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Mississippi Appeals Court Reversal “Service of Process Fail, Default Judgment Void” | TURNER v. DEUTSCHE BANK

Mississippi Appeals Court Reversal “Service of Process Fail, Default Judgment Void” | TURNER v. DEUTSCHE BANK

3 We note that Turner’s argument that Deutsche Bank possessed unclean hands is an equitable defense to the merits of this lawsuit. This is an issue for the chancery court to consider on remand.





¶1. Deutsche Bank National Trust Company initiated a foreclosure action in the Warren County Chancery Court and attempted to serve Angela Turner by publication. But before doing so, it neither certified Turner was a non-resident of Mississippi nor alleged she could not be located in the state after a diligent inquiry. Because we find service of process did not strictly comply with the governing rules, we reverse the chancellor’s refusal to set aside the default judgment she entered on behalf of Deutsche Bank when Turner did not respond. We remand the case for further proceedings.


¶11. Although Deutsche Bank published a summons in the newspaper for three consecutive weeks and filed proof of the publication, Deutsche Bank did not comply with Rule 4(c)(4)(A). It is undisputed that Deutsche Bank never filed a sworn petition or affidavit attesting that Turner was a nonresident or could not be found in Mississippi after a diligent inquiry. Therefore, it follows that Deutsche Bank did not comply with any of the remaining requirements for information that must be included in the petition or affidavit.

¶12. “The rules on service of process are to be strictly construed. If they have not been complied with, the court is without jurisdiction unless the defendant appears of his own volition.” Kolikas v. Kolikas, 821 So. 2d 874, 878 (16) (Miss. Ct. App. 2002) (internal citation omitted). Actual notice does not cure defective process. See, e.g., Mosby v. Gandy, 375 So. 2d 1024, 1027 (Miss. 1979). “Even if a defendant is aware of a suit, the failure to comply with rules for the service of process, coupled with the failure of the defendant voluntarily to appear, prevents a judgment from being entered against him.” Sanghi, 759 So. 2d at 1257 (33).


¶20. Because service of process in this case failed to comply with Rule 4(c), we find the default judgment entered against Turner is void. Caldwell, 533 So. 2d at 417-18 (finding judgment void for defective process by publication). Thus, the chancery court erred in refusing to set the void judgment aside under Rule 60(b). We reverse and remand for further proceedings in which Deutsche Bank will have the opportunity to serve Turner with process.3


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Benedict v. Ratner, 268 US 353 – Supreme Court 1925

Benedict v. Ratner, 268 US 353 – Supreme Court 1925

268 U.S. 353 (1925)


No. 11.

Supreme Court of United States.

Argued October 5, 1923. Decided May 25, 1925.


354*354 Mr. Selden Bacon, for petitioner.

Mr. Louis S. Posner, for respondent.

357*357 MR. JUSTICE BRANDEIS delivered the opinion of the Court.

The Hub Carpet Company was adjudicated bankrupt by the federal court for southern New York in involuntary proceedings commenced September 26, 1921. Benedict, who was appointed receiver and later trustee, collected the book accounts of the company. Ratner filed in that court a petition in equity praying that the amounts so collected be paid over to him. He claimed them under a writing given May 23, 1921 — four months and three days before the commencement of the bankruptcy proceedings. By it the company purported to assign to him, as collateral for certain loans, all accounts present and future. Those collected by the receiver were, so far as 358*358 appears, all accounts which had arisen after the date of the assignment, and were enumerated in the monthly list of accounts outstanding which was delivered to Ratner September 23. Benedict resisted the petition on the ground that the original assignment was void under the law of New York as a fraudulent conveyance; that, for this reason, the delivery of the September list of accounts was inoperative to perfect a lien in Ratner; and that it was a preference under the Bankruptcy Act. He also filed a cross-petition in which he asked that Ratner be ordered to pay to the estate the proceeds of certain collections which had been made by the company after September 17 and turned over to Ratner pursuant to his request made on that day. The company was then insolvent and Ratner had reason to believe it to be so. These accounts also had apparently been acquired by the company after qthe date of the original assignment.

The District Judge decided both petitions in Ratner’s favor. He ruled that the assignment executed in May was not fraudulent in law; that it created an equity in the future acquired accounts; that because of this equity, Ratner was entitled to retain, as against the bankrupt’s estate, the proceeds of the accounts which had been collected by the company in September and turned over to him; that by delivery of the list of the accounts outstanding on September 23, this equity in them had ripened into a perfect title to the remaining accounts; and that the title so perfected was good as against the supervening bankruptcy. Accordingly, the District Court ordered that, to the extent of the balance remaining unpaid on his loans, there be paid Ratner all collections made from accounts enumerated in any of the lists delivered to Ratner; and that the cross-petition of Benedict be denied. There was no finding of fraud in fact. On appeal, the Circuit Court of Appeals affirmed the order. 282 Fed. 12. A writ of certiorari was granted by this Court. 259 U.S. 579.

359*359 The rights of the parties depend primarily upon the law of New York. Hiscock v. Varick Bank of N.Y., 206 U.S. 28. It may be assumed that, unless the arrangement of May 23 was void because fraudulent in law, the original assignment of the future acquired accounts became operative under the state law, both as to those paid over to Ratner before the bankruptcy proceedings and as to those collected by the receiver;[1] and that the assignment will be deemed to have taken effect as of May 23. Sexton v. Kessler, 225 U.S. 90, 99. That being so, it is clear that, if the original assignment was a valid one under the law of New York, the Bankruptcy Act did not invalidate the subsequent dealings of the parties. Thompson v. Fairbanks, 196 U.S. 516; Humphrey v. Tatman, 198 U.S. 91. The sole question for decision is, therefore, whether on the following undisputed facts the assignment of May 23 was in law fraudulent.

The Hub Carpet Company was, on May 23, a mercantile concern doing business in New York City and proposing to continue to do so. The assignment was made there to secure an existing loan of $15,000, and further advances not exceeding $15,000 which were in fact made July 1, 1921. It included all accounts receivable then outstanding and all which should thereafter accrue in the ordinary course of business. A list of the existing accounts was delivered at the time. Similar lists were to be delivered to Ratner on or about the 23d day of each succeeding month containing the accounts outstanding at such future dates. Those enumerated in each of the lists delivered prior to September, aggregated between $100,000 and $120,000. The receivables were to be collected by the company. Ratner was given the right, at any time, to 360*360 demand a full disclosure of the business and financial conditions; to require that all amounts collected be applied in payment of his loans; and to enforce the assignment although no loan had matured. But until he did so, the company was not required to apply any of the collections to the repayment of Ratner’s loan. It was not required to replace accounts collected by other collateral of equal value. It was not required to account in any way to Ratner. It was at liberty to use the proceeds of all accounts collected as it might see fit. The existence of the assignment was to kept secret. The business was to be conducted as theretofore. Indebtedness was to be incurred, as usual, for the purchase of merchandise and otherwise in the ordinary course of business. The amount of such indebtedness unpaid at the time of the commencement of the bankruptcy proceedings was large. Prior to September 17, the company collected from accounts so assigned about $150,000, all of which it applied to purposes other than the payment of Ratner’s loan. The outstanding accounts enumerated in the list delivered September 23 aggregated $90,000.

Under the law of New York a transfer of property as security which reserves to the transferor the right to dispose of the same, or to apply the proceeds thereof, for his own uses is, as to creditors, fraudulent in law and void.[2] 361*361 This is true whether the right of disposition for the transferor’s use be reserved in the instrument[3] or by agreement in pais,[4] whether the right of disposition reserved by unlimited in time[5] or be expressly terminable by the happening of an event;[6] whether the transfer cover all the property of the Debtor[7] or only a part;[8] whether the right of disposition extends to all the property transferred[9] or only to a part thereof;[10] and whether the instrument of transfer be recorded or not.[11] oral or written;

If this rule applies to the assignment of book accounts, the arrangement of May 23 was clearly void; and the equity in the future acquired accounts, which it would otherwise have created,[12] did not arise. Whether the rule applies to accounts does not appear to have been passed upon by the Court of Appeals of New York. But it would seem clear that whether the collateral consist of chattels 362*362 or of accounts, reservation of dominion inconsistent with the effective disposition of title must render the transaction void. Ratner asserts that the rule stated above rests upon ostensible ownership, and argues that the doctrine of ostensible ownership is not applicable to book accounts. That doctrine raises a presumption of fraud where chattels are mortgaged (or sold) and possession of the property is not delivered to the mortgagee (or vendee).[13] The presumption may be avoided by recording the mortgage (or sale). It may be assumed, as Ratner contends, that the doctrine does not apply to the assignment of accounts. In their transfer there is nothing which corresponds to the delivery of possession of chattels. The statutes which embody the doctrine and provide for recording as a substitute for delivery do not include accounts. A title to an account good against creditors may be transferred without notice to the debtor[14] or record of any kind.[15] But it is 363*363 not true that the rule stated above and invoked by the receiver is either based upon or delimited by the doctrine of ostensible ownership. It rests not upon seeming ownership because of possession retained, but upon a lack of ownership because of dominion reserved. It does not raise a presumption of fraud. It imputes fraud conclusively because of the reservation of dominion inconsistent with the effective disposition of title and creation of a lien.

