Cit Group/Consumer Finance, In v. Beverly Burden, Trustee

318 F. App'x 354
CourtCourt of Appeals for the Sixth Circuit
DecidedMarch 19, 2009
Docket07-6447
StatusUnpublished
Cited by4 cases

This text of 318 F. App'x 354 (Cit Group/Consumer Finance, In v. Beverly Burden, Trustee) is published on Counsel Stack Legal Research, covering Court of Appeals for the Sixth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Cit Group/Consumer Finance, In v. Beverly Burden, Trustee, 318 F. App'x 354 (6th Cir. 2009).

Opinions

OPINION

SOLOMON OLIVER, JR., District Judge.

This appeal, which arises from the Bankruptcy Court for the Eastern District of Kentucky’s (“Bankruptcy Court”) Memorandum Opinion and its accompanying Judgment granting summary judgment to Beverly Burden, the Chapter 13 trustee (“Trustee”), comes to us by way of our circuit’s Bankruptcy Appellate Panel (“BAP”), which affirmed the Bankruptcy Court’s Memorandum Opinion. For the following reasons, we AFFIRM the order of the Bankruptcy Court granting summary judgment to the Trustee.

I. BACKGROUND

A. The Mortgage

Debtors Samuel G. Wilson and Liza Wilson granted the Creditors a mortgage in the original principal amount of $65,741.00 (“Mortgage”) on real property owned by the Wilsons and located at 2721 Country Road, Ashland, Kentucky. (Mortgage, Joint Appendix (“JA”) at 10.) The Creditors recorded the Mortgage in the Boyd County Clerk’s Office on May 16, 2001, and it is on record in Mortgage Book 772, Page 509 of that office.

Douglas Strayer was the attorney who conducted the closing and acted as notary to accept the acknowledgment of the Wil-sons. The Wilsons signed the Mortgage, and it was acknowledged as indicated below:

IN WITNESS WHEREOF, the undersigned (has-have) signed this instrument on the date and year first above written.

Isl Samuel G. Wilson (Seal)
SAMUEL G. WILSON
Is/ Liza Wilson (Seal)
LIZA WILSON
STATE OF KENTUCKY
COUNTY OF BOYD

The foregoing instrument is acknowledged before me this 08 day of MAY, 2001.

My commission expires 11-30-02. Is/ Douglas Strayer
Prepared by Is/ Douglas Strayer /hw/ Bourbon Country, Kentucky

{Id. at 12.) Though the instrument clearly indicates that the Wilsons signed the Mortgage, it is important to note that the Certificate of Acknowledgment itself does [356]*356not identify the Wilsons as the individuals who signed the Mortgage.

B. The Bankruptcy Court’s Order Granting Summary Judgment to the Trustee

The Wilsons filed for bankruptcy in the Eastern District of Kentucky on January 17, 2005. The duly-appointed Trustee for the Wilsons filed an adversary complaint pursuant to 11 U.S.C. §§ 544, 550, and 551 on May 13, 2005. Under 11 U.S.C. § 544, a trustee has the status of a bona fide purchaser of real property, and if a hypothetical bona fide purchaser can avoid a mortgage, the trustee can also avoid it. The Trustee in the instant case sought to avoid the Mortgage pursuant to 11 U.S.C. § 544 because the Certificate of Acknowledgment allegedly did not conform with the requirements of Ky. Rev. Statute § 423.130 and therefore did not provide the Trustee, a hypothetical bona fide purchaser, with notice under Ky.Rev.Stat. § 382.270. Burden v. The CIT Group/Consumer Finance, Inc., Adv. No. 05-1014 (Bankr.E.D.Ky. Aug. 16, 2005) (JA at 85).

Section 423.130 of the Ky. Rev. Statute, part of the Kentucky Uniform Recognition of Acknowledgment Act enacted in 1970, provides as follows:

The person taking an acknowledgment shall certify that: (1) The person acknowledging appeared before him and acknowledged he executed the instrument; and (2) The 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.

(Emphasis added.)

Section 382.2701 of the Ky.Rev.Stat. provides as follows:

No deed or deed of trust or mortgage conveying a legal or equitable title to real property shall be valid against a purchaser for a valuable consideration, without notice thereof, or against creditors, until such deed or mortgage is acknowledged or proved according to law and lodged for record. As used in this section “creditors” included all creditors irrespective of whether or not they have acquired a lien by legal or equitable proceedings or by voluntary conveyance.

The Bankruptcy Court granted the Trustee’s summary judgment motion based on the factual similarities to Rogan v. America’s Wholesale Lender (In Re Vance), 99 Fed.Appx. 25, 28 (6th Cir.2004). In Vance, this court held, in an unpublished opinion, that the notary statement in a mortgage Certificate of Acknowledgment was defective under Ky.Rev.Stat. § 423.130 since it failed to state: (1) the identity and/or names of those who signed the mortgage; (2) the name of the county where the acknowledgment was taken; and (3) the date of the acknowledgment. Id. at 28.

[357]*357The Vance court concluded that the failure to comply with Ky.Rev.Stat. § 423.130 becomes significant in light of the requirements of Ky.Rev.Stat. § 382.270 because:

Under 11 U.S.C. § 544(a)(3), if a bona fide purchaser hypothetically can avoid a mortgage, then the trustee may avoid the mortgage. Simon v. Chase Manhattan Bank, 250 F.3d 1020, 1024 (6th Cir.2001). Kentucky has historically held that a defectively acknowledged security interest that is recorded does not provide protection from a subsequent party who lacks notice of the interest. See Smith v. Jackson, 232 Ky. 76, 22 S.W.2d 420 (Ky.1929) (citing identical notice language as KRS § 382.270); Starr Piano Co. v. Petrey, 168 Ky. 530, 182 S.W. 624, 625 (Ky.1916); see also State Street Bank and Trust Co. v. Heck’s, Inc., 963 S.W.2d 626, 630 [453 Ky. L. Summary 25] (Ky.1998) (a defectively recorded mortgage provides no protection unless a creditor can be charged with knowledge of the mortgage).

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Cite This Page — Counsel Stack

Bluebook (online)
318 F. App'x 354, Counsel Stack Legal Research, https://law.counselstack.com/opinion/cit-groupconsumer-finance-in-v-beverly-burden-trustee-ca6-2009.