Menninger, Jr v. Accredited Home Lenders, Inc. et al

UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF OHIO
WESTERN DIVISION
In Re: 	)
)
David M. Morgeson 	) 	Case No. 04-15619
)
Tina M. Morgeson 	) 	Chapter 7
)
Debtors 	) 	Adversary Case No. 05-1270
)
Henry E. Menninger, Jr., 	)
Trustee 	)
)
Plaintiff 	)
)
vs. 	)
)
Accredited Home Lenders, 	)
et al. 	)
)
Defendants 	)
DECISION
In 	this 	adversary 	proceeding 	the 	plaintiff 	is 	the 	Chapter 	7
Trustee appointed in the noted bankruptcy case. 	The defendant is
a 	lender 	which 	claims 	to 	hold 	a 	mortgage 	interest 	in 	the
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: August 31, 2006
____________________________________________________________
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residential real estate owned by debtors. 	(While debtors are named
as co-defendants in the pleadings, Accredited Home Lenders is the
real party in interest, and the singular term “defendant” as used
herein refers to Accredited Home Lenders.) 	Here, plaintiff seeks
to 	avoid, 	at 	least 	in 	part, 	defendant’s 	mortgage 	interest.
Defendant filed a Motion for Summary Judgment and plaintiff filed
a 	Cross 	Motion 	for 	Summary 	Judgment. 	In 	his 	cross 	motion,
plaintiff requests an opportunity for oral argument. 	Because the
issues 	are 	made 	perfectly 	clear 	by 	the 	filings 	of 	the 	respective
parties the court has concluded that oral argument cannot assist it
in reaching a conclusion in this matter. 	Accordingly, plaintiff’s
request is denied.
We find the following facts. 	They are undisputed. 	On August
31, 	1999, 	debtors 	David 	M. 	Morgeson, 	Jr. 	and 	Tina 	M. 	Morgeson,
husband and wife, took title to residential property at 9684 Kelso
Court, 	Cincinnati, 	Ohio 	45231 	(the 	“subject 	property”). 	The
subject property was registered land in Hamilton County, Ohio. 	A
Registered 	Land 	Transfer 	Certificate 	of 	Title 	was 	issued 	upon
assumption 	of 	ownership 	by 	the 	Morgesons 	after 	title 	was
transferred to them by deed dated August 25, 1999. 	Accredited Home
Lenders, Inc. (“creditor”) made a loan to debtors in the amount of
$106,200.00 purportedly secured by a mortgage executed May 24, 2002
and recorded June 7, 2002. 	This is the information recorded in the
registered 	land 	records 	of 	Hamilton 	County, 	Ohio. 	The 	mortgage
document itself was made an exhibit in the filings by both parties.
On its first page it shows that the “borrower” is David M. Morgeson
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and Tina M. Morgeson, husband and wife. 	Lender is Accredited Home
Lenders, 	Inc. 	On 	the 	signature 	page 	to 	the 	mortgage 	document
appears the signature of David M. Morgeson, Jr. with his name typed
beneath 	the 	signature 	line. 	There 	is 	also 	a 	signature 	line 	for
Tina 	M. 	Morgeson 	upon 	which 	appears 	her 	signature. 	Beneath 	the
signature appears the statement, “signing only to release her dower
interest.” 	The signature page is followed by one on which appears
the 	certificate 	of 	a 	notary 	of 	public. 	The 	notary 	says 	that:
“personally 	appeared 	[before 	me] 	David 	M. 	Morgeson 	and 	Tina 	M.
Morgeson, spouse, signing only to release her dower interest.”
Motions for summary judgment are governed by F.R. Civ. P. 56
which 	is 	incorporated 	into 	bankruptcy 	practice 	by 	F.R.B.P. 	7056.