The nature of the rule is made clear by its limitations. Where the mortgagor of chattels agrees to apply the proceeds of their sale to the payment of the mortgage debt or to the purchase of other chattels which shall become subject to the lien, the mortgage is good as against creditors, if recorded.[16] The mortgage is sustained in such cases “upon the ground that such sale and application of proceeds is the normal and proper purpose of a chattel mortgage, and within the precise boundaries of its lawful operation and effect. It does no more than to substitute the mortgage as the agent of the mortgagee to do exactly what the latter had the right to do, and what it was his privilege and his duty to accomplish. It devotes, as it should, the mortgaged property to the payment of the mortgage debt.” The permission to use the proceeds to furnish substitute collateral “provides only for a shifting of the lien from one piece of property to another taken in exchange.” Brackett v. Harvey, 91 N.Y. 214, 221, 223. 364*364 On the other hand, if the agreement is that the mortgagor may sell and use the proceeds for his own benefit, the mortgage is of no effect although recorded. Seeming ownership exists in both classes of cases because the mortgagor is permitted to remain in possession of the stock in trade and to sell it freely. But it is only where the unrestricted dominion over the proceeds is reserved to the mortgagor that the mortgage is void. This dominion is the differentiating and deciding element. The distinction was recognized in Sexton v. Kessler, 225 U.S. 90, 98, where a transfer of securities was sustained.[17] It was pointed out that a reservation of full control by the mortgagor might well prevent the effective creation of a lien in the mortgagee and that the New York cases holding such a mortgage void rest upon that doctrine.

The results which flow from reserving dominion inconsistent with the effective disposition of title must be the same whatever the nature of the property transferred. The doctrine which imputes fraud where full dominion is reserved must apply to assignments of accounts although the doctrine of ostensible ownership does not. There must also be the same distinction as to degrees of dominion. Thus, although an agreement that the assignor of accounts shall collect them and pay the proceeds to the assignee will not invalidate the assignment which it accompanies,[18] the assignment must be deemed fraudulent in law if it is agreed that the assignor may use the proceeds as he sees fit.

In the case at bar, the arrangement for the unfettered use by the company of the proceeds of the accounts precluded 365*365 the effective creation of a lien[19] and rendered the original assignment fraudulent in law. Consequently the payments to Ratner and the delivery of the September list of accounts were inoperative to perfect a lien in him, and were unlawful preferences.[20] On this ground, and also because the payment was fraudulent under the law of the State, the trustee was entitled to recover the amount.[21]

Stackhouse v. Holden, 66 App. Div. 423, is relied upon by Ratner to establish the proposition that reservation of dominion does not invalidate an assignment of accounts. The decision was by an intermediate appellate court, and, although decided in 1901, appears never to have been cited since in any court of that State.[22] There was a strong dissenting opinion. Moreover, the case is perhaps distinguishable on its facts, p. 426. Greey v. Dockendorff, 231 U.S. 513, upon which Ratner also relies, has no bearing on the case at bar. It involved assignment of accounts, but there was no retention of dominion by the bankrupt. The sole question was whether successive assignments of accounts by way of security, made in pursuance of a contract, were had because the contract embraced all the accounts. The lien acquired before knowledge by either party of insolvency was held good against the trustee.


[1] Williams v. Ingersoll, 89 N.Y. 508, 518-520; Coats v. Donnell, 94 N.Y. 168, 177. See Rochester Distilling Co. v. Rasey, 142 N.Y. 570, 580; MacDowell v. Buffalo Loan, etc. Co., 193 N.Y. 92, 104. Compare New York Security & Trust Co. v. Saratoga Gas, etc. Co., 159 N.Y. 137; Zartman v. First National Bank, 189 N.Y. 267.

[2] Griswold v. Sheldon, 4 N.Y. 580; Edgell v. Hart, 9 N.Y. 213; Russell v. Winne, 37 N.Y. 591; Southard v. Benner, 72 N.Y. 424; Potts v. Hart, 99 N.Y. 168; Hangen v. Hachemeister, 114 N.Y. 566; Mandeville v. Avery, 124 N.Y. 376; Skilton v. Codington, 185 N.Y. 80; Zartman v. First National Bank, 189 N.Y. 267; In re Marine Construction & Dry Docks Co., 135 Fed. 921, 144 Fed. 649; In re Davis, 155 Fed. 671; In re Hartman, 185 Fed. 196; In re Volence, 197 Fed. 232; In re Purtell, 215 Fed. 191; In re Leslie-Judge Co., 272 Fed. 886. Compare Frost v. Warren, 42 N.Y. 204; also Lukins v. Aird, 6 Wall. 78; Robinson v. Elliot, 22 Wall. 513; Smith v. Craft, 123 U.S. 436; Means v. Dowd, 128 U.S. 273; Etheridge v. Sperry, 139 U.S. 266; Huntley v. Kingman, 152 U.S. 527; Knapp v. Milwaukee Trust Co., 216 U.S. 545.

[3] Edgell v. Hart, 9 N.Y. 213, 216; Zartman v. First National Bank, 189 N.Y. 267, 270.

[4] Russell v. Wynne, 37 N.Y. 591, 595; Southard v. Benner, 72 N.Y. 424, 432; Potts v. Hart, 99 N.Y. 168, 172-173.

[5] Southard v. Benner, 72 N.Y. 424, 430; Potts v. Hart, 99 N.Y. 168, 172.

[6] Zartman v. First National Bank, 189 N.Y. 267, 270.

[7] Zartman v. First National Bank, 189 N.Y. 267, 269.

[8] Russell v. Winne, 37 N.Y. 591; Southard v. Benner, 72 N.Y. 424.

[9] Potts v. Hart, 99 N.Y. 168, 172.

[10] Russell v. Winne, 37 N.Y. 591, 593; In re Leslie-Judge Co., 272 Fed. 886, 888.

[11] Potts v. Hart, 99 N.Y. 168, 171. N.Y. Personal Property Law, § 45; Laws, 1911, c. 626, authorizes the creation of a general lien or floating charge upon a stock of merchandise, including after-acquired chattels, and upon accounts receivable resulting from the sale of such merchandise. It provides that this lien or charge shall be valid against creditors provided certain formalities are observed and detailed filing provisions are complied with. It is possible that, if its conditions are performed, the section does away with the rule “that retention of possession by the mortgagor with power of sale for his own benefit is fraudulent as to creditors.”

[12] Field v. Mayor, etc. of New York, 6 N.Y. 179.

[13] Smith v. Acker, 23 Wend. 653; Griswold v. Sheldon, 4 N.Y. 580, 590; Edgell v. Hart, 9 N.Y. 213, 218; Conkling v. Shelley, 28 N.Y. 360. The statutes to this effect merely embody the commonlaw rule. But, in New York, an additional statute provides that unrecorded chattel mortgages under such circumstances are absolutely void as to creditors. New York Lien Law, § 230; Laws, 1909, c. 38, § 230, as amended 1911, c. 326, and 1916, c. 348, See Seidenbach v. Riley, 111 N.Y. 560; Karst v. Kane, 136 N.Y. 316; Stephens v. Perrine, 143 N.Y. 476; Russell v. St. Mart, 180 N.Y. 355. See Stewart v. Platt, 101 U.S. 731, 735. Compare Preston v. Southwick, 115 N.Y. 139; Nash v. Ely, 19 Wend. (N.Y.) 523; Goodwin v. Kelly, 42 Barb. (N.Y.) 194. In the case of a transfer of personal property by sale, retention of possession creates a rebuttable presumption of fraud. See Kimball v. Cash, 176 N.Y. Supp. 541; also New York Ice Co. v. Cousins, 23 App. Div. 560; Rheinfeldt v. Dahlman, 43 N.Y. Supp. 281; Tuttle v. Hayes, 107 N.Y. Supp. 22; Young v. Wedderspoon, 126 N.Y. Supp. 375; Sherry v. Janov, 137 N.Y. Supp. 792; Gisnet v. Moeckel, 165 N.Y. Supp. 82. In order to create a valid pledge of tangible personalty, there must be a delivery to the pledgee. In re P.J. Sullivan Co., 247 Fed. 139, 254 Fed. 660.

[14] Williams v. Ingersoll, 89 N.Y. 508, 522.

[15] Niles v. Mathusa, 162 N.Y. 546; National Hudson River Bank v. Chaskin, 28 App. Div. 311, 315; Curtis v. Leavitt, 17 Barb. (N.Y.) 309, 364; Young v. Upson, 115 Fed. 192. In 1916, Section 230 of the New York Lien Law was amended to the effect that a mortgage, pledge, or lien on stocks or bonds given to secure the repayment of a loan is, if not recorded, absolutely void against creditors unless such securities are delivered to the mortgagee or pledgee on the day the loan is made. See N.Y. Laws, 1916, c. 348.

[16] Conkling v. Shelley, 28 N.Y. 360; Brackett v. Harvey, 91 N.Y. 214; Spaulding v. Keyes, 125 N.Y. 113; Briggs v. Gelm, 122 App. Div. 102. See Robinson v. Elliot, 22 Wall. 513, 524; People’s Savings Bank v. Bates, 120 U.S. 556, 561.

[17] See note 18, infra.

[18] Young v. Upson, 115 Fed. 192. If it is agreed that the transferor may use the original collateral for his own purposes upon the substitution of other of equal value, the transfer is not thereby invalidated. Clark v. Iselin, 21 Wall. 360 (book accounts); Sexton v. Kessler, 225 U.S. 90 (negotiable securities); Chapman v. Hunt, 254 Fed. 768 (book accounts). Compare Casey v. Cavaroc, 96 U.S. 467.

[19] Compare Mechanics’ Bank v. Ernst, 231 U.S. 60, 67.

[20] Schaupp v. Miller, 206 Fed. 575; Grimes v. Clark, 234 Fed. 604; Gray v. Breslof, 273 Fed. 526, 527.

[21] Mandeville v. Avery, 124 N.Y. 376, 382; Stimson v. Wrigley, 86 N.Y. 332, 338; Dutcher v. Swartwood, 15 Hun (N.Y.) 31.

