Opinion
Bankruptcy No. 03-18370DWS, Adversary No. 03-1017.
October 28, 2004
MEMORANDUM OPINION
This adversary proceeding was brought by the debtor Hortense C. Tippett ("Plaintiff") seeking to invalidate the mortgage held by Defendant EMC Mortgage Co. ("Defendant" or "EMC") against certain non-residential real property or in the alternative to bifurcate EMC's secured claim and reduce it by a recoupment under the Truth in Lending Act, 15 U.S.C. § 1601 et seq. ("TILA"). After trial on this matter and opportunity to reopen the record, this matter is ripe for decision. BACKGROUND
EMC's counsel made an oral motion for a continuance to investigate possible claims against the title insurance policy based upon the allegations of forgery as to the deed discussed below. I denied the motion for reasons stated on the record. I nevertheless allowed the parties additional time following the trial to request a reopening of the record, an opportunity which was not invoked by either side.
The following facts are either stipulated in the Amended Joint Pretrial Statement (the "Statement of Uncontested Facts"), were established at trial, or are facts of which I may take judicial notice. The only witnesses called at trial were Plaintiff and her brother, Talmadge Tippett ("Talmadge").
Plaintiff resides at 5930 Spruce Street, Philadelphia, PA, 19139. The property at issue here is adjacent to Plaintiff's home, numbered 5928 Spruce Street, and contains a vacant, multi-unit building to which some renovations and repairs have been made but which is nevertheless currently uninhabitable (the "Property"). Talmadge purchased the Property from the Redevelopment Authority (the "Authority") of the City of Philadelphia (the "City") for one dollar pursuant to provisions of the Philadelphia City Code providing for the rehabilitation of vacant and blighted properties. See Philadelphia, PA, Code § 16-400 et seq. This conveyance is evidenced by a deed, executed by the Authority to Talmadge on February 13, 1996 and recorded on May 9, 1997. Exhibit P-1 (the "Authority-Talmadge Deed"). Talmadge acknowledged this deed and authenticated his signature.
It appears that Talmadge's involvement with the Property may have begun even earlier. Mixed in with the deed is a separate agreement titled "Authorization to Enter Upon City Owned Property" (the "Authorization"). This Authorization, which is distinctly paginated from the Authority-Talmadge Deed, allows Talmadge to enter upon the Property as of October 30, 1990 for the purposes of securing entry against unauthorized persons, keeping the steps and sidewalk free of debris, and otherwise protecting the Property. No testimony was elicited as to the Authorization and in fact the distinction between the Authorization and Authority-Talmadge Deed was ignored by both parties.
The Authority-Talmadge Deed conveys the Property to Talmadge subject to certain conditions, namely that Talmadge or any heirs and assigns: (1) must undertake and complete rehabilitation of the Property in conformance with all applicable codes within one year of the date of execution; (2) occupy and use the Property or portion thereof for six years after the date of execution; and (3) neither offer or sell the Property during that six year period for more than fifteen percent over and above the cost of the Property and initial cost of rehabilitation. Id. at D0301-200. Both Plaintiff and Talmadge testified that it was their intent that Talmadge would transfer the Property to the Plaintiff, who would be responsible for its rehabilitation.
Failure to comply with these terms causes title to revert to the City automatically upon the City's written notice of noncompliance and the grantee's failure to remedy within thirty days following such notice. Id. It is clear from the facts below that these conditions have not been met, but there is no evidence that the City has acted upon this failure.
A second deed, dated August 16, 1997 and recorded on December 16, 1999, evidences a conveyance of the Property from Talmadge to Plaintiff for one dollar (the "Talmadge-Plaintiff Deed"). Exhibit P-6. The Talmadge-Plaintiff Deed bears a signature purporting to be that of Talmadge as well as the acknowledgment and seal of notary public Murray Levin ("Levin"), attesting that:
On this, the 16th day of August, 1997, before me, a Notary Public for the Commonwealth of Pennsylvania, . . . the undersigned officer, personally appeared Talmadge Tippett, known to me (or satisfactorily proven) to be the person whose name is subscribed to the within instrument, and acknowledged that he executed the same for the purposes therein contained, and desired the same might be recorded as such, according to law. Id at 4. Notwithstanding this attestation, Talmadge testified at trial that the signature on the Talmadge-Plaintiff Deed is not his. No testimony was presented from either an expert on handwriting or a lay person familiar with Talmadge's signature. See 42 Pa. C.S.A. § 6111. Plaintiff did not provide any testimony as to the Talmadge-Plaintiff Deed. My own comparison of the signature to his admitted signature on the Authority-Talmadge Deed, leads me to conclude that the signatures are substantially identical. Exhibits P1, P-6. There are admittedly minute differences, such as the final flourish at the end of the signatures, but as the trier of fact I do not find these differences significant enough to persuade me that the Talmadge signatures on these two exhibits were not made by the same person.
