Logan, Jr v. Universal 1 Credit Union, Inc.

UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF OHIO
EASTERN DIVISION
In re: 	Case No. 05-59775
Debra A. Bozman 	Chapter 7
Cornelius E. Bozman
Judge Preston
Debtors.
William B. Logan, Jr.
Plaintiff,
v. 	Adv. Pro. No. 06-02498
Universal 1 Credit Union, Inc.,
Defendant.
MEMORANDUM OPINION
GRANTING PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT
AND DENYING DEFENDANT’S MOTION FOR SUMMARY JUDGMENT
This document has been electronically entered in the records of the United
States Bankruptcy Court for the Southern District of Ohio.
IT IS SO ORDERED.
Dated: March 31, 2007
____________________________________________________________
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This cause came on for consideration of the Defendant Universal 1 Credit Union,
Inc.’s (“Universal”) Motion for Summary Judgment (Doc. 9), Plaintiff William Logan’s
(“Trustee”) Motion for Summary Judgment (Doc. 10), Universal’s response (Doc. 11),
and the Trustee’s response (Doc. 12) filed in the above captioned adversary proceeding.
The Court having considered the record and the arguments of the parties, makes the
following findings and conclusions.
The Court has jurisdiction over this matter pursuant to 28 U.S.C. § 1334, and the
standing General Order of Reference entered in this District. 	This matter is a core
proceeding pursuant to 28 U.S.C. § 157(b)(2)(A) and (K). Venue is properly before this
Court pursuant to 28 U.S.C. §§ 1408 and 1409.
I. 	Standard of Review for Motions for Summary Judgment
Rule 56 of the Federal Rules of Civil Procedure, made applicable to adversary
proceedings by Bankruptcy Rule 7056, provides that summary judgment is appropriate
“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.” Fed. R. Civ. P. 56(c).
The party seeking summary judgment bears the initial burden of “informing the . . . court
of the basis for its motion, and identifying those portions of the [record] which it believes
demonstrate the absence of a genuine issue of material fact.” 	Celotex Corp. v. Catrett,
477 U.S. 317, 323 (1986).
If the movant satisfies this burden, the nonmoving party must then “set forth
specific facts showing that there is a genuine issue for trial.” Fed. R. Civ. P. 56(e). The
mere allegation of a factual dispute is not sufficient to defeat a motion for summary
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judgment; to prevail, the nonmoving party must show that there exists some genuine
issue of material fact. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247–48 (1986).
When deciding a motion for summary judgment, all justifiable inferences must be drawn
in favor of the nonmoving party. Id. at 255.
The Sixth Circuit Court of Appeals has succinctly described the standard to grant
a motion for summary judgment as follows:
[T]he moving party may discharge its burden by “pointing out to the
[bankruptcy] court . . . that there is an absence of evidence to support the
nonmoving 	party’s 	case.” 	The 	nonmoving 	party 	cannot 	rest 	on 	its
pleadings, but must identify specific facts supported by affidavits, or by
depositions, answers to interrogatories, and admissions on file that show
there is a genuine issue for trial. Although we must draw all inferences in
favor of the nonmoving party, it must present significant and probative
evidence in support of its complaint. “The mere existence of a scintilla of
evidence 	in 	support 	of 	the 	[nonmoving 	party’s] 	position 	will 	be
insufficient; there must be evidence on which the jury could reasonably
find for the [nonmoving party].”
Gibson v. Gibson (In re Gibson), 219 B.R. 195, 198 (B.A.P. 6th Cir. 1998) (citing Hall v.
Tollett, 128 F.3d 418, 421-22 (6th Cir.1997)) (internal citations omitted) (alterations in
Gibson). A material fact is one whose resolution will affect the determination of the
underlying action. Tenn. Dep't of Mental Health & Mental Retardation v. Paul B., 88
F.3d 1466, 1472 (6th Cir.1996). An issue is genuine if a rational trier of fact could find in
favor of either party on the issue. Schaffer v. A.O. Smith Harvestore Prods., Inc., 74 F.3d
722, 727 (6th Cir.1996) (citation omitted). “The substantive law determines which facts
are ‘material’ for summary judgment purposes.” Hanover Ins. Co. v. American Eng'g
Co., 33 F.3d 727, 730 (6th Cir.1994) (citations omitted). In determining whether each
party has met its burden, the court must keep in mind that “[o]ne of the principal
purposes of the summary judgment rule is to isolate and dispose of factually unsupported
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1 The “/s/” followed by Debtors’ names is the Court’s attempt to reproduce what really is an actual
signature on the Mortgage document.
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claims or defenses . . . .” Celotex Corp. v. Catrett, 477 U.S. 317, 323-24, 106 S. Ct. 2548,
2553 (1986).