[22] It was cited in Young v. Upson, 115 Fed. 192 (Circ. Ct.); In re Michigan Furniture Co., 249 Fed. 978 (D. Ct.); and in the opinion here under review.

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DailyFinance | COURT: Busted Securitization Prevents Foreclosure

DailyFinance | COURT: Busted Securitization Prevents Foreclosure

On March 30, an Alabama judge issued a short, conclusory order that stopped foreclosure on the home of a beleaguered family, and also prevents the same bank in the case from trying to foreclose against that couple, ever again. This may not seem like big news — but upon review of the underlying documents, the extraordinarily important nature of the decision and the case becomes obvious.

No Securitization, No Foreclosure

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Ka-B°oO°M!!! Alabama Judge Denies Securitization Trustee Standing To Foreclose HORACE v. LaSALLE BANK NA

Ka-B°oO°M!!! Alabama Judge Denies Securitization Trustee Standing To Foreclose HORACE v. LaSALLE BANK NA

Attorney Nick Wooten does it again and again!






Following hearing and review of all submissions from the parties the Court has come to two conclusions necessary for the disposition of this case:

First, the Court is surprised to the point of astonishment that the defendant trust (LaSalle Bank National Association) did not comply with the terms of it’s own Pooling and Servicing Agreement and further did not comply with the New York Law in attempting to obtain assignment of plaintiff Horac’s note and mortgage.

Second, the plaintiff Horace is a third party beneficiary of the Pooling and Servicing Agreement created by the defendant trust (Lasalle Bank National Association). Indeed without such Pooling and Servicing Agreements, plaintiff Horace and other mortgages similarly situated would never have been able to obtain financing.


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GA SUPREME COURT Rejects Bank’s Definition of “Duly Filed, Recorded, and Indexed” U.S. Bank v. GORDON

GA SUPREME COURT Rejects Bank’s Definition of “Duly Filed, Recorded, and Indexed” U.S. Bank v. GORDON


Supreme Court of Georgia.

Decided: March 25, 2011.

NAHMIAS, Justice.

The United States District Court for the North District of Georgia has certified a question to this Court regarding the 1995 Amendment to OCGA § 441-4-33. See Ga. L. 1995, p. 1076, § 1. The question is whether the 1995 Amendment

means that, in the absence of fraud, a security deed that is actually filed and recorded, and accurately indexed, on the appropriate county land records provides constructive notice to subsequent bona fide purchasers, where the security deed contains the grantor’s signature but lacks both an official and unofficial attestation (i.e., lacks attestation by a notary public and also an unofficial witness).

For the reasons that follow, we answer the certified question in the negative.

1. In October 2005, Bertha Hagler refinanced her residence through the predecessor-in-interest to U.S. Bank National Association (U.S. Bank) and granted the predecessor a first and a second security deed to her residence. The security deeds were recorded with the Clerk of the Fulton County Superior Court in November 2005, but the first security deed was not attested or acknowledged by an official or unofficial witness. According to the district court’s certification order:

Gordon, the Chapter 7 Trustee in Hagler’s bankruptcy case, sought to avoid or set aside the valid, but unattested, first security deed to the residence through the “strong-arm” power of Section 544 (a) (3) of the Bankruptcy Code. See 11 U.S.C. § 544 (a) (3). Gordon argued that under the proper interpretation of § 44-14-33 of the Georgia Code, a security deed that is not attested by an official and unofficial witness cannot provide constructive notice to a subsequent purchaser even if it is recorded. U.S. Bank argued, in opposition, that a 1995 amendment to § 44-14-33 changed the law to enable an unattested security deed to provide constructive notice. Gordon argued in response that the 1995 amendment served only to recognize constructive notice from a security deed with a “latently” defective attestation, meaning an irregular attestation that appears regular on its face; a deed with a “patently” defective attestation, meaning an attestation that is obviously defective on its face, would not provide constructive notice.

The bankruptcy court ruled in Gordon’s favor, concluding that, under the 1995 Amendment, a security deed with a facially defective attestation would not provide constructive notice, while a security deed with a facially proper but latently defective attestation would provide constructive notice. See Gordon v. U.S. Bank Natl. Assn. (In re Hagler), 429 BR 42, 47-53 (Bankr. N.D. Ga. 2009). Concluding that the issue involved an unclear question of Georgia law and that no Georgia court had addressed the issue after the 1995 Amendment, the district court certified the question to this Court. We conclude that the bankruptcy court properly resolved the issue.

2. OCGA § 44-14-61 provides that “[i]n order to admit deeds to secure debt . . . to record, they shall be attested or proved in the manner prescribed by law for mortgages.” OCGA § 44-14-33 provides the law for attesting mortgages:

In order to admit a mortgage to record, it must be attested by or acknowledged before an officer as prescribed for the attestation or acknowledgment of deeds of bargain and sale; and, in the case of real property, a mortgage must also be attested or acknowledged by one additional witness. In the absence of fraud, if a mortgage is duly filed, recorded, and indexed on the appropriate county land records, such recordation shall be deemed constructive notice to subsequent bona fide purchasers.

The second sentence of this Code section was added by the 1995 Amendment.

3. We first address Gordon’s contention that the 1995 Amendment does not apply at all to security deeds. He contends that only the first sentence of § 44-14-33, which expressly deals with attestation, is applicable to security deeds through § 44-14-61 and that, because the 1995 Amendment addresses constructive notice, it does not apply to security deeds. We disagree. The General Assembly chose to enact the 1995 Amendment not as a freestanding Code provision but as an addition to a Code provision clearly referenced by § 44-14-61. Moreover, “[t]he objects of a mortgage and security deed . . . under the provisions of the Code are identical — security for a debt. While recognizing the technical difference between a mortgage and security deed hereinbefore pointed out, this court has treated deeds to secure debts . . . as equitable mortgages.” Merchants & Mechanics’ Bank v. Beard, 162 Ga. 446, 449 (134 SE 107)Fair v. State, 288 Ga. 244, 252 (702 SE2d 420) (2010), so the placement of the amendment makes complete sense. Indeed, no reason has been suggested why the General Assembly would want the same type of recording to provide constructive notice for mortgages but not for security deeds. Accordingly, we conclude that the 1995 Amendment is applicable to security deeds. (1926). The General Assembly is presumed to have been aware of the existing state of the law when it enacted the 1995 Amendment, see

4. Turning back to the certified question, we note that the “recordation” that is deemed to provide constructive notice to subsequent purchasers clearly refers back to “duly filed, recorded, and indexed” deeds. U.S. Bank argues that a “dulyin fact filed, recorded, and indexed, even if unattested by an officer or a witness. We disagree. filed, recorded, and indexed” deed is simply one that is

Particular words of statutes are not interpreted in isolation; instead, courts must construe a statute to give “`”sensible and intelligent effect” to all of its provisions,'” Footstar, Inc. v. Liberty Mut. Ins. Co., 281 Ga. 448, 450 (637 SE2d 692)State v. Bowen, 274 Ga. 1, 3 (547 SE2d 286) (2001). In particular, “statutes `in pari materia,’ i.e., statutes relating to the same subject matter, must be construed together.” Willis v. City of Atlanta, 285 Ga. 775, 776 (684 SE2d 271) (2009). (2006) (citation omitted), and “must consider the statute in relation to other statutes of which it is part.”

Construing the 1995 Amendment in harmony with other recording statutes and longstanding case law, we must reject U.S. Bank’s definition of “duly filed, recorded, and indexed.” Its definition ignores the first sentence of § 44-14-33, which provides that to admit a security deed to record, the deed must be attested by or acknowledged before an officer, such as a notary public, and, in the case of real property, by a second witness. See OCGA § 44-2-15 (listing the “officers” who are authorized to attest a mortgage or deed). Other statutes governing deeds and mortgages similarly preclude recording and constructive notice if certain requirements are not satisfied. See OCGA § 44-2-14 (“Before any deed to realty or personalty or any mortgage, bond for title, or other recordable instrument executed in this state may be recorded, it must be attested or acknowledged as provided by law.”); OCGA § 44-14-61 (“In order to admit deeds to secure debt or bills of sale to record, they shall be attested or proved in the manner prescribed by law for mortgages”). Indeed, U.S. Banks’ construction of the 1995 Amendment contradicts OCGA § 44-14-39, which provides that “[a] mortgage which is recorded . . . without due attestation . . . shall not be held to be notice to subsequent bona fide purchasers.”

Thus, the first sentence of § 44-14-33 and the statutory recording scheme indicate that the word “duly” in the second sentence of § 44-14-33 should be understood to mean that a security deed is “duly filed, recorded, and indexed” only if the clerk responsible for recording determines, from the face of the document, that it is in the proper form for recording, meaning that it is attested or acknowledged by a proper officer and (in the case of real property) an additional witness. This construction of the 1995 Amendment is also consistent with this Court’s longstanding case law, which holds that a security deed which appears on its face to be properly attested should be admitted to record, see Thomas v. Hudson, 190 Ga. 622, 626 (10 SE2d 396) (1940); Glover v. Cox, 137 Ga. 684, 691-694 (73 SE 1068) (1912), but that a deed that shows on its face that it was “not properly attested or acknowledged, as required by statute, is ineligible for recording.” Higdon v. Gates, 238 Ga. 105, 107 (231 SE2d 345) (1976).