My pretrial order specifically requested legal issues be presented with constitutional, statutory, regulatory and decisional authority, but the parties have not specified whether Pennsylvania law governs here. As noted below, state law governs the issue of whether a deed's signature is a forgery. Infra n. 13. Absent any input from the parties and given that the plaintiff is a Pennsylvania resident and the dispute involves property in Pennsylvania, I find that Pennsylvania law should govern the forgery issue. The above-cited statute provides in relevant part:
(a) Opinion evidence as to handwriting. — Where there is a question as to any writing, the opinions of the following persons shall be deemed to be relevant:
(1) The opinion of any person acquainted with the handwriting of the supposed writer.
(2) The opinion of those who have had special experience with, or who have pursued special studies relating to, documents, handwriting, and alterations thereof, who are called experts in this section.
Id.
Plaintiff subsequently took out a loan with EMC for $46,700 (the "Loan") to pay for rehabilitation to the Property, evidenced by a Note and a Mortgage on the Property dated March 13, 1998 (the "Settlement Date"). Exhibit P-7. Plaintiff acknowledges her signature upon the Note and Mortgage underlying the Loan despite a prior assertion to EMC's predecessor in interest that her signature on the "mortgage documents" was a forgery. Exhibit P-8 (Letter dated July 11, 2000). Plaintiff admitted that this prior assertion was not true but did not seek to explain the reason for her misrepresentation.
The loan documents are actually between Plaintiff and United Companies Lending Corp. ("United"). While the parties did not so stipulate in their pretrial statement, there appears to be no dispute that EMC is the successor in interest to United. EMC characterizes the loan as being made with its "predecessor in interest," and EMC is asserting the proof of claim based upon the Note and Mortgage. Answer to Complaint ¶¶ 5-6.
While Talmadge was present at the Loan settlement, he did not sign any documents and did not have any involvement in the transaction. Both Plaintiff and Talmadge deny signing any deed conveying the Property at the Loan settlement. Nevertheless, Plaintiff testified that she in fact believed herself to be the owner of the Property at the time she entered into the Loan. No testimony was elicited as to the basis of this belief. Around this same time, Plaintiff entered into an agreement with a contractor, Yusuf's General Contracting ("Yusuf"). Exhibit P-5.
This document is undated and it is unclear exactly when it was executed or when Yusuf began working on the Property. Plaintiff testified that Yusuf was referred by the mortgage broker and/or United. Neither witness identified the mortgage broker.
On March 31, 1998, approximately two weeks after the Settlement Date, Plaintiff received a letter from a Dryden Abstract, Inc. ("Dryden" and the "Dryden Letter"). Exhibits P-2 and P-9. The Dryden Letter was ultimately forwarded to Talmadge. The letter's salutation is to "Mr. and Mrs. Tippett" and states:
Exhibit P-2 is the Dryden Letter, with the attached Dryden Deed discussed below. Exhibit P-9 is the original envelope in which it was mailed. While Plaintiff testified that P-2 was sent to her brother's home, this testimony is contradicted by Talmadge and Exhibit P-9 itself, which indicates that the Dryden Letter was sent to Plaintiff's residence, 5930 Spruce St. The envelope is addressed only to "Mr. Tippett." Talmadge testified that someone forwarded P-2 and P-9 to him, though the identity of that person is unclear.
Attached is the deed you signed off on. At the time in which you signed, you did not have deed notarized in the presence of you signing. This must be notarized in order to be properly recorded. Please contact a Notary Public and have them notarize this document and send directly back to me with the UPS envelope that I have provided.
