Opinion
Case No. 12-34418 Adv. No. 13-3160
06-04-2014
In re: HELEN C. GEYER, Debtor JEFFREY M. KELLNER, TRUSTEE, Plaintiff v. JP MORGAN CHASE BANK, N.A., Defendant
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.
__________
Lawrence S. Walter
United States Bankruptcy Judge
Judge L. S. Walter
Chapter 13
DECISION DENYING THE MOTION FOR SUMMARY JUDGMENT
OF JP MORGAN CHASE NA [adv. doc. 28]
The court has jurisdiction over this matter pursuant to 28 U.S.C. §§ 157(a), 157(b)(2) and 1334 and the standing General Order of Reference in this District.
This matter is before the court on the Motion for Summary Judgment of JP Morgan Chase NA [adv. doc. 28]; Plaintiff's Response to Defendant's Motion for Summary Judgment [adv. doc. 37]; and the Reply of JP Morgan Chase Bank NA to Plaintiff's Response to the Motion for Summary Judgment of JP Morgan Chase NA [adv. doc. 38].
FACTUAL BACKGROUND
At the center of the dispute is whether notary public Jennifer Vongsy, whose signature appears on the acknowledgement clause of the mortgage at issue, was actually present at the closing when the mortgage was executed by Debtor Helen C. Geyer ("Debtor"). The Debtor executed the mortgage on her real property located at 2430 Barnett Drive in Bellbrook, Ohio ("Property") on February 22, 2006 to secure a loan from Chase Bank ("Chase"). The closing occurred at the Debtor's place of employment, Lexis-Nexis. The signature of a notary public by the name of Jennifer Vongsy appears on the acknowledgment clause of the mortgage indicating that the mortgage was signed in her presence at the closing. The mortgage was subsequently recorded in Greene County on March 3, 2006 and a copy of the recorded mortgage is attached to the Debtor's complaint [adv. doc. 1, Ex. A].
Following the commencement of a foreclosure case on the Property in the Greene County Court of Common Pleas, the Debtor filed her Chapter 13 bankruptcy petition on September 24, 2012. On June 13, 2013, Chapter 13 Trustee Jeffrey Kellner ("Trustee") filed an adversary complaint to avoid Chase's mortgage asserting that the mortgage was not properly notarized and may be avoided pursuant to 11 U.S.C. § 544(a)(1) and /or § 544(a)(3). In the complaint, the Trustee asserts that Jennifer Vongsy did not appear at the Debtor's place of employment where the mortgage documents were executed nor has the Debtor personally met Jennifer Vongsy. Instead, the Trustee alleges that an individual by the name of Dee Savage appeared at Lexis-Nexis to have the Debtor sign the note, mortgage and other documents related to the mortgage. The Trustee believes that Dee Savage was an employee of LSI, a division of Chicago Title Agency. Because the mortgage was allegedly notarized by someone who was not present at the closing, the Trustee asserts that the acknowledgement clause is defective resulting in an avoidable mortgage interest.
The Complaint includes a second cause of action for avoidance of a preferential transfer pursuant to 11 U.S.C. § 547. However, this cause of action appears to be contingent on Chase raising the defense of lis pendens to block the avoidance of the mortgage under § 544. Because the doctrine of lis pendens has not been raised [see adv. doc. 28, p. 8 (Chase notes that it has not raised lis pendens as a defense nor asserted that lis pendens cuts off the Trustee's BFP powers)], the court believes that the preference claim is moot.
On March 14, 2014, Chase filed a motion for summary judgment along with the attached affidavit of Jennifer Vongsy. In the affidavit, Jennifer Vongsy attests that she did, in fact, attend the mortgage closing and was present when the Debtor executed the documents. Vongsy attests to details of the day including her arrival at Lexis-Nexis on February 22, 2006, check-in with security, and her wait for the arrival of the Debtor in the lobby. In the affidavit, Vongsy states that the Debtor signed the mortgage in her presence and that it is Vongsy's handwriting on the acknowledgment page of the mortgage. Vongsy recalls that she was told and wrote down the Debtor's marital status on the mortgage, that she inspected the Debtor's driver's license, and that the Debtor signed other documents, including an Owners Affidavit and Survey Affidavit, in Vongsy's presence. Vongsy states that she does not know anyone by the name of Dee Savage and that Dee Savage did not accompany her to the closing on February 22, 2006.
Chase further provides the affidavit of Cheryl Haberman, VP of Closing Operations for Service Link formerly known as LSI. Haberman reviewed the contents of her company's file on the refinance of the mortgage executed by the Debtor and Chase. Haberman attests that Dee Savage did work for LSI on February 22, 2006 as a member of the HUD preparation team and she worked directly on the Debtor's file. However, Haberman attests that Dee Savage did not attend the closing in Ohio. Instead, it was the common practice of LSI to have a local notary attend closings.
