS holds only legal title to the interests granted by Borrower in this Mortgage,
but, if necessary to comply with law or custom, MERS (as nominee for Lender and Lender's successors and assigns) has the
right to exercise any or all of those interests, including, but not limited to, the right to foreclose and sel! the Premises, and to
take any action required of Lender including, but not limited to, releasing and canceling this Mortgage.

TERMS AND CONDITIONS:

STATUTORY CONDITION - This Mortgage is given upon the Statutory Condition. "Statutory Condition” is defined in
Section 5302.14 of the Revised Code and provides generally that if 1 pay the indebtedness and perform the other obligations
secured by this Mortgage and do not commit or permit waste. then this Mortgage will become auil and void

SEE OTHER SIDE FOR ADDITIONAL IMPORTANT TERMS

Dw Luror Leto (Seal) (Seal)
DINO BRIAN BURSON

(Ty ge mune af Mortgages)

(Type mane of Mnetgager)

(Seal)

{Type name of Murtgagix)

(Type mans of Mortgagoc)

T
State of Chio ACKNOWLEDGMEN

County of ‘bo oy _

Before me, a notary public in and for the above County, personally appeared the above named MORTGAGOR
who acknowledged that (he-she-they) did sign the foregoing instrpefien and that the same is (his-her-their) free act and deed.
In testimony whepfot, [ have hereunte’Sbscribed my name at _

_ PjAsAse,
YZ TF? (Notary Public)
THE CIT GROUP/CONSUMER FINANCE, INC.
(Type Name}

This instrument was prepared by

A survey of this property was made by None __ __
(Type Name)

ANGELA COOK
Notary Public - Stats of Ohio
My Commission Expires 12-3-2007 Page I of 2

DINO BRIAN BURSON
1839949 OGf1GOS 14:53

2.-TEAZA (4/04) Ohio First Mortgage

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TAXES - LIENS - INSURANCE - MAINTENANCE - [ will pay, whea they are due and payable, all taxes, liens, assessments,
obligations, water rates and any other charges against the Premises, whether superior or inferior to the lien of this Mortgage, maintain
hazard insurance on the Premises in your favor in a form and amount satisfactory to you and maintain aod keep the Premises in good
repair at all times during the term of this Mortgage You may pay any such tax, lien, assessment, obligation, water rates, premium or
other charge (including charges to repair the Premises) or purchase such insurance in your own name, if] fail to do so. The amount
you pay will be duc and payable to you on demand, will bear intercst at the interest rate sct forth in the Note secured by this
Mortgage if permitted by law or, if not, at the highest lawful interest rate, will be an additional lien on the Premises and may be
enforced and collected in the same manner as the other obligations secured by this Mortgage. The insurance carrier providing the
insurance referred to above will be chosen by me subject to your approval which will not be unreasonably withheld. All insurance
policies and renewals must be acceptable to you and must include a standard mortgagee clause You will have the right to hold the
policics and renewals. If you require, I will promptly give to you all receipts of paid premiums and renewal notices. In the event of a
loss, 1 will give prompt notice to the insurance carrier and you. You may file a proof of loss if not made promptly by me. Insurance
proceeds will be applied to the restoration or repair of the Premises damaged or, at your option, the insurance proceeds will be
applied to the sums, secured by this Mortgage, whether or not thea due, with any excess paid to me. If I abandon the Premises, or do
not answer within ten (10) days, a notice from you that the insurance carrier has offered to settle a claim, then you may collect the

insurance proceeds The ten (10)-day period will begin when the notice is given.

TITLE - The Premises were conveyed to me by a deed which is to be, or has been, recorded before this Mortgage, and I warrant the
title to the Premises. I further warrant that the lien created by this Mortgage is a valid and enforceable first lien, subordinate only to
easements and restrictions of record on the date of this Mortgage, and that during the entire term of the indebtcdacss securcd by this

Mortgage, such lien will not become subordinate to anything else.

CONDEMNATION - The proceeds of any award or claim for damages, direct or consequential, in connection with any
condemnation (the taking of my property for a public use) or other taking of any part of the Premises, or for conveyance in licu of
condemnation, are hereby assigned and will be paid to you and are subject to the lien of and secured by this Mortgage. In the event
of a taking of the Premises, the proceeds will be applied to the sums secured by this Mortgage, whether or not then due, with any
cxecss paid to me. If the Premises arc abandoned by me, or if, after notice by you to me that the condemnor offers to make an award
or settle a claim for damages, | fuil to respond to you within ten (10) days after the date the notice is given, you are authorized to
collect and apply the proceeds, at your option, either to the restoration or repair of the Premises, or to the sums secured by this

Mortgage, whether or not then due.