II. Findings of Fact
Upon the pleadings, depositions, answers to interrogatories, admissions on file,
and affidavits, the Court makes the following findings of fact: 	Debra and Cornelius
Bozman (“Debtors”) filed their Chapter 7 voluntary petition on August 2, 2006. 	The
Debtors own real property located at 1196 East 24 th Avenue, Columbus, Ohio, which
constitutes property of their bankruptcy estate pursuant to 11 U.S.C. § 541. 	Debtors
granted a mortgage to Defendant, (“Mortgage”) which was recorded with Franklin
County Recorder’s Office on April 20, 2004. Plaintiff and Defendant agree that the copy
of the Mortgage attached to Plaintiff’s complaint as an exhibit is a true and accurate copy
of the one on file at the Franklin County Recorder’s Office. 	The only page in the
Mortgage that contains complete signatures of Debtors appears as follows:
BY SIGNING BELOW, Borrower accepts and agrees to the terms and
covenants contained in this Security Instrument and in any Rider executed
by Borrower and recorded with it.
Witnesses:
/s/ Steven Williams________ 	/s/ Debra A. Bozman1 (Seal)
Steven Williams 	Debra A. Bozman 	-Borrower
________________________ 	/s/ Cornelius E. Bozman 	(Seal)
Cornelius E. Bozman -Borrower
Space Below this Line for Acknowledgment
Complaint, Exhibit A at 16. In addition, the Mortgage contains directly below the “Line
for Acknowledgment” an imprint of a notary stamp containing a notarial seal for the
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2 Universal also argues that the equitable doctrine of part performance removes the mortgage from
operation of the statute; however, this Court finds that the doctrine of part performance is inapplicable to
the facts of this case because it does not involve an oral or verbal contract. See Myers v. Croswell, 45 Ohio
St. 543, 547 (1888) (“[C]ertain acts done in the part performance of verbal contracts for the sale of lands,
may operate to take them out of the statute . . . .”). In addition, “[e]quitable remedies are generally not
available with regard to the rights and powers of a bankruptcy trustee under 11 U.S.C. § 544(a)(3).” Field
v. Wells Fargo (In re Bross), 2006 Bankr. LEXIS 523, *6 (Bankr. S.D. Ohio Jan. 18, 2006) (citing Norwest
bank Worthington v. Ahlers, 485 U.S. 197 (1988)).
3 This case was filed before the effective date of most amendments to the Bankruptcy Code enacted by the
Bankruptcy Abuse Prevention and Consumer Protection Act of 2005.
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State of Ohio, the text “Steven D. Williams, Notary Public, State of Ohio, My
Commission Expires 12-08-08,” and the signature of Steven Williams. 	Complaint,
Exhibit A at 16. 	The Mortgage does not, however, contain any additional language or
text on the page with the notary stamp.
The Trustee argues that he is entitled to avoid the Mortgage because it does not
contain an acknowledgment as required by Ohio Revised Code § 5301.01. 	In contrast,
Universal asserts that the Mortgage is valid under Ohio law because the notary signature
and commission information affixed to the section of the Mortgage designated for the
acknowledgment complies with the statute, and in the alternative, the Mortgage is valid
under Ohio law because it substantially complies with the statute.2
III. Conclusions of Law
The party challenging the validity of a mortgage must prove by clear and
convincing evidence that the mortgage is not valid. See Menninger v. Mortgage Elec.
Registration Sys. (In re Bowling), 314 B.R. 127, 135 (Bankr. S.D. Ohio 2004). 	Pursuant
to the Bankruptcy Code, “[t]he Trustee shall have . . . 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 . . . .” 11 U.S.C. § 544(a)(3) (2005). 3 The Ohio Revised Code provides,
in pertinent, part as follows:
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(A) 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 in the case of a deed, mortgage, land
contract, or lease or shall be signed by the settler and trustee in the case of
a memorandum of trust. 	The signing shall be acknowledged by the
grantor, mortgagor, vendor, or lessor, or by the settler and 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.
O.R.C. § 5301.01(A). “The acknowledgment before a notary public, or any other public
official mentioned in [O.]R.C. 5301.01, includes the formal execution of the certificate
by the officer taking the acknowledgment.” Mid-American Nat’l Bank & Trust Co. v.