Also attached to the motion for summary judgment are excerpts from the Debtor's deposition transcript. With the deposition testimony, Chase attempts to establish that the Debtor's recollection of the February 22, 2006 closing is far from clear. During the deposition, the Debtor is asked about her encounter with Dee Savage:
Q. Did Ms. Savage give you any identification, like a business card, anything like that when you met?[Doc. 38, Ex. 4, Geyer Dep. dated Feb. 26, 2014, pp. 13, 34-35].
A. I do not recall.
Q. Do you know who the title company was?
A. LSI. I think that's right.
Q. And do you know what Ms. Savage's job was at the title company?
A. I do not.
Q. Can you tell me what she looks like?
A. No.
Q. Would you say older or younger than you.
A. I don't know.
* * *
Q. How sure are you, Mrs. Geyer, that Dee Savage was with you on February 22, 2007?
A. That is what I recall.
Q. Do you have a very good recollection of it or on a scale of one to ten, how good is your recollection of the events surrounding the signing of this mortgage?
A. I don't know if I can put it on a scale, that's what I remember.
Q. If Ms. Savage told me that she wasn't in Ohio that day, would you describe her as being untruthful?
A. I can't say that.
Q. And if Jennifer, our notary . . . told me that she absolutely was in Ohio and met with you that day, would she be telling the truth?
A. I can't say that either.
* * * *
The court assumes that the questioning attorney intended to ask about February 22, 2006, the date of the closing. It appears that the Debtor was not confused by the use of the incorrect year.
In response to the motion for summary judgment, the Trustee relies on testimony from the same deposition to support the Debtor's recollection that Dee Savage, rather than Jennifer Vongsy, appeared at Lexis-Nexis to have the Debtor execute the mortgage documents. The Trustee asserts that Chase's focus on the vagueness of the Debtor's memory and reliance on contradictory affidavits is nothing more than a request that the court consider the credibility of the witnesses and weigh the evidence which is prohibited on summary judgment.
LEGAL ANALYSIS
A. Summary Judgment Standard
The appropriate standard to address Chase's motion for summary judgment is contained in Fed. R. Civ. P. 56 and incorporated in bankruptcy adversary proceedings by reference in Fed. R. Bankr. P. 7056. Rule 56(a) provides that summary judgment is to be granted by the court "if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a) applicable in bankruptcy adversary proceedings via Fed. R. Bankr. P. 7056. "'A material fact is one whose resolution will affect the determination of the underlying action.'" SPC Plastics Corp. v. Griffith (In re Structurelite Plastics Corp.), 224 B.R. 27, 30 (B.A.P. 6th Cir. 1998) (further citation omitted). An issue is genuine if a rational trier of fact could find in favor of either party on the issue. Id.
To meet the burden of showing no genuine issue of material fact and entitlement to judgment as a matter of law, the movant must cite to particular parts of materials in the record including depositions, affidavits, stipulations or other materials. Fed. R. Bankr. P. 56 (c); Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). Once a properly supported motion for summary judgment is made, the adverse party must set forth specific facts showing that there is a genuine issue for trial. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250 (1986).
At the summary judgment stage, the judge's function is not to weigh the evidence and determine the truth of the matter, but to determine whether there is a genuine issue for trial. Id. The evidence of record is viewed in a light most favorable to the nonmoving party. Id. at 255 (noting that the "evidence of the non-movant is to be believed, and all justifiable inferences are to be drawn in his favor"). Nonetheless, mere conclusory allegations or unsupported opinions of the non-movant are insufficient to defeat a motion for summary judgment. Cloke v. West Clermont Local School Dist. Bd. of Educ., 409 F.Supp.2d 927, 932 (S.D. Ohio 2006) (noting that the "nonmovant must present 'significant probative evidence' demonstrating that 'there is [more than] some metaphysical doubt as to the material facts' to survive summary judgment . . . ."). See also Blaney v. Cengage Learning, Inc., 2011 WL 1532032, at *7 (S.D. Ohio Apr. 22, 2011).
B. Trustee's Claim to Avoid the Mortgage Pursuant to § 544
On summary judgment, the parties focus on the evidence that supports the Trustee's claim that the mortgage instrument was not properly acknowledged before a notary public and is avoidable pursuant to 11 U.S.C. § 544. Section 544(a) gives the Trustee certain "strong arm" powers that include the ability to avoid a mortgage that would not be enforceable under state law against a hypothetical bona fide purchaser of the real property on the date of the bankruptcy filing. 11 U.S.C. § 544(a)(3); Argent Mortg. Co., LLC v Drown (In re Bunn), 578 F.3d 487, 488 and n.1 (6th Cir. 2009).
In Ohio, only properly executed and recorded mortgages take priority over a bona fide purchaser. Drown v. Countrywide Home Loans, Inc. (In re Peed), 403 B.R. 525, 530 (Bankr. S.D. Ohio 2009). One requirement for a properly executed mortgage is that the mortgagor must sign the mortgage and the signing must be acknowledged by the mortgagor before a notary public or other designated official "who shall certify the acknowledgement and subscribe the official's name to the certificate of the acknowledgement." Ohio Rev. Code § 5301.01(A). See also Simon v. Chase Manhattan Bank (In re Zaptocky), 250 F.3d 1020, 1024 (6th Cir. 2001). Lacking this requirement, the mortgage is invalidly executed and may be avoided by a bankruptcy trustee in the shoes of a bona fide purchaser. Zaptocky, 250 F.3d at 1024.