DUE ON SALE OR ALTERATION - Except in those circumstances in which Federal law otherwise provides, I will not, without
your consent, sel! or transfer the Premises or alter, remove or demolish the buildings on the Premises, allow the Premises to

deteriorate or commit waste.

DEFAULT - If I default in paying any part of the indebtedness secured by this Morigage or if | default in any other way uader this
Mortgage or under the Note which it secures, or if ] default under the terms of any other mortgage covering the Premises, the entire
unpaid principal balance and accrued and unpaid interest and any other amounts I then owe to you under this loan will become
immediately due if you desire, without your advising me. If 1 am required to pay immediately in full as described above, 1 promise to
pay your costs and disbursements to which you may become entitled by law in connection with any suit to collect the Note or to
realize on your security interest under this Mortgage. If any money is left over after you foreclose on this Mortgage and deduct such
reasonable costs and disbursements incurred if legally permitted, it will be paid to the persons legally entitled to it, but if any money

is still owing, I agree to pay you the balance

APPOINTMENT OF RECEIVER AND ASSIGNMENT OF RENTS - I agree that you are entitled to the appointment of a
receiver in any action to foreclose on this Mortgage and you may also enter the Premises and take pc ion of them, rent them if
the Premises are not already rented, receive all rents and apply them to the obligations secured by this Mortgage. Except as required
by law, you shall not be obligated to perform or discharge any obligation under any lease by reason of this assignment. | assign all
rents to you but you agree that I may continue to collect the rents unless fam in default under this Mortgage or the Note

RIGHTS CUMULATIVE - Your rights under this Mortgage will be separate, distinct and cumulative and none of them will be in
exclusion of any other nor will any act of yours be considered as an election to proceed under any one provision of this Mortgage to

the exclusion of any other provision
NOTICES - | agree that any notice and demand may be given to me either in person or by mail.

RELEASE - Upon payment of all sums secured by this Mortgage, you shail release the Premises from the lien of this instrument. |
shall pay recording costs to the extent permitted by applicable law.

WAIVER OF EXEMPTIONS - Each person signing this Mortgage waives all rights of dower in the real estate, all marital rights,
homestead exemptions, and all other exemptions relating to the Premises

EXTENSIONS AND MODIFICATIONS - Each of the persons signing this Mortgage agrees that no extension of time or other
variation of any obligation secured by this Mortgage will affect any other obligation under this Mortgage

APPLICABLE LAW - This Mortgage is made in accordance with, and will be governed by, the laws of the State of Ohio, including
Chapter 1343 of the Ohio Revised Code, except that with respect to the maximum interest rate and aumber of points permitted, this
Mortgage is governed by the provisions of the Depository Institutions Deregulation and Monetary Control Act of 1980, and any other

applicable Federal law
RECEIPT OF COPY - Each person signing this Mortgage acknowledges reccipt of a completed and signed copy of this Mortgage
BINDING EFFECT - This mortgage is binding on and inures to your, my and MERS' successors and assigns.

SEE OTHER SIDE FOR ADDITIONAL IMPORTANT TERMS
Upon recording mail to:

Nationwide Title Clearing, Inc. = _.. a a
2100 Alt 19 North, Pains Harbor, 134623 ___ ATTN: Dusti Woodbury = CIT Unit___ ole
1839949 O61 4/05 14:53 DINO BRIAN BURSON Il a

CU aoc

septs
120 06/20/2600:
Rick Campbell 9:25AM MTGE 5

Recorder T7230!

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2411828

Lega! Description

SITUATED IN THE CITY OF ALLIANCE, COUNTY OF STARK AND STATE OF
OHIO:

AND KNOWN AS AND BEING LOT NUMBER SEVEN THOUSAND FOUR HUNDRED
FIFTY-THREE (7453) IN SAID CITY OF ALLIANCE, AS THE SAME IS MARKED,
NUMBERED AND DISTINGUISHED ON THE PLAT RECORDS OF SAID CITY ON
FILE IN THE COUNTY RECORDER'S OFFICE AT CANTON, OHIO.

SUBJECT TO: RESTRICTIONS CONTAINED IN DEED, RECORDED IN VOL.. 619,
PAGE 494, OF STARK COUNTY RECORDS.

PARCEL NO. 01-09477

aut

Instr 3200

P:3 of 3 F: 36 22 i
i iL 9.25AM NT!
Rick Caomnty Recorder 720052028058

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