Gymnastics Internat’l, Inc., 6 Ohio App. 3d 11, 12 (Ohio Ct. App. 1982). The execution
of a mortgage must comply with these statutorily required formalities to be considered
valid. See Simon v. Chase Manhattan Bank (In re Zaptocky), 250 F.3d 1020, 1024 (6th
Cir. 2001). 	This is significant because under Ohio law a mortgage that is improperly
executed is not entitled to be recorded. 	See O.R.C. § 5301.25(A). 	As a result, a bona
fide purchaser who does not have knowledge of the existence of the prior mortgage can
avoid it. See O.R.C. § 5301.25; Simon v. Chase Manhattan Bank (In re Zaptocky), 250
F.3d 1020, 1024 (6th Cir. 2001). 	Notwithstanding, if the execution of a mortgage
“substantially complies” with the statutory requisites of O.R.C. § 5301.01(A), the
mortgage may still be considered valid. See Menninger v. First Franklin Fin. Corp. (In
re Fryman), 314 B.R. 137, 138 (Bankr. S.D. Ohio 2004).
In the present case, the Mortgage document does not contain any language
normally found in an acknowledgment, nor does it contain a certification of the
acknowledgment. Ohio Revised Code provides as follows:
The person taking an acknowledgment shall certify that:
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(A) The person acknowledging appeared before him and acknowledged he
executed the instrument;
(B) 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.
O.R.C. § 147.53. The Ohio Revised Code further provides suggestions of what language
would be sufficient to qualify as an acknowledgment under Ohio law. 	See 	O.R.C. §
147.55. 	For example, the language suggested for an acknowledgment of an individual
acting in his own right could simply state as follows: “The foregoing instrument was
acknowledged before me this (date) by (name of person acknowledged)[.]” O.R.C. §
147.55. This language, or something substantially similar accompanied by the signature
of 	the 	person 	taking 	the 	acknowledgment 	is 	sufficient 	to 	satisfy 	the 	statutory
requirements of O.R.C. § 5301.01. In this case, however, the Mortgage at issue does not
contain any of the acknowledgment language suggested by O.R.C. § 147.55 or anything
substantively similar. 	Universal has not provided any evidence that the Mortgage
contains any language purporting to be an acknowledgment or certification of an
acknowledgment. 	Instead, Universal asserts that the acknowledgment complies with
Ohio law because “the notary wrote his name and included his commission information
in the area of the Mortgage designated for the acknowledgment.” 	Defendant’s Motion
for Summary Judgment at 2. 	This Court disagrees and finds as a matter of law that a
notary’s signature and seal without additional language similar in content, if not the
same, 	as 	that 	contained 	in 	O.R.C. 	§ 	147.55 	is 	insufficient 	to 	constitute 	an
acknowledgment for the execution of a mortgage. 	See In re Wheeler, 2006 U.S. Dist.
LEXIS 38733, *10 (S.D. Ohio June 12, 2006) (rejecting creditor’s argument that signing
of 	the 	mortgage 	in 	the 	presence 	of 	the 	notary, 	but 	without 	his 	certification 	of
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4 In support of Universal’s Motion for Summary Judgment, it attached an affidavit of Kevin D. Williams,
the notary that signed the Mortgage, wherein Mr. Williams states that he took the acknowledgment of the
Debtors when they signed the Mortgage, that the Debtors appeared before him to sign the Mortgage, and
the Debtors provided driver’s licenses to verify their identities. Defendant’s Motion for Summary
Judgment, Exhibit 1. The affidavit, however, does not indicate that Mr. Williams certified the Debtors’
acknowledgment, nor does it explain or address why a certificate of the acknowledgement is not contained
in the Mortgage as required by O.R.C. § 5301.01(A). Even if the affidavit did state that the notary certified
the acknowledgment, this Court is not satisfied that would overcome the fact that the Mortgage itself does
not contain a certificate evidencing the same.
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acknowledgment, was in compliance with [O.R.C.] § 5301.01). 4 Therefore, the
execution of the Mortgage in this case fails to comply with all of the statutory
requirements because it does not contain an acknowledgment or a certification of
acknowledgment required by O.R.C. § 5301.01.
Furthermore, the execution of the Mortgage does not “substantially comply” with
the statutory requirements. 	When the validity of a mortgage is challenged for failure to
comply with the statutory mandates of O.R.C. § 5301.01, a court can “review the nature
of the error and the balance of the document to determine whether or not the ‘instrument
supplies within itself the means of making the correction.’” Menninger v. First Franklin
Fin. Corp. (In re Fryman), 314 B.R. 137, 138 (Bankr. S.D. Ohio 2004) (quoting Dodd v.
Bartholomew, 44 Ohio St. 171, 175 (1886)). This principle enunciated by the Dodd court
essentially allows a court to determine whether the execution of a mortgage is in
“substantial compliance” with O.R.C. § 5301.01. 	See Menninger v. First Franklin Fin.
Corp. (In re Fryman), 314 B.R. 137, 138 (Bankr. S.D. Ohio 2004). 	Under Ohio law, a
mortgage that substantially complies with O.R.C. § 5301.01 will be considered valid.