That rule provides in part that a motion for summary judgment is to
be 	granted 	“if 	the 	pleadings, 	depositions, 	answers 	to
interrogatories, 	and 	admissions 	on 	file, 	together 	with 	the
affidavits, if any, show that there is no genuine issue of material
fact and that the moving party is entitled to judgment as a matter
of law.” 	The moving party bears the initial burden of showing that
there is no issue of material fact. 	Celotex Corp. V. Catrett, 477
U.S. 317, 323-324 (1986). 	The nonmoving party, however, bears the
ultimate 	burden 	of 	showing 	that 	a 	genuine 	issue 	of 	material 	fact
exists. 	In 	doing 	so, 	the 	nonmoving 	party 	cannot 	rest 	on 	its
pleadings, 	but 	must, 	in 	response, 	offer 	some 	evidence 	which
demonstrates a genuine issue of material fact for trial.
In support of its Motion for Summary Judgment defendant makes
reference to O.R.C. §5301.01(A) which reads as follows:
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A 	deed, 	mortgage, 	land 	contract 	as 	referred 	to 	in
division(B)(2) of Section 317.08 of the Revised Code, or
lease of any interest in real property and a memorandum
of trust as described in division (A) of Section 5301.255
of 	the 	Revised 	Code 	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 	settlor 	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 	settlor 	and
trustee, before a judge or clerk of a court of record in
the state, or a county auditor, county engineer, notary
public, 	or 	mayor, 	who 	shall 	certify 	the 	acknowledgment
and subscribe the official’s name to the certificate of
the acknowledgment.
This section makes provision under Ohio law that a “deed, mortgage,
[or] 	land 	contract” 	must 	be 	executed 	for 	it 	to 	be 	valid. 	Though
defendant provides us with this code section, it says that it does
not 	apply 	in 	the 	case 	before 	us 	because 	the 	subject 	property 	is
registered land.
Defendant 	argues 	that, 	instead, 	the 	creation 	of 	a 	mortgage
interest for registered land must comply with O.R.C. §5309.47 and
5309.48. O.R.C. §5309.47 in relevant part states:
Whenever 	any 	registered 	land 	or 	interest 	therein 	is
intended to be charged or made security in favor of any
mortgagee, the mortgagor shall execute a mortgage deed...
Every mortgage deed and instrument of encumbrance shall
contain 	a 	pertinent 	description 	of 	the 	land 	and 	an
accurate 	statement 	of 	the 	interest 	intended 	to 	be
mortgaged, 	charged, 	or 	encumbered, 	and 	when 	registered
shall operate as a lien or charge upon and bind the land
covered 	thereby 	for 	the 	period 	ending 	twenty-one 	years
after 	the 	maturity 	of 	the 	last 	secured 	debt 	or
obligation.
Ohio Revised Code Section 5309.48 provides in relevant part:
When 	a 	mortgage...is 	filed 	in 	the 	county 	recorder’s
office...the recorder shall enter upon the proper folium
of the register, where such title is registered, and upon
the 	owner’s 	duplicate 	certificate 	of 	title, 	a 	memorial
accurately stating the purport and nature of the lien or
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charge 	created, 	the 	date 	of 	filing 	the 	instrument, 	and
its file number.
It 	is 	the 	position 	of 	defendant, 	then, 	that 	because 	the
subject property is registered land, proper execution is controlled
not 	by 	O.R.C. 	§5301.01, 	but 	rather 	O.R.C. 	§5309.47 	and 	5309.48.
Because 	registered 	land 	records 	show 	that 	defendant 	holds 	a
mortgage on the property without qualification, says defendant, it
is entitled to prevail on its motion.
In opposition to defendant’s Motion for Summary Judgment, and
in 	support 	of 	it 	Cross 	Motion 	for 	Summary 	Judgment, 	plaintiff
disputes 	defendant’s 	contention 	that 	O.R.C. 	§5301.01 	has 	no
application 	when 	it 	is 	registered 	land 	which 	is 	in 	question.
Plaintiff 	supports 	this 	position 	by 	reference 	to 	registered 	land
sections of the Ohio Revised Code, saying that these sections imply
that 	mortgages 	relating 	to 	registered 	land 	must 	meet 	the 	same
requirements as those pertaining to unregistered land.