Exhibit P-2. The letter is undated and signed, "Heather Williford, Mortgage Dept." Id.
The attached deed (the "Dryden Deed") is undated and purports to convey the Property from both Talmadge and Plaintiff as Grantors, to Plaintiff alone as Grantee. The Dryden Deed bears signatures which purport to be those of Plaintiff and Talmadge, but which are denied by both as forgeries. The "premises" section of the Dryden Deed describes the Property, including the following prior conveyance:
The "Premises" is the portion of the standard form deed that extends from the beginning of the deed to the "habendum" (the portion beginning with the words "to have and to hold"). Black's Law Dictionary at 1180 (6th ed. 1990); Ladner, Conveyancing in Pennsylvania § 9.03 at 7 (4th ed. 1979).
Being the same premises which Talmadge Tippett conveyed to Talmadge Tippett and Hortense C. Tipett [ sic] by Deed dated ____ and recorded ____ in Deed Book ____ Page ____ in and for the County of Philadelphia, Commonwealth of Pennsylvania. Exhibit P-2 at 2. The blanks are not filled in, however, and no evidence was presented of a prior conveyance from Talmadge to Plaintiff and Talmadge jointly. My own independent review of public record databases finds no recording of such a conveyance. Both Plaintiff and Talmadge deny any conveyance since Talmadge's receipt of the Property from the City. The Dryden Deed is not notarized, though Talmadge testified that he received numerous phone calls from Dryden thereafter urging him to notarize the Dryden Deed.
The only conveyances of public record are from: (1) the City of Philadelphia to the Authority (recorded in Deed Book 301, Page 187); (2) the Authority to Talmadge (recorded in Deed Book 301, Page 196); and (3) Talmadge to Plaintiff (Document No. 50000497). Document number 50000497 matches the document number on the sticker pasted to each page of the Talmadge-Plaintiff Deed (Exhibit P-6). Westlaw.com, Real Property Tax Assessor and Transaction Records — Pennsylvania. Judicial notice of public filings is appropriate under Federal Rule of Evidence 201(b)(2).See Oran v. Stafford, 226 F.3d 275, 289 (3d Cir. 2000).
No testimony from Dryden was proffered. Aside from Plaintiff's testimony that Dryden contacted her after the Loan to inform her when Yusuf would be starting work, she did not identify Dryden or what role it played with respect to the Property. Plaintiff's testimony as to the Dryden Letter and Deed was limited to acknowledging receipt by her brother and denying the authenticity of her signature on the Dryden Deed. Talmadge believed that Exhibit P-2 was related to the Plaintiff's contract with Yusuf and would not sign the Dryden Deed because he was unhappy with the way work was proceeding on the Property. While the testimony of Plaintiff and Talmadge therefore implies that the Dryden Letter and Deed are somehow related to the Yusuf contract and/or the Loan, there is no clear statement to this effect or other evidence to support such a finding.
Though it was not called to the Court's attention by either party, I note that "Dryden Abstract" is listed as the party to contact on the "Philadelphia Real Estate Transfer Tax Certification" that is attached to the Talmadge-Plaintiff Deed. Exhibit P-6. In addition, the Mortgage bears an incomplete stamp of what appears to be a title company, the legible portion of which matches Dryden's address on the Dryden Letter. Exhibits P-7 and P-2, P-9. My initial conclusion was that Dryden was therefor the title company for both transaction. However, the title company of record for both transactions is Lawyers Title Insurance Corporation. Westlaw.com, Real Property Tax Assessor and Transaction Records — Pennsylvania. Absent any testimony or evidence on this issue, Dryden's role remains shrouded in ambiguity.
Both Plaintiff and Talmadge testified that Yusuf did not finish the work for which he was contracted and paid. The rehabilitation of the Property was never completed, and the Property remains uninhabitable today. EMC has filed a proof of claim based upon the Loan, asserting a secured claim in the amount of $97,492.16. Plaintiff has not disputed the accuracy of this amount.