See Mid-American Nat’l Bank & Trust Co. v. Gymnastics Internat’l, Inc., 6 Ohio App. 3d
11 (Ohio Ct. App. 1982); In re Wheeler, 2006 U.S. Dist. LEXIS 38733, *6 (S.D. Ohio
June 12, 2006). 	As previously discussed, the Mortgage in the present case does not
contain a certificate of acknowledgment or any semblance of one. 	As such, it is
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5 Even though the notary’s affidavit in support of Universal’s Motion for Summary Judgment states that
the Debtors appeared before the notary and acknowledged the signing of the Mortgage, the doctrine of
substantial compliance mandates that the corrective language or the means of making the correction be
found within the Mortgage document itself. An affidavit attached to a motion for summary judgment is not
part of the Mortgage document and in this case was produced years after the execution of the Mortgage.
Thus, the statements in the affidavit in this case cannot provide the means of making the correction in the
defective Mortgage.
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impossible for something to substantially comply with a statute when it does not exist in
any form. 	The location of the notary’s signature and seal in the space designated for the
acknowledgment without language to meet the criteria for an acknowledgment under
O.R.C. § 147.53 is insufficient to qualify as an acknowledgment or certificate of
acknowledgment.
Moreover, nothing within the Mortgage at issue provides a means of making the
correction because there simply is no language in the document to indicate that the
Debtors appeared before a notary and acknowledged that they signed the Mortgage.5 It is
not apparent from the Mortgage document that the Debtors ever acknowledged signing
the instrument. Accordingly, the Mortgage is not in substantial compliance with O.R.C.
§ 5301.01. The Mortgage, therefore, has not been properly executed.
A mortgage that is not properly executed is not entitled to be recorded. 	See
O.R.C. § 5301.25(A); Menninger v. Mortgage Elec. Registration Sys. (In re Bowling),
314 B.R. 127, 134 (Bankr. S.D. Ohio 2004). 	Furthermore, “an improperly executed
mortgage does not put a subsequent bona fide purchaser on constructive notice.” Simon v.
Chase Manhattan Bank (In re Zaptocky), 250 F.3d 1020, 1028 (6th Cir. 2001) (citations
omitted). The Trustee has proven by clear and convincing evidence that the Mortgage in
this case is not entitled to be recorded and does not put a subsequent bona fide purchaser
on constructive notice because it failed to contain a certificate of acknowledgment and
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6 Universal cites to numerous cases in support of its motion for summary judgment; however, those cases
are distinguishable from the present case because the instruments at issue in the cases actually contained
certificates of acknowledgment so the courts therein had to determine if the content of the certificates were
sufficient to comply with O.R.C. § 5301. See Mid-American Nat’l Bank & Trust Co. v. Gymnastics
Internat’l, Inc., 6 Oho App. 3d 11 (Ohio Ct. App. 1982) (holding that although the recital in the
certification is somewhat incomplete, it nonetheless substantially complies with O.R.C. § 5301); Amick v.
Woodworth, 58 Ohio St. 86 (1898) (determining that a grantee in an instrument is disqualified to act as the
official taking and certifying the acknowledgment of grantor); Wayne Bldg. & Loan Co. v. Hoover, 12
Ohio St. 2d 62 (1967) (holding that the certificate of acknowledgment was sufficient).
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was not properly executed.6 Accordingly, the Trustee can avoid the Mortgage in this
case as a subsequent bona fide purchaser pursuant to the authority granted to him under
11 U.S.C. § 544(a)(3) and preserve the Mortgage for the benefit of the bankruptcy estate
pursuant to 11 U.S.C. § 551.
IV. Conclusion
For the foregoing reasons, the Court finds that the Mortgage in favor of Universal
was improperly executed, was not entitled to be recorded and does not put a subsequent
bona fide purchaser on notice. 	The Court further finds that the Trustee can avoid the
Mortgage and preserve it for the benefit of the bankruptcy estate. Accordingly, the Court
hereby 	DENIES 	Defendant’s 	Motion 	for 	Summary 	Judgment 	in 	its 	entirety 	and
GRANTS Plaintiff’s Motion for Summary Judgment in its entirety.
Counsel for the Plaintiff shall submit a Final Judgment consistent with this
Opinion.
IT IS SO ORDERED.
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Copies to:
Kenneth M. Richards, Attorney for Plaintiff (Electronic Service)
Amelia A. Bower, Attorney for Defendant (Electronic Service)
Cornelius Emmanul Bozman, Sr., Debra Ann Bozman, 1196 E. 24th Avenue, Columbus,
OH 43211
Karen E. Hamilton, Attorney for Debtors (Electronic Service)
Office of U.S. Trustee (Electronic Service)
# # #
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