On summary judgment, neither party disputes that the mortgage facially complies with Ohio law including a notarized acknowledgment clause. Under Ohio law, a notarial acknowledgement is generally considered conclusive evidence of the facts set forth therein. Ransier v. Standard Fed. Bank (In re Collins), 292 B.R. 842, 847 (Bankr. S.D. Ohio 2003). Consequently, when a trustee seeks to challenge a facially valid notarial acknowledgment contained in a mortgage, "he must establish his challenge by clear and convincing evidence." Id. at 848. See also Zaptocky, 250 F.3d at 1024-25. "'Clear and convincing evidence may be defined as that measure or degree of proof which will produce in the mind of the trier of fact a firm belief or conviction as to the allegations sought to be established.'" Menninger v. Mortg. Elec. Registration Sys. (In re Bowling), 314 B.R. 127, 135 (Bankr. S.D. Ohio 2004). In other words, the Trustee carries a heavy burden of proof to demonstrate that Jennifer Vongsy, whose signature appears on the acknowledgment clause, did not actually attend the closing. See Collins, 292 B.R. at 847.
The presumption of validity given to a facially valid mortgage is so strong that at least one Ohio appellate court held that the testimony of the mortgagor, alone, is insufficient to overcome a facially valid certificate of acknowledgment by a notary when that certificate is corroborated by the testimony of the notary herself. See Paramount Fin. Co. v. Berk, 179 N.E.2d 788, 788-89 (Ohio Ct. App. 1962). See also Simon v. First Union Mortg. Co. (In re Burnham), 231 B.R. 270, 274-75 (Bankr. N.D. Ohio 1999) (relying on Paramount). This "per se" rule has been subject to some criticism by the Sixth Circuit Court of Appeals and no party to the current dispute has asked the court to apply a per se rule in this case. Zaptocky, 250 F.3d at 1025-26 (declining to extend Paramount beyond the certificate of acknowledgment). See also Bowling, 314 B.R. at 135 (following Zaptocky and concluding that Ohio has not adopted a per se rule that the mortgagor's testimony is never sufficient to overcome the presumption of validity of the notary's certificate of acknowledgment). Nonetheless, these cases highlight the heavy burden of clear and convincing evidence that the Trustee must meet.
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In the motion for summary judgment, Chase relies on the presumption of validity attached to the notary acknowledgment and further supports the presumption with additional evidence in the form of the affidavit of the notary, Jennifer Vongsy, whose signature appears on the acknowledgment. Ms. Vongsy attests that she did attend the closing with the Debtor and provides details of their meeting at the Debtor's workplace.
Chase provides the separate affidavit of Cheryl Haberman, a vice-president at Service Link (formerly known as LSI) to contradict the Debtor's assertion that a woman named Dee Savage attending the closing. However, the Trustee objects to the admissibility of the affidavit on hearsay grounds because it appears that Ms. Haberman's only information regarding the February 22, 2006 closing comes from a review of the company's file on the matter. The court agrees that Ms. Haberman's statements appear largely based on hearsay. With no exception to the hearsay rule raised by Chase, the Haberman affidavit will be disregarded on summary judgment. See Fed. R. Civ. P. 56(c)(4) ("An affidavit or declaration used to support or oppose a motion must be made on personal knowledge, set out facts that would be admissible in evidence, and show that the affiant or declarant is competent to testify on the matters stated").
Without consideration of the Haberman affidavit, the matter is reduced to the conflicting recollections of the Debtor and Jennifer Vongsy regarding who was present at the mortgage closing at Lexis-Nexis on February 22, 2006. At trial, the court may conclude that the Debtor's testimony does not overcome the presumption of validity attached to the mortgage and corroborated by Jennifer Vongsy's testimony that she attended the closing and appropriately signed the acknowledgement clause. However, the Court cannot come to that conclusion on summary judgment without weighing the conflicting evidence and attempting to determine the truth of the matter. In the context of a summary judgment motion, that is improper. See Anderson, 477 U.S. at 249, 253-55 (noting that, on summary judgment, the court should take into consideration the appropriate burden of proof, but cannot weigh the evidence, make credibility determinations, or attempt to determine the truth of the matter). Rather, the Court is limited to determining that a genuine issue of material fact has been raised regarding the presence of the notary at the closing on February 22, 2006.
Accordingly, Chase's motion for summary judgment [adv. doc. 28] is DENIED.
SO ORDERED. cc: Jeffrey M Kellner
Chapter 13 Trustee
131 N. Ludlow Street
Suite 900
Dayton, OH 45202-1161
Andrew Ziegler
1340 Woodman Drive
Dayton, OH 45432
Email: andrew@thomsonanddeveny.com
Kenneth Johnson
100 South Third Street
Columbus, OH 43215
kjohnson@bricker.com
Amelia A Bower
300 East Broad Street
Suite 590
Columbus, OH 43215
Email: abower@plunkettcooney.com