We note that at the time the 1995 Amendment was considered and enacted, the appellate courts of this State had “never squarely considered” whether a security deed with a facially valid attestation could provide constructive notice where the attestation contained a latent defect, like the officer or witness not observing the grantor signing the deed. Leeds Bldg. Prods. v. Sears Mortg. Corp., 267 Ga. 300, 301 (477 SE2d 565) (1996). The timing of the amendment suggests that the General Assembly was attempting to fill this gap in our law as the Leeds litigation worked its way through the trial court and the Court of Appeals before our decision in 1996. See Gordon, 429 BR at 50. We ultimately decided in Leeds that, “in the absence of fraud, a deed which, on its face, complies with all statutory requirements is entitled to be recorded, and once accepted and filed with the clerk of court for record, provides constructive notice to the world of its existence.” 267 Ga. at 302. We noted that Higdon remained good law, because in that case the deed was facially invalid, did “not entitle [the deed] to record,” and “did not constitute constructive notice to subsequent purchasers.” Leeds, 267 Ga. at 302. Because we reached the same result as under the 1995 Amendment, we did not have to consider whether the amendment should be applied retroactively to that case. See id. at 300 n.1.

Our interpretation of the 1995 Amendment also is supported by commentators that have considered the issue. See Frank S. Alexander, Georgia Real Estate Finance and Foreclosure Law, § 8-10, p. 138 (4th ed. 2004) (stating that “[a] security deed that is defective as to attestation, but without facial defects, provides constructive notice to subsequent bona fide purchasers”); Daniel F. Hinkel, 2 Pindar’s Georgia Real Estate Law and Procedure, § 20-18 (6th ed. 2011) (without mentioning deeds with facial defects, explaining that the 1995 Amendment to § 44-14-33 and Leeds “provide that in the absence of fraud a deed or mortgage, which on its face does not reveal any defect in the acknowledgment of the instrument and complies with all statutory requirements, is entitled to be recorded, and once accepted and filed with the clerk of the superior court for record, provides constructive notice to subsequent bona fide purchasers”); T. Daniel Brannan & William J. Sheppard, Real Estate, 49 Mercer L. Rev. 257, 263 (Fall 1997) (without mentioning deeds with facial defects, stating that the 1995 Amendment to § 44-14-33 resolves “the issue that was before the court in [Leeds]”). As noted by the bankruptcy court, if Hinkel and the law review authors thought that the 1995 Amendment altered longstanding law with regard to deeds containing facial defects as to attestation, they surely would have said so. See Gordon, 429 BR at 52-53.

Finally, it should be recognized that U.S. Bank’s interpretation of the 1995 Amendment to § 44-14-33 “would relieve lenders of any obligation to present properly attested security deeds” and “would tell clerks that the directive to admit only attested deeds is merely a suggestion, not a duty,” and this would risk an increase in fraud because deeds no longer would require an attestation by a public officer who is sworn to verify certain information on the deeds before they are recorded and deemed to put all subsequent purchasers on notice. Gordon, 429 BR at 51-52. Moreover, while “it costs nothing and requires no special expertise or effort for a closing attorney, or a lender, or a title insurance company to examine the signature page of a deed for missing signatures before it is filed,” U.S. Bank’s construction would “shift to the subsequent bona fide purchaser and everyone else the burden of determining [possibly decades after the fact] the genuineness of the grantor’s signature and therefore the cost of investigating and perhaps litigating whether or not an unattested deed was in fact signed by the grantor.” Id. at 52.

For these reasons, we answer the certified question in the negative.

Certified question answered. All the Justices concur.

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IOWA Appeals Court Declares RE Mortgage VOID Under IA Code Sec. 561.13 CITIMORTGAGE, INC. v. Danielson

IOWA Appeals Court Declares RE Mortgage VOID Under IA Code Sec. 561.13 CITIMORTGAGE, INC. v. Danielson

Read about this more HERE. Thanks for the Tip

CITIMORTGAGE, INC., Plaintiff-Appellant,



No. 9-194/08-1473

Court of Appeals of Iowa.

Filed May 29, 2009.

Mollie Pawlosky and Jon P. Sullivan of Dickinson, Mackaman, Tyler & Hagen, P.C., Des Moines; Theodore R. Boecker of Petosa, Petosa & Boecker, L.L.P., Clive; and Thomas J. Miller, Attorney General, and Grant Dugdale, Assistant Attorney General, for appellant.

Jerrold Wanek of Garten & Wanek, Des Moines, for appellee.

Heard by Vaitheswaran, P.J., and Potterfield and Doyle, JJ.


Citimortgage, Inc. appeals from a district court ruling declaring the real estate mortgage it held on property owned by Matthew Danielson to be void under Iowa Code section 561.13 (2007). We affirm the judgment of the district court.

I. Background Facts and Proceedings.

In late April 2007, Matthew Danielson entered into an agreement to purchase a newly constructed home in Ankeny for $320,228. Matthew and his wife, Jamie, met with their real estate agent, the builder, and the builder’s real estate agent on several occasions and walked through the home together multiple times before deciding to purchase it. The purchase agreement was contingent upon Matthew obtaining financing for one hundred percent of the purchase price at or below seven percent interest. A closing date of May 10, 2007, was set.

Because Jamie’s credit was poor, Matthew decided to apply for a loan on his own. He contacted mortgage broker Jason Larson, who was employed by One Source Mortgage, Inc., for assistance in securing a loan. Matthew knew Larson because their children attended the same daycare. Larson arranged for Matthew to obtain a loan through Citimortgage and retained attorney David Pulliam to act as the closing agent. In anticipation of the closing, an attorney for the builder’s real estate agent prepared a warranty deed conveying title in the property to Matthew as “a married person.” The deed was later changed by someone else to refer to Matthew as “an unmarried person.”

The closing date was pushed back several times. Finally, on May 24, 2007, Larson called Matthew and asked him to meet in “about 45 to 50 minutes” at a food court in a shopping mall for the closing. Matthew asked Larson if his wife needed to be present. Larson said no. Matthew attempted to call Jamie anyway because she handled the couple’s finances and was employed as a loan originator for a mortgage banker. He was unable to reach Jamie and attended the closing alone with Larson.[1]

At the closing, which Matthew described as “rushed,” Larson had Matthew sign a large packet of documents. Included in that packet were two uniform residential loan applications. One application appears to have been generated by One Source Mortgage while the other was apparently generated by Citimortgage. Both loan applications identify Larson as the interviewer and indicate the application was taken by telephone. Matthew and Larson signed both applications at the closing on May 24, 2007.[2] The applications refer to Matthew as “unmarried” and as a “[s]ingle man.” Matthew also signed a promissory note in the amount of $320,228 at the May 24 closing. The note is payable to Citimortgage and secured by a purchase money mortgage on Matthew’s home. The mortgage, which contains a homestead exemption waiver clause, identifies the borrower as “Matthew D. Danielson, a single man.”

Matthew, Jamie, and their son have resided in the house since the closing. They failed, however, to make payments on the mortgage. Citimortgage consequently initiated foreclosure proceedings in December 2007 against Matthew. Matthew filed an answer and raised Citimortgage’s failure to secure Jamie’s signature on the mortgage as required by Iowa Code section 561.13 as an affirmative defense. Citimortgage amended its petition to add Jamie as a defendant. The Danielsons then filed a counterclaim to quiet title to the property, seeking an order from the court that Matthew’s mortgage with Citimortgage is void under section 561.13.

The district court denied summary judgment motions filed by Citimortgage and the Danielsons, and the matter proceeded to trial before the court. At the close of the evidence, the court ruled from the bench that the mortgage was void under section 561.13 and denied Citimortgage’s claim that Matthew fraudulently misrepresented his marital status. Citimortgage appeals.

II. Scope and Standards of Review.

“Review of an equitable claim to foreclose a mortgage is de novo.” Iowa State Bank & Trust Co. v. Michel, 683 N.W.2d 95, 98 (Iowa 2004). We give weight to the fact findings of the district court, especially when considering the credibility of witnesses, but are not bound by them. Iowa R. App. P. 6.14(6)(g).

III. Discussion.

“Homestead rights are jealously guarded by the law.” Michel, 683 N.W.2d at 101; see also Merchants Mut. Bonding Co. v. Underberg, 291 N.W.2d 19, 21 (Iowa 1980) (“Homestead laws are creatures of public policy, designed to promote the stability and welfare of the state by preserving a home where the family may be sheltered and live beyond the reach of economic misfortune.”). One way in which the legislature has sought to protect homesteads is through Iowa Code section 561.13, which invalidates encumbrances of the homestead not signed by both spouses “unless and until the spouse of the owner executes the same or a like instrument.” See Thayer v. Sherman, 218 Iowa 451, 458, 255 N.W. 506, 509 (1934) (“The provisions of this section are for the benefit of all who are interested in the homestead. It is designed as a protection to the wife, the children, and the husband himself.”). If section 561.13 is not satisfied, the transaction is invalid as to both the husband and the wife. See Martin v. Martin, 720 N.W.2d 732, 736 (Iowa 2006)Beal Bank v. Siems, 670 N.W.2d 119, 124 (Iowa 2003) (holding mortgage on homestead void because not signed by owner’s spouse as required by section 561.13). (finding deed attempting to convey a homestead invalid where it was not signed by the owner’s spouse);

Section 561.13 was not satisfied in this case because the mortgage encumbering the parties’ homestead was signed only by Matthew, who was married to Jamie at the time of the encumbrance. The mortgage is therefore invalid and void as to both Matthew and Jamie. See Martin, 720 N.W.2d at 738 (emphasizing section 561.13 makes a conveyance or encumbrance of the homestead “invalid—that is, void—without the signature of both spouses, not merely voidable by the spouse who did not sign”).