Both sides presented testimony as to the value of the Property. EMC presented valuation testimony by expert witness Robert Ludwig ("Ludwig"), whose qualifications were conceded by Plaintiff. Ludwig credibly testified that the Property is worth approximately $41,000 in its current condition. While Talmadge testified to his opinion that the Property was worth approximately $2,000, to the limited extent it was supported, relied on an obsolete appraisal. DISCUSSION
This figure is based upon his June 9, 2004 inspection of the Property, after which Ludwig originally opined that the Property had a value of $45,000. He did not take into account the semi-detached garage in the rear of the Property, to which he did not have access during his inspection. Upon reviewing the photographs entered into evidence by Plaintiff, Ludwig opined that the garage was in such poor condition as to require demolition, reducing the value by the cost of doing so, i.e., approximately $4,000.
Talmadge testified to an alleged appraisal when he first obtained the Property from the City. Unlike Ludwig's appraisal, which is a fair market value based upon similar properties in that specific market and taking into account the current condition of the Property, no explanation was provided by Talmadge as to the basis of his appraisal. In any case, Talmadge's appraisal is based on the condition of the Property prior to, and therefore failing to take into account, the improvements that have been made to the Property.
I.
In this adversary action, Plaintiff asserts that the Talmadge-Plaintiff Deed, having a forged signature, did not convey the Property to her. EMC concedes that if Plaintiff had no ownership interest in the Property at the Settlement Date, the Mortgage is therefore void. Plaintiff is correct that, under Pennsylvania law, a forged deed cannot convey an interest in real property. Bryant v. Woodland (In re Bryant), 103 B.R. 95, 101 (Bankr. E.D. Pa. 1989) ( citing Zimmer v. Zimmer, 326 A.2d 318 (Pa. 1974)). Plaintiff, however, has not addressed the significant evidentiary burdens which she must overcome to sustain the underlying premise that the signature on the Talmadge-Plaintiff Deed is forged.
The notary public's certificate attached to the Talmadge-Plaintiff Deed is prima facie evidence that Talmadge did in fact sign the Talmadge-Plaintiff Deed. Williamson v. Barrett, 24 A.2d 546, (Pa.Super. 1942). This prima facie evidence may be rebutted, but Pennsylvania law requires that forgery be proven by "clear and convincing evidence." Bryant, 103 B.R. at 101-02; Warehouse Builders and Supply, Inc. v. Perryman, 257 A.2d 349, 350 (1969). Pennsylvania law defines this heightened standard as follows:
As noted by my colleague, Judge Fox, state law is determinative of the issue of whether the deed has been forged. 103 B.R. at 102 n. 17. I apply Pennsylvania law. Supra n. 4.
The term "clear and convincing evidence," means that the witnesses must be found to be credible, that the facts to which they have testified are remembered distinctly and the details thereof narrated exactly and in due order, and that their testimony is so clear, direct, weighty, and convincing as to enable either a judge or jury to come to a clear conviction, without hesitancy, of the truth of the precise facts in issue.
Jones v. Prudential Property and Cas. Ins. Co., 856 A.2d 838, 844 (Pa.Super. 2004).
Plaintiff's assertion of forgery depends entirely upon Talmadge's self-serving testimony that the signature is not his. He has a clear incentive to be untruthful, namely having the Property revert back to him free and clear of the Mortgage. Moreover, he and Plaintiff testified that he intended to convey the Property to the Plaintiff. It is only logical that such a conveyance would have to occur before or at the time of Plaintiff taking the Loan — how else could she possibly encumber the Property with a mortgage? Yet both deny any conveyance occurred! Nor was supporting testimony presented from either a handwriting expert or a lay person familiar with Talmadge's signature. See 42 Pa. C.S.A. § 6111(a). Finally, as finder of fact, the final determination as to the genuineness of the signature is mine.Levy v. Lenenberg, 795 A.2d 419, 423 (Pa.Super. 2002) ( citing 42 Pa. C.S.A. § 6111(d)). As noted above, I find that Talmadge's signature on the Talmadge-Plaintiff Deed is substantially identical to his conceded exemplar (Exhibit P-1). Under these circumstances, I do not find Talmadge's testimony denying the authenticity of his signature on the Talmadge-Plaintiff Deed to meet the clear and convincing evidentiary standard.
This provision states: "The opinions of the witnesses to handwriting being submitted as competent testimony to the jury, the final determination as to whether any particular handwriting is genuine or simulated shall remain, as heretofore, a question for the jury on all the evidence submitted." Id.