Specifically, O.R.C. §5309.40 provides in pertinent part:
A registered owner in fee of real property, in order to
transfer the owner’s whole interest in the property or in
any 	part 	of 	the 	property 	or 	to 	transfer 	any 	undivided
interest 	in 	the 	property 	shall 	execute 	to 	the 	intended
transferee 	a 	deed 	or 	instrument 	of 	conveyance 	that, 	in
case of transfer of the whole of the property, may be on
the 	duplicate 	certificate 	of 	title. 	The 	deed 	or
instrument of conveyance may be in any form authorized by
law...
(Emphasis added).
Similarly, O.R.C. §5309.42 states:
...When a registered owner desires to transfer to another
lesser 	estate 	than 	the 	fee, 	as 	an 	estate 	for 	life, 	for
years, or other term, or any other kind of lesser estate
than a fee, he may do so by executing to the transferee
a deed, lease or other proper instrument of conveyance or
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transfer of such estate, in any form authorized by law,
giving 	the 	number 	of 	his 	certificate 	and 	other
requirements of identification.
(Emphasis added).
Finally, O.R.C. §5309.47 provides that:
Whenever 	any 	registered 	land 	or 	interest 	therein 	is
intended to be charged or made security in favor of any
mortgagee, the mortgagor shall execute a mortgage deed.
...Every 	mortgage 	deed 	and 	instrument 	of 	encumbrance
shall contain a pertinent description of the land and an
accurate 	statement 	of 	the 	interest 	intended 	to 	be
mortgaged, 	charged, 	or 	encumbered, 	and 	when 	registered
shall operate as a lien or charge upon and bind the land
covered 	thereby 	for 	the 	period 	ending 	twenty-one 	years
after 	the 	maturity 	of 	the 	last 	secured 	debt 	or
obligation.
(Emphasis added).
(The emphasized language above is that noted by plaintiff.)
It is then plaintiff’s position that the manner in which the
mortgage 	was 	signed 	by 	debtors 	cannot 	be 	ignored. 	Plaintiff’s
position is that, at best, defendant holds a mortgage on only half
the 	subject 	property 	because 	Tina 	Morgeson 	signed 	the 	mortgage
document only for the purpose of relinquishing her dower interest.
Since that is so, plaintiff contends that he is entitled, pursuant
either 	to 	his 	strong 	arm 	powers 	under 	11 	U.S.C. 	§544(a)(3) 	or 	11
U.S.C. 	§547, 	to 	avoid 	any 	interest 	that 	defendant 	claims 	in 	the
subject property with respect to the interest to Tina Morgeson.
It is the conclusion of the court, and we find as a fact, that
the 	court 	recorder 	erred 	when 	he 	entered 	on 	the 	registered 	land
certificate 	that 	both 	debtors 	were 	mortgagees. 	It 	was 	the 	clear
intention 	of 	Tina 	Morgeson 	to 	sign 	only 	to 	convey 	her 	dower
interest in David Morgeson’s title interest. 	In such a situation
the intention as expressed by the signatories must prevail over the
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registered 	land 	certificate. 	Defendant’s 	position 	that 	the
registered land certificate may not be questioned is mistaken.
That the county recorder may err is clear from OCR §5310.05-
5310.14 	which 	create 	an 	assurance 	fund 	from 	which 	one 	harmed 	by
such an error may seek compensation. 	The implication to be drawn
from those sections is that a county recorder may err in entering
information 	on 	the 	records 	of 	registered 	land, 	and 	a 	remedy 	for
such an event is necessary. 	We find such an error to be the case
here, 	and 	the 	basic 	document 	as 	executed 	by 	the 	parties 	must 	be
given effect despite the land registration certificate.
We 	therefore 	will 	grant 	plaintiff’s 	Motion 	for 	Summary
Judgment 	and 	deny 	defendant’s 	Motion 	for 	Summary 	Judgment.
Defendant’s mortgage interest will extend only to David Morgeson’s
interest in the subject property.
Copies to:
Henry E. Menninger, Jr.
600 Vine Street, Suite 2500
Cincinnati, OH 45202
David A. Freeburg
1370 Ontario Street, Suite 1700
Cleveland, OH 44113
U.S. Trustee
36 E. 7 th Street
Cincinnati, OH 45202
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