Citimortgage attempts to avoid the harsh effect of section 561.13 in this case by asserting Matthew procured the mortgage by fraudulently misrepresenting his marital status, which it contends should result in the imposition of an equitable mortgage. The district court denied this claim, finding there was “not one piece of evidence to indicate Mr. Danielson knowingly or with any intent to defraud gave false information to anyone throughout this transaction.” Citimortgage claims the district court erred in so concluding.[3] We do not agree.

Our supreme court has recognized in “other circumstances that `courts of equity are bound by statutes and follow the law in [the] absence of fraud or mistake.'” Michel, 683 N.W.2d at 107 (quoting Mensch v. Netty, 408 N.W.2d 383, 386 (Iowa 1987)). It is a well-settled principle of equity that misrepresentations amounting to fraud in the inducement of a contract, whether innocent or not, give rise to a right of avoidance on the part of the defrauded party. First Nat’l Bank v. Brown, 181 N.W.2d 178, 182 (Iowa 1970). Here, however, Citimortgage attempts to use the Danielsons’ supposed fraud in procuring their mortgage to enforce that mortgage rather than avoid it. In any event, to prevail on such a claim, Citimortgage must prove “(1) a representation, (2) falsity, (3) materiality, (4) an intent to induce the other to act or refrain from acting, and (5) justifiable reliance.” City of Ottumwa v. Poole, 687 N.W.2d 266, 269 (Iowa 2004). We believe this case fails on the last two elements.

The evidence presented at trial establishes, as the district court found, that “everyone involved who actually had a role in this actual transaction . . . knew that Mr. Danielson was married.” Matthew and Jamie toured the home together with their real estate agent, the builder, and the builder’s real estate agent before Matthew agreed to purchase it. They also met with those individuals on several other occasions to discuss matters related to the purchase of the home. The warranty deed prepared by the attorney for the builder’s real estate agent originally referred to Matthew as “a married person,” though someone later changed that deed to identify him as “an unmarried person.” Matthew, whom the district court found to be credible, see Iowa R. App. 6.14(6)(g) (stating we give weight to the district court’s credibility determinations in equity cases), testified that Larson “absolutely” knew he was married. He specifically asked Larson before the closing if his wife needed to be present, and Larson said no. Matthew nevertheless attempted to contact her on his way to the closing. In light of the foregoing, we do not believe the record reveals any intent on Matthew’s part to induce Citimortgage to act on the basis of the representations in the closing documents regarding his marital status.

Indeed, it appears Citimortgage approved Matthew for the loan before receiving a signed copy of his loan application. Matthew did not sign the loan applications prepared by Larson until the closing on May 24, 2007. Yet Citimortgage issued a commitment letter to Matthew on May 16 advising him that his application for a mortgage had been approved. No evidence was presented as to what information Citimortgage relied on in approving the loan to Matthew and preparing the mortgage that identified him as a “single man.” We cannot see how Citimortgage could have justifiably relied on the representations contained in the loan applications and the mortgage itself regarding Matthew’s marital status in agreeing to loan him $320,228 on May 16 when those documents were not executed until May 24. See Lockard v. Carson, 287 N.W.2d 871, 878 (Iowa 1980) (stating the recipient of a fraudulent representation cannot recover “if he blindly relies on a misrepresentation the falsity of which would be patent to him if he had utilized his opportunity to make a cursory examination or investigation”). Finally, even if we were to assume for the sake of argument that Matthew fraudulently induced Citimortgage to enter into the mortgage by representing that he was not married, there is no evidence present in the record from which we could conclude that Jamie had any part in that supposed fraud.

It is clear from our review of cases applying section 561.13 that the statute is intended to protect “the whole family unit.” Martin, 720 N.W.2d at 736, 739 (“If the statute is not satisfied, the deed is invalid as to both the husband and the wife.”); see also Beal Bank, 670 N.W.2d at 124 (voiding mortgage in favor of spouse whose signature was omitted); Hostetler v. Eddy, 128 Iowa 401, 406, 104 N.W. 485, 487 (1905) (holding contract not signed by wife “was void in favor of both husband and wife”). As we alluded to earlier, “[o]ur law has chosen to provide special procedures to protect homestead rights, and has defined this protection in a comprehensive manner.” Martin, 720 N.W.2d at 738.

[T]he purpose of the homestead laws is to provide a margin of safety to the family, not only for the benefit of the family, but for the public welfare and social benefit which accrues to the State by having families secure in their homes.

Id. (citation omitted). We therefore construe homestead laws “broadly and liberally” in favor of the beneficiaries of the legislation, which include “the wife, the children, and the husband himself,” Thayer, 218 Iowa at 458, 255 N.W. at 509,See Martin, 720 N.W.2d at 738. to secure its benevolent purposes.

While it may be tempting for courts to fashion remedies deemed to be fair and just under the particular circumstances of a case, “the law has defined those concepts and must dominate the decision making process.” Id. “[I]t is not for courts to overlook the language of a statute to reach a particular result deemed unjust under the particular circumstances of a case.” Id. “This rule protects the integrity of the legislature’s judgment that certain transactions will be given effect only if they comply with the requirements set out in the statute.” Michel, 683 N.W.2d at 107 (refusing to apply equitable mortgage where bank did not comply with the disclosure requirements of section 561.22 even though debtors knew they were mortgaging their homestead); see also Thayer, 218 Iowa at 458, 255 N.W. at 509 (“The homestead right is created by statute, and this can only be alienated in the manner provided by statute.”). We are thus bound to apply section 561.13 to invalidate the mortgage in this case as it did not contain the signatures of both spouses and Citimortgage did not establish any fraud on the part of either spouse in obtaining the mortgage. See Michel, 683 N.W.2d at 109 n.6 (“[A] creditor is bound by statutory requirements in the absence of fraud or mistake.”).[4]

IV. Conclusion.

We conclude the mortgage was entered into while Matthew was married, and his wife did not execute the same or a like instrument joining in the encumbrance. It was therefore void under Iowa Code section 561.13. Citimortgage has not established any fraud on the part of either spouse that would avoid the effect of section 561.13. We therefore affirm the judgment of the district court dismissing Citimortgage’s petition to foreclose its mortgage on the property and declaring that mortgage to be void under section 561.13.


[1] It appears Larson handled the closing himself. Pulliam testified that he had no recollection of the closing or Matthew. Matthew likewise testified that he had never met Pulliam prior to the trial and that Larson had conducted the closing on his own.

[2] Although Larson’s signature appears on both loan applications, Pulliam testified that he actually signed Larson’s name for him on the Citimortgage loan application as indicated by Pulliam’s initials that appear after Larson’s name.

[3] Citimortgage raises a variety of alternative theories on appeal seeking to preclude the application of section 561.13, including mutual mistake, equitable estoppel, and ratification. It additionally challenges the status of the property as a homestead at the time the property was encumbered, arguing,

With . . . a purchase money mortgage, the party that is purchasing the property is not using the property as a homestead at the time that the mortgage is executed, because the purchase money mortgage is necessary for the party to acquire the initial ownership in the property.

Although it appears some of these theories were raised in the district court proceedings, the only issue decided by the district court was Citimortgage’s claim of fraud. See Meier v. Senecaut, 641 N.W.2d 532, 537 (Iowa 2002) (“It is a fundamental doctrine of appellate review that issues must ordinarily be both raised and decided by the district court before we will decide them on appeal.”). “When a district court fails to rule on an issue properly raised by a party, the party who raised the issue must file a motion requesting a ruling in order to preserve error for appeal.” Id. No such motion was filed in this case. We therefore confine our analysis to Citimortgage’s claim of fraud.

[4] We note, as did the court in Michel, that our decision does not leave Citimortgage without remedies. See Michel, 683 N.W.2d at 107 n.5 (observing the bank could pursue a personal judgment against the debtors).
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BLOOMBERG | Arizona Bill Would Void Foreclosures Without Full Title History

BLOOMBERG | Arizona Bill Would Void Foreclosures Without Full Title History

Arizona may become the first state to require lenders to prove they have the right to foreclose by providing a complete list of any previous owners of the mortgage, under a bill passed yesterday by its Senate.

The legislation, which is headed to the House after being approved 28-2 in the Republican-dominated Senate, would allow foreclosure sales to be voided if lenders that didn’t originate the loan can’t produce the full chain of title. Arizona permits nonjudicial foreclosures, meaning property can be seized from the homeowner without a court order.

Lawmakers in states including New York, Oregon and Virginia also have proposed legislation to address concerns among consumer advocates that lenders or mortgage servicers are using incomplete or false paperwork to repossess properties in default. The attorneys general of all 50 states are jointly investigating how the mortgage-servicing industry operates.

“If you foreclose on somebody you should have to tell them who owns the property,” Michele Reagan, who sponsored Senate Bill 1259, said in a telephone interview. “People have the right in this country to face their accusers.” The Republican lawmaker is in litigation with her mortgage servicer, which she said won’t identify the owner of the loan.

Continue reading HERE

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PR Dist. Court Renders Judgment Void CITIMORTGAGE, INC. v. PANIAGUA-LATIMER

PR Dist. Court Renders Judgment Void CITIMORTGAGE, INC. v. PANIAGUA-LATIMER


Civil No. 08-1591 (SEC).

United States District Court, D. Puerto Rico.

December 27, 2010.


SALVADOR E. CASELLAS, Senior District Judge.

Pending before this Court is Defendants Reinaldo Paniagua Latimer, Cynthia Marie Muñoz Zayas, and their conjugal partnership’s (“Defendants”) motion to vacate default judgment. Docket #18. Plaintiff Citimortgage, Inc. (“Plaintiff”) opposed (Docket #20), and Defendants replied (Docket #21 & 24). After reviewing the filings and the applicable law, Defendants’ motion to vacate default judgment is GRANTED.