Plaintiff was not questioned at all about the Talmadge-Plaintiff Deed. She admits that she believed she was the owner of the Property when she took the Loan. There must be a basis for such a belief, and the only evidence on this record which could support that belief is the Talmadge-Plaintiff Deed. Moreover, Plaintiff's actions during the relevant time period speak much more convincingly than her words at trial. Subsequent to Talmadge's execution of the Talmadge-Plaintiff Deed, Plaintiff acted as though she owned the Property. She hired a contractor, obtained the Loan, and encumbered the Property with the Mortgage. While she now asserts that Talmadge was and is the owner of the Property, she fails to explain the basis for her change of mind. Finally, I find her credibility impugned by her admitted and unexplained prior misrepresentation that her signature on the Mortgage was a forgery.
As to the Dryden Letter and Deed, they simply make no sense absent any evidence of a prior conveyance to Talmadge and Plaintiff jointly. Neither party called a witness from Dryden, which might have shed some light on why and with respect to what transaction these documents were sent to Plaintiff and her brother. Standing alone, these ambiguous documents provide no answers. Indeed, they raise new questions.
Plaintiff has fallen far short of the requisite clear and convincing evidence standard, that is evidence which is "so clear, direct, weighty, and convincing" as to enable me "to come to a clear conviction, without hesitancy," that Talmadge's signature on the Talmadge-Plaintiff Deed is a forgery. As forgery is the only basis she has asserted to invalidate the Mortgage, I will enter judgment against her on this claim.
Nothing in this opinion should be construed as a finding that Plaintiff holds valid title to the Property. That issue is not before me, and I make no such determination here.
II.
While Plaintiff's Complaint asserts that the disclosure statement provided to her under the Truth in Lending Act was incorrect, absolutely no evidence was presented on this issue. As such, I will enter judgment against her on this claim. Thus, the only issue remaining is Plaintiff's alternative request to bifurcate EMC's secured claim based upon the value of the Property. I address this below.
III.
The value of a secured claim is established by 11 U.S.C. § 506(a), "Determination of Secured Status," which states in relevant part:
An allowed claim of a creditor secured by a lien on property in which the estate has an interest, or that is subject to setoff under section 553 of this title, is a secured claim to the extent of the value of such creditor's interest in the estate's interest in such property, or to the extent of the amount subject to setoff, as the case may be, and is an unsecured claim to the extent that the value of such creditor's interest or the amount so subject to setoff is less than the amount of such allowed claim. Such value shall be determined in light of the purpose of the valuation and of the proposed disposition or use of such property, and in conjunction with any hearing on such disposition or use or on a plan affecting such creditor's interest.
Id. While the United States Supreme Court has noted that the "proposed disposition or use" of the Property is the paramount question in determining its value, Associates Commercial Corporation v. Rash, 520 U.S. 953, 962, 117 S.Ct. 1879, 1885 (1997), Plaintiff presented no evidence as her intentions toward the Property. Indeed, her position that Talmadge still owns the Property belies an intent to do anything with the Property.
The only competent evidence as to value was Ludwig's expert opinion that the Property has an "as-is" value of $41,000. While Talmadge testified to a value of $2,000, he failed to provide any reasonable basis for such a low value. As such, I find that the Property is worth $41,000. Thus, pursuant to § 506, EMC has a secured claim in the amount of $41,000 and an unsecured claim in the amount of $56,492.16.
CONCLUSION
The burden here was the Plaintiff's and she has failed to meet it. The evidence required to meet her primary goal of invalidating the Mortgage was wholly insufficient. The TILA claim never materialized beyond the allegations in the Complaint. Finally, Plaintiff presented no credible evidence to support a Property value of $2,000. To the extent that she achieved bifurcation at all, that is owed to the evidence presented by EMC and operation of 11 U.S.C. § 506.
An Order consistent with this Memorandum Opinion shall issue.
ORDER
AND NOW, this 28th day of October 2004, upon trial of the Complaint of (the "Plaintiff") and for the reasons stated in the accompanying Memorandum Opinion;
It is hereby ORDERED that Judgment is GRANTED IN PART in favor of the Plaintiff as follows: the secured claim of EMC Mortgage Corp is bifurcated into an allowed secured claim in the amount of $41,000 and an allowed unsecured claim in the amount of $56,492.16.