We further note that, as Defendants correctly point out, although Plaintiff submitted an affidavit by the process server, they did not file a verified complaint or accompanied the motion for service by publication with an affidavit setting forth factual allegations that justifies that they are entitled to some relief. In light of the applicable case law, this defect deprives this Court of jurisdiction over Defendants, and consequently renders the default judgment void. As a result, this Court’s May 14, 2009 default judgment is VACATED, and the present case is DISMISSED without prejudice for lack of personal jurisdiction.


For the above stated reasons, Defendants’ motion to vacate default judgment is GRANTED, the May 14, 2009 default judgment is VACATED, and the instant case is DISMISSED without prejudice.


In San Juan, Puerto Rico, this 27 day th of December, 2010.

s/Salvador E. Casellas
Salvador E. Casellas
U.S. Senior District Judge

Continue below…

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Testimony of Diane E. Thompson Before the Senate Banking, Housing Committee

Testimony of Diane E. Thompson Before the Senate Banking, Housing Committee

I was impressed with Mrs. Thompson and her knowledge. Excellent read with Mr. Levitin’s testimony.


What robo-signing reveals is the contempt that servicers have long exhibited for rules, whether
the rules of court procedure flouted in the robo-signing scandal or the contract rules breached in
the common misapplication of payments or the rules for HAMP modifications, honored more
often in the breach than in reality. Servicers do not believe that the rules that apply to everyone
else apply to them. This lawless attitude, supported by financial incentives and too-often
tolerated by regulators, is the root cause of the robo-signing scandal, the failure of HAMP, and
the wrongful foreclosure of countless American families.

The falsification of judicial foreclosure documents is closely and directly tied to widespread
errors and maladministration of HAMP and non-HAMP modification programs, and the forcedplaced
insurance and escrow issues. Homeowners for decades have complained about servicer
abuses that pushed them into foreclosure without cause, stripped equity, and resulted, all too
often, in wrongful foreclosure. In recent months, investors have come to realize that servicers’
abuses strip wealth from investors as well.3 Unless and until servicers are held to account for
their behavior, we will continue to see fundamental flaws in mortgage servicing, with cascading
costs throughout our society. The lack of restraint on servicer abuses has created a moral hazard
juggernaut that at best prolongs and deepens the current foreclosure crisis and at worst threatens
our global economic security.

The current robo-signing scandal is a symptom of the flagrant disregard adopted by servicers as
to the basic legal and business conventions that govern most transactions. This flagrant
disregard has been carried through every aspect of servicer’s business model. Servicers rely on
extracting payments from borrowers as quickly and cheaply as possible; this model is at odds
with notions of due process, judicial integrity, or transparent financial accounting. The current
foreclosure crisis has exposed these inherent contradictions, but the failures and abuses are
neither new nor isolated. Solutions must include but go beyond addressing the affidavit and
ownership issues raised most recently. Those issues are merely symptoms of the core problem:
servicers’ failure to service loans, account for payments, limit fees to reasonable and necessary
ones, and provide loan modifications where appropriate and necessary to restore loans to
performing status.

Continue to the testimony below…

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Diane E. Thompson, Of Counsel

Diane E. Thompson has represented low-income homeowners since 1994.  She currently works of counsel for the National Consumer Law Center.  From 1994 to 2007, Ms. Thompson represented individual low-income homeowners in East St. Louis at Land of Lincoln Legal Assistance Foundation.  While at Land of Lincoln Legal Assistance, Ms. Thompson served as the Homeownership Specialist, providing assistance to casehandlers representing homeowners in 65 counties in downstate Illinois, and the Supervising Attorney of the Housing and Consumer unit of the East St. Louis office.  She has served on the boards of the National Community Reinvestment Coalition and the Metropolitan St. Louis Equal Housing Opportunity Council.  She was a member of the Consumer Advisory Council of the Federal Reserve Board from 2003-2005.  Between 1995 and 2001, Ms. Thompson served as corporate counsel to the largest private nonprofit affordable housing provider in the East St. Louis metropolitan area. She received her B.A. from Cornell University and her J.D. from New York University.

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Highlights From The Testimony of Adam J. Levitin Before the Senate Banking, Housing Committee

Highlights From The Testimony of Adam J. Levitin Before the Senate Banking, Housing Committee

Watched the hearing yesterday and Mr. Levitin was extremely impressive!

Please watch the video for explosive info regarding securitization, “Nothing-Backed Securities”…transfers are void!

Sorry for the quality but was the best I could do.




Written Testimony of

Adam J. Levitin

Associate Professor of Law

Georgetown University Law Center
Before the
Senate Committee on Banking, Housing, and Urban Affairs

“Problems in Mortgage Servicing from Modification to Foreclosure”
November 16, 2010
2:30 pm


A number of events over the past several months have roiled the mortgage world, raising
questions about:

(1) Whether there is widespread fraud in the foreclosure process;

(2) Securitization chain of title, namely whether the transfer of mortgages in the
securitization process was defective, rendering mortgage-backed securities into non-mortgagebacked

(3) Whether the use of the Mortgage Electronic Registration System (MERS) creates
legal defects in either the secured status of a mortgage loan or in mortgage assignments;

(4) Whether mortgage servicers’ have defaulted on their servicing contracts by charging
predatory fees to borrowers that are ultimately paid by investors;

(5) Whether investors will be able to “putback” to banks securitized mortgages on the
basis of breaches of representations and warranties about the quality of the mortgages.
These issues are seemingly disparate and unconnected, other than that they all involve
mortgages. They are, however, connected by two common threads: the necessity of proving
standing in order to maintain a foreclosure action and the severe conflicts of interests between
mortgage servicers and MBS investors.

It is axiomatic that in order to bring a suit, like a foreclosure action, the plaintiff must
have legal standing, meaning it must have a direct interest in the outcome of the legislation. In
the case of a mortgage foreclosure, only the mortgagee has such an interest and thus standing.
Many of the issues relating to foreclosure fraud by mortgage servicers, ranging from more minor
procedural defects up to outright counterfeiting relate to the need to show standing. Thus
problems like false affidavits of indebtedness, false lost note affidavits, and false lost summons
affidavits, as well as backdated mortgage assignments, and wholly counterfeited notes,
mortgages, and assignments all relate to the evidentiary need to show that the entity bringing the
foreclosure action has standing to foreclose.

Concerns about securitization chain of title also go to the standing question; if the
mortgages were not properly transferred in the securitization process (including through the use
of MERS to record the mortgages), then the party bringing the foreclosure does not in fact own
the mortgage and therefore lacks standing to foreclose. If the mortgage was not properly
transferred, there are profound implications too for investors, as the mortgage-backed securities
they believed they had purchased would, in fact be non-mortgage-backed securities, which
would almost assuredly lead investors to demand that their investment contracts be rescinded,
thereby exacerbating the scale of mortgage putback claims.


Pay Close Attention To What He Says

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POWERFUL BK CASE! Mortgage Was Not Properly Executed | IN RE CLEARY

POWERFUL BK CASE! Mortgage Was Not Properly Executed | IN RE CLEARY

In re: DAVID CLEARY JR., Chapter 7, Debtor.
DAVID CLEARY JR., et al., Defendants.

Case No. 09-14900, Adversary Proceeding No. 09-1285.

United States Bankruptcy Court, N.D. Ohio.

July 1, 2010.


ARTHUR I. HARRIS, Bankruptcy Judge.

This matter is currently before the Court on the motion for partial summary judgment filed by the plaintiff-trustee, Lauren Helbling, and the joint brief in opposition of Carrington Mortgage and Deutsche Bank National Trust Company (“Deutsche Bank”). The main issue is whether the trustee is entitled to avoid a mortgage because the notary’s certificate of acknowledgment failed to recite the names of the parties whose signatures were acknowledged. The Court must also decide whether the filing of one or both foreclosure actions imparted the trustee with constructive notice resulting in inability to act as a bona fide purchaser for value. If the trustee is charged with constructive notice, then the Court must consider whether the second foreclosure action was an avoidable preference. For the reasons that follow, the Court holds that the Mortgage was not executed in accordance with Ohio’s statutory requirements but that the trustee is charged with constructive notice of the interest of Deutsche Bank as a result of the filing of the second foreclosure action. However, the filing of the second foreclosure acted to perfect the defective mortgage as against third persons, and it is a preferential transfer. As such, the Mortgage can be avoided by the trustee as a preference. Accordingly, the trustee’s motion for partial summary judgment is granted.


On December 30, 2009, the plaintiff-trustee and defendants Deutsche Bank and Carrington submitted the following stipulations:

1. Jurisdiction of this Court is proper and as set forth in Paragraph 1 of the complaint.

2. This is a core proceeding as set forth in Paragraph 2 of the Complaint.

3. Plaintiff is the duly appointed, qualified and acting Trustee of the estate of the debtor.

4. A legal description for property known as 4155 West 114th Street, Cleveland, OH is shown as Exhibit A to the Complaint (“Property”).

5. The petition in this case was filed on May 31, 2009.

6. The Debtor’s interest in the Property is property of the bankruptcy estate pursuant to 11 U.S.C. § 541.

7. The Debtor is the owner, in fee simple of the Property, by virtue of a General Warranty Deed filed in Instrument No. 200302030753 of the records of Cuyahoga County, Ohio on February 3, 2003.

8. Deutsche Bank National Trust Company (“Deutsche”) is the holder of a mortgage on the Property (the “Mortgage”), which Mortgage is at issue in this proceeding.

9. The Mortgage was filed on May 5, 2004, as Instrument No. 200405050625 in the records of Cuyahoga County, Ohio.

10. A true and exact copy of the Mortgage is attached to the Complaint as Exhibit B.

11. The original mortgagee under the Mortgage is New Century Mortgage Corporation. The Mortgage was assigned to Deutsche of record by assignment filed December 16, 2008 as Instrument No. 200812160236, Cuyahoga County Records.

12. The acknowledgment provision of the Mortgage on page 15 reads as follows:

  This instrument was acknowledged before me this 30th day of April 2004, by

        Notary Public
        In and for the State of Ohio
        My Commission Expires
        May 19, 2008
                                  /s/ Jerry Russo
                                   Notary Public

13. Debtor’s initials appear at the bottom of Mortgage pages 1 through 13, and page 15 and page 17.

14. A foreclosure action was filed as to thea subject property in Case No. 663230 of the Cuyahoga County, Ohio Common Pleas Court on June 25, 2008 by Deutsche. The property was described in the foreclosure Complaint. The debtor answered in that case on September 25, 2008. The case was dismissed without prejudice on October 30, 2008.

15. A foreclosure action was filed as to the subject property in Case No. 694194 of the Cuyahoga County, Ohio Common Pleas Court on May 28, 2009 by Aeon Financial. The property was described in the foreclosure Complaint. The debtor filed a Notice of Suggestion of Stay on June 15, 2009. The Court entered an Order staying the case on June 19, 2009. The case was dismissed without prejudice on August 5, 2009.

On August 28, 2009, the trustee of the Chapter 7 estate initiated this adversary proceeding seeking to avoid the Mortgage and to determine the respective interests of various parties in the real property. The complaint named as defendants the debtor; Carrington Mortgage; CitiFinancial Inc.; Aeon Financial, LLC; Beneficial Ohio, Inc.; TFC National Bank; Deutsche Bank National Trust Company; and the Cuyahoga County Treasurer. The treasurer, Citifinancial, David Cleary, Aeon Financial, TFC National Bank, and Carrington/Deutsche Bank filed answers to the complaint. Aeon Financial and TFC National Bank disclaimed any interest, and all parties stipulated that the Cuyahoga County Treasurer has a first lien for taxes and assessments. Default was entered against Beneficial Ohio on March 24, 2010. On January 13, 2010, the trustee filed a motion for partial summary judgment seeking to avoid the Mortgage held by Deutsche Bank. On February 3, 2010, Deutsche Bank filed a brief in response. Briefing on the trustee’s partial motion for summary judgment is complete, and the Court is ready to rule.


Determinations of the validity, extent, or priority of liens are core proceedings under 28 U.S.C. section 157(b)(2)(K). The Court has jurisdiction over core proceedings under 28 U.S.C. sections 1334 and 157(a) and Local General Order No. 84, entered on July 16, 1984, by the United States District Court for the Northern District of Ohio.


Federal Rule of Civil Procedure 56(c), as made applicable to bankruptcy proceedings by Bankruptcy Rule 7056, provides that a court shall render summary judgment, if the pleadings, depositions, answers to interrogatories, and admissions on file, together with affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law.

The moving party bears the burden of showing that “there is no genuine issue as to any material fact and that [the moving party] is entitled to judgment as a matter of law.” Jones v. Union County, 296 F.3d 417, 423 (6th Cir. 2002). See generally Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). Once the moving party meets that burden, the nonmoving party “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.” Hall v. Tollett, 128 F.3d 418, 422 (6th Cir. 1997). See, e.g., Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252 (1986) (“The mere existence of a scintilla of evidence in support of the plaintiff’s position will be insufficient; there must be evidence on which the jury could reasonably find for the plaintiff.”). The Court shall view all evidence in a light most favorable to the nonmoving party when determining the existence or nonexistence of a material fact. See Tenn. Dep’t of Mental Health & Mental Retardation v. Paul B., 88 F.3d 1466, 1472 (6th Cir. 1996).


Under the “strong arm” clause of the Bankruptcy Code, the bankruptcy trustee has the power to avoid transfers that would be avoidable by certain hypothetical parties. See 11 U.S.C. § 544(a). Section 544 provides in pertinent part:

(a) The trustee shall have, as of the commencement of the case, and without regard to any knowledge of the trustee or of any creditor, the rights and powers of, or may avoid any transfer of property of the debtor or any obligation incurred by the debtor that is voidable by —

. . . .

(3) a bona fide purchaser of real property, other than fixtures, from the debtor, against whom applicable law permits such transfer to be perfected, that obtains the status of a bona fide purchaser and has perfected such transfer at the time of the commencement of the case, whether or not such a purchaser exists.

11 U.S.C. § 544. Any transfer under section 544 is preserved for the benefit of the estate. See 11 U.S.C. § 551.

Page 10 of the Mortgage provides that “[t]his Security Instrument shall be governed by federal law and the law of the jurisdiction in which the Property is located.” Accordingly, because the real property in question is located in Ohio, the Court will apply Ohio law to determine whether the trustee may avoid the Mortgage using the “strong arm” clause. See Simon v. Chase Manhattan Bank (In re Zaptocky), 250 F.3d 1020, 1024 (6th Cir. 2001) (applicable state law governs determination whether hypothetical bona fide purchaser can avoid mortgage).

Under Ohio law, a bona fide purchaser is a purchaser who ” `takes in good faith, for value, and without actual or constructive knowledge of any defect.’ ” Stubbins v. Am. Gen. Fin. Servs. (In re Easter), 367 B.R. 608, 612 (Bankr. S.D. Ohio 2007) (quoting Terlecky v. Beneficial Ohio, Inc. (In re Key), 292 B.R. 879, 883 (Bankr. S.D. Ohio 2003)); see also Shaker Corlett Land Co. v. Cleveland, 139 Ohio St. 536 (1942). The Bankruptcy Code expressly provides that a bankruptcy trustee is a bona fide purchaser regardless of actual knowledge. See In re Zaptocky, 250 F.3d at 1027 (“actual knowledge does not undermine [trustee’s] right to avoid a prior defectively executed mortgage”). Because actual knowledge does not affect the trustee’s strong-arm power, contrary to the assertions made by the defendants, the Court need only determine whether the trustee had constructive knowledge of the prior interest held by Deutsche Bank.

Ohio law provides that “an improperly executed mortgage does not put a subsequent bona fide purchaser on constructive notice.” In re Zaptocky, 250 F.3d at 1028. Ohio courts have refused to allow a recorded mortgage to give constructive notice when the mortgage has been executed in violation of a statute. See In re Nowak, 104 Ohio St. 3d 466, 469 (2004) (listing cases). The first question, then, is whether the Mortgage was executed in compliance with, or substantially conforms to applicable statutory law.

The Mortgage Was Not Properly Executed in Accordance with Ohio Revised Code § 5301.01

Ohio Revised Code § 5301.01, requires four separate acts to properly execute a mortgage: (1) the mortgage shall be signed by the mortgagor; (2) the mortgagor shall acknowledge his signing in front of a notary public, or other qualified official; (3) the official shall certify the acknowledgment; and (4) the official shall subscribe his name to the certificate of acknowledgment. Ohio Rev. Code § 5301.01(A) (2004); see Drown v. GreenPoint Mortgage Funding, Inc. (In re Leahy), 376 B.R. 826, 832 (Bankr. S.D. Ohio 2007) (listing four requirements provided by Ohio Rev. Code. § 5301.01).[ 2 ] The first issue in this case is whether the certificate of acknowledgment, which omitted the name of the borrower, satisfies the third requirement to proper execution of a mortgage.

Certification of an acknowledgment is governed by Ohio Revised Code sections 147.53-147.58. Ohio Revised Code section 147.53 provides:

The person taking an acknowledgment shall certify that:

(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.

The Ohio Revised Code further provides that a certificate of acknowledgment is acceptable in Ohio if it is in a form prescribed by the laws or regulations of Ohio or contains the words “acknowledged before me,” or their substantial equivalent. Ohio Rev. Code § 147.54. Ohio’s statutory short form acknowledgment for an individual is as follows:

  State of ________

  County of ________

  The foregoing instrument was acknowledged before me this (date) by
  (name of person acknowledged.)

  (Signature of person taking acknowledgment)
  (Title or rank) (Serial number, if any)

Ohio Rev. Code § 147.55(A).

The trustee argues that the Mortgage is invalid because the certification of acknowledgment fails to indicate or recite who appeared before the notary public as required by Ohio law. The Court agrees. Recent case law, including a 2008 decision from the Sixth Circuit BAP, supports the trustee’s position that an acknowledgment is defective if it fails to identify the person whose signature is being acknowledged. See In re Nolan, 383 B.R. 391, 396 (6th Cir. B.A.P. 2008); In re Sauer, 417 B.R. 523, (Bankr. S.D. Ohio 2009); Daneman v. Nat’l City Mortg. Co. (In re Cornelius), 408 B.R. 704, 708 (Bankr. S.D. Ohio 2009) (“The absence of the name of the mortgagee acknowledging election is the functional equivalent of no certificate of acknowledgment and renders an acknowledgment insufficient.”); Drown v. Countrywide Home Loans, Inc. (In re Peed), 403 B.R. 525, 531 (Bankr. S.D. Ohio 2009) affirmed at No. 2:09cv347 (S.D. Ohio May 1, 2009); Terlecky v. Countrywide Home Loans, Inc. (In re Baruch), No. 07-57212, Adv. No. 08-2069, 2009 Bankr. Lexis 608 at *22 (Bankr. S.D. Ohio Feb. 23, 2009) (“An acknowledgment clause containing nothing relative to the mortgagor’s identity is insufficient; rather, an acknowledgment clause must either identify the mortgagor by name or contain information that permits the mortgagor to be identified by reference to the mortgage.”); In re Leahy, 376 B.R. at 832. See also Smith’s Lessee v. Hunt, 13 Ohio 260, 269 (1844) (holding that court was unable to infer name of grantor when acknowledgment was blank as to the grantor and, thus, the mortgage was defective and did not convey title).

The holdings in Nolan, Smith’s Lessee, and similar cases are also supported by case law interpreting almost identical statutory provisions for acknowledgment clauses in Kentucky and Tennessee. See, e.g., Gregory v. Ocwen Fed. Bank (In re Biggs), 377 F.3d 515 (6th Cir. 2004) (affirming bankruptcy court’s decision avoiding deed of trust under section 544 and Tennessee law when deed of trust omitted names of acknowledging parties); Select Portfolio Servs. v. Burden (In re Trujillo), 378 B.R. 526 (6th Cir. B.A.P. 2007) (affirming bankruptcy court’s decision avoiding mortgage under section 544 and Kentucky law when debtor was not named or identified in certificate of acknowledgment).

Although no argument was made, 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 Ohio Revised Code section 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, 176 (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 section 5301.01. See In re Fryman, 314 B.R. at 138. Under Ohio law, a mortgage that substantially complies with section 5301.01 will be considered valid. See Drown v. EverHome Mortg. Co. (In re Andrews), 404 B.R. 275, 279 (Bankr. S.D. Ohio 2008) (citing Mid-American Nat’l Bank & Trust, 451 N.E.2d 1243, 1245-46) (Ohio Ct. App. 1982)).

Nothing in the present case provides evidence of substantial compliance with section 5301.01. See In re Peed, 403 B.R. at 536 (presence of initials on each page of mortgage, including acknowledgment clause page, did not substantially comply with requirement that acknowledgment clause identify person whose signature is being acknowledged); accord Bank of America N.A. v. Corzin, (In re Bergman), 2010 U.S. Dist. LEXIS 8755 Case No. 5:09cv2520 (N.D. Ohio Feb. 2, 2010) (same), In re Cornelius, 408 B.R. at 708 (same); In re Andrews, 404 B.R. at 279 (same). Therefore, the Mortgage was improperly executed because the certification of acknowledgment fails to indicate or recite who appeared before the notary public as required under Ohio Revised Code section 5301.01.

The Second Foreclosure Action Precludes the Trustee from Avoiding the Mortgage under 11 U.S.C. § 544

Having found that the Mortgage is defective, the Court must determine whether the trustee is charged with constructive notice of Deutsche Bank’s interest as a result of either of the foreclosure actions. This Court finds that the second foreclosure action imparted constructive notice to the trustee, under the rule of lis pendens.

The most recent version of Ohio’s lis pendens statute provides that “[w]hen a complaint is filed, the action is pending so as to charge a third person with notice of its pendency. While pending, no interest can be acquired by third persons in the subject of the action, as against the plaintiff’s title.” Ohio Rev. Code Ann. § 2703.28. Thus, the filing of a foreclosure complaint prior to the date of filing of the bankruptcy petition imparts constructive notice to a bankruptcy trustee of the plaintiff’s interest, whatever that might be, in the property. See Treinish v. Norwest Bank Minn. (In re Periandri), 266 B.R. 651, 659 (6th Cir. BAP 2001).

As to the June 25, 2008, foreclosure, filed by Deutsche Bank, the trustee cannot be charged with constructive notice because the case was not pending at the commencement of the bankruptcy petition on May 31, 2009. The section requires that the case be “pending” in order to charge third parties with notice. Ohio Rev. Code Ann. § 2703.28.

Deutsche Bank asserts that because the second foreclosure action was pending when the case was filed, the trustee was on notice of Deutsche Bank’s interest due to the fact it was a defendant and the complaint listed it as holding an interest in the property. This Court agrees. “The Ohio lis pendens statute operates to provide constructive notice of the pendency of a suit concerning specifically described property and with it the knowledge, albeit deemed or imputed, of all claims against the property that might reasonably be discerned from an investigation into the circumstances of the litigation.” In re Periandri, 266 B.R. at 656. The Ohio Supreme Court has quoted this passage from Periandri, holding that lis pendens puts a prospective purchaser on notice of any possible claims to the subject property. See Beneficial Ohio, Inc. v. Ellis, 121 Ohio St. 3d 89, 92 (Ohio 2009) (“the statute places the burden upon [third persons] to examine the county records to determine whether a lawsuit involving the property is pending . .. . a person who seeks to acquire an interest in property should bear the responsibility for checking county records.”) See also Stern v. Stern, No. 97 JE 77, 1999 WL 1243316 at *3 fn. 2 (Ohio App. 1999) (“Pursuant to R.C. 2703.26, which is the codification of the doctrine of lis pendens, a purchaser is charged with notice of any issues presented in a pending lawsuit which directly concern the property to be purchased.”)

The complaint, taken as a whole, provides constructive notice of the interest of Deutsche Bank. The complaint provides in part

the following named defendants, to wit: David Cleary, Jr., Spouse, if any, of David Cleary Jr., Deutsche Bank National Trust Company, as Indenture Trustee for New Century Home Equity Loan Trust 2004-2, Beneficial Ohio, Inc., and James Rokakis, Treasurer of Cuyahoga County, Ohio, have or may claim to have some interest in or lien upon said premises, but Plaintiff, not being fully advised as to the extent, if any, of such liens or claims, says that the same, if any, are inferior and subsequent to the lien of Plaintiff. (See Preliminary Judicial Report, Exhibit C.)

Exhibit C to the Complaint lists Deutsche Bank as an interest holder by way of a second mortgage, in the amount of $104,500. As a result of lis pendens, third parties had constructive notice of the interest of Deutsche Bank at the commencement of the bankruptcy case, and therefore the trustee cannot avoid the mortgage pursuant to her strong arm powers. “When any purchaser would have constructive knowledge of the mortgage, the trustee, cannot assume the position of a hypothetical BFP because no such good-faith purchaser can exist.” Argent Mortgage Company, LLC v. Drown (In re Bunn), 578 F.3d 487, 489 (6th Cir. 2009).

The Perfection of Deutsche Bank’s Interest by way of Lis Pendens is an Avoidable Preferential Transfer

A trustee may avoid as a preference any transfer of an interest of the debtor’s property that is for the benefit of a creditor, on account of an antecedent debt, made while the debtor was insolvent within 90 days before the filing of a bankruptcy case that allows the creditor to receive more than what it would have received in a typical liquidation. 11 U.S.C. § 547(b). Additionally, “a transfer of real property other than fixtures, but including the interest of a seller or purchaser under a contract for the sale of real property, is perfected when a bona fide purchaser of such property from the debtor against whom applicable law permits such transfer to be perfected cannot acquire an interest that is superior to the interest of the transferee.” 11 U.S.C. § 547(e)(1). Thus, this Court must determine whether a “transfer” occurred. The Sixth Circuit BAP has held that lis pendens provides constructive notice of a defectively acknowledged mortgage but that because the filing of a notice of lis pendens “took place within the preference period, it is considered a transfer, subject to avoidance as a preference, assuming the other required elements of a preference exist.” Kendrick v. CIT Small Business Lending Corp. (In re Gruseck), No. 06-8091, 2008 WL 1756243 at *8 (6th Cir. BAP 2008). See also Hurst Concrete Products Inc. v. Lane (In re Lane), 980 F.2d 601, 604 (9th Cir 1992) (because the recording of the lis pendens operated to perfect the filer’s interest against bona fide purchasers, the recording was a transfer under § 547(e)(1)(A)). Here, a transfer occurred because the trustee could no longer acquire an interest superior to the interest of Deutsche Bank upon the filing of the foreclosure complaint. The filing of the complaint acted to perfect Deutsche Bank’s interest as against third parties (while the suit was pending) such that no bona fide purchaser could exist.

It is undisputed that the bankruptcy was filed on May 31, 2009, and the foreclosure was filed only three days prior on May 28, 2009. Because a transfer of property of the debtor on account of a debt incurred in 2008, took place within the 90 day preference window that allowed Deutsche Bank to receive more than it would have as an unsecured creditor, the transfer is avoidable under 11 U.S.C. § 547.


For the reasons stated above, the Court holds that the certificate of acknowledgment in the Mortgage at issue is defective, that the filing of the second foreclosure complaint provided the trustee with constructive notice, and the that trustee may avoid the Mortgage as a preferential transfer. Accordingly, the trustee’s motion for partial summary judgment is granted. While it appears that this decision is largely dispositive, the precise interests and relative priorities of all parties have yet to be determined. Therefore, this is not a final judgment for purposes of 28 U.S.C. § 158. See Bankr. Rule 7054 and Fed R. Civ. P. 54(b). The Court will conduct a status conference at 1:30 p.m. on July 20, 2010. Counsel shall be prepared to advise the Court as to what additional steps are needed to resolve all remaining claims in this adversary proceeding.


1. This Memorandum of Opinion is not intended for official publication.
2. In Zaptocky, the Sixth Circuit identified “three major prerequisites for the proper execution of a mortgage: (1) the mortgagor must sign the mortgage deed; (2) the mortgagor’s signature must be attested by two witnesses; and (3) the mortgagor’s signature must be acknowledged or certified by a notary public.” Zaptocky, 250 F.3d at 1024. The differences between Zaptocky’s three requirements and Leahy’s four requirements are (A) the deletion in Leahy of Zaptocky’s second requirement — attestation by two witnesses — due to a change in the statute, and (B) the Leahy court’s breaking down of Zaptocky’s third requirement — certification of acknowledgment — into three separate parts.

This copy provided by Leagle, Inc.

© 2010-19 FORECLOSURE FRAUD | by DinSFLA. All rights reserved.

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