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In re Wheeler

June 12, 2006

IN RE PATRICIA WHEELER,
EILEEN K. FIELD, TRUSTEE, APPELLEE,
v.
PATRICIA WHEELER, ET AL., APPELLANTS.



The opinion of the court was delivered by: Sandra S. Beckwith, Chief Judge United States District Court

ORDER

Appellant ABN AMRO Mortgage Group, Inc. appeals from the judgment of the United States Bankruptcy Court for the Southern District of Ohio finding that pursuant to 11 U.S.C. § 544(a)(3), the Trustee, Appellee Eileen K. Field, is able to avoid a mortgage allegedly given to ABN AMRO by Defendant Patricia Wheeler. For the reasons set forth below, the judgment of the Bankruptcy Court is AFFIRMED.

I.

The facts in this case are not in dispute. On December 24, 2001, Harry Wheeler and Debtor Patricia Wheeler signed a mortgage in favor of Appellant ABN AMRO Mortgage Group, Inc. ("ABN") on a parcel of real property located in Cincinnati, Ohio. Ex. A. Both Debtor and Harry Wheeler signed the mortgage, although the definitions section of the instrument names only "Harry R. Wheeler, Married" as the borrower. There were two witnesses to their signatures, one of whom was also the notary public who executed the certificate of acknowledgment of the mortgage. The certificate of acknowledgment states:

STATE OF OHIO, HAMILTON County On this 24th day of December, 2001, before me, a Notary Public in and for said County and State, personally appeared Harry R. Wheeler, Married the individual(s) who executed the foregoing instrument and acknowledged that he/she/they did examine and read the same and did sign the foregoing instrument, and that the same is his/her/their free act and deed.

IN WITNESS WHEREOF, I have hereunto set my hand and official seal.

Jack W. Wehmeier

Notary Public

Id. at 2427. ABN recorded the mortgage in a timely fashion.

In November 2002, Debtor filed a petition for voluntary bankruptcy. The bankruptcy trustee, Appellee Eileen K. Field, then filed an adversary proceeding against Debtor and ABN to avoid the mortgage pursuant to her status as a hypothetical bona fide purchaser under 11 U.S.C. § 544(a)(3). The complaint contended that as to the Debtor, the mortgage in question was invalid because the certificate of acknowledgment did not comply with Ohio Rev. Code § 5301.01*fn1 in that the notary did not certify the acknowledgment of Debtor's signature. ABN conceded that there were "scrivener's errors" with respect to both completion of the mortgage instrument and execution of the certificate of acknowledgment, but contended that the mortgage was not avoidable because there was substantial compliance with § 5301.01. Alternatively, ABN argued that although defectively executed, the mortgage was sufficient to give bona fide purchasers notice that Debtor intended to mortgage her interest in the subject property.

Therefore, ABN argued, the Trustee could not avoid the mortgage pursuant to § 544(a)(3).

On cross-motions for summary judgment, the Bankruptcy Court ruled that the Trustee was entitled to avoid the mortgage. The Court first determined that there had not been substantial compliance with § 5301.01. In so holding, the Court distinguished In re Fryman, 314 F.R.D. 137 (S.D. Ohio 2004), a case with very similar facts, based on differences in the wording of the acknowledgment clauses at issue. Then, relying on cases from other jurisdictions which it concluded represented the majority view, the Court held that the defective mortgage was insufficient to give constructive notice to bona fide purchasers even though it was valid as to the non-debtor spouse and had been properly recorded.

ABN now appeals from the judgment of the Bankruptcy Court and presents the same issues for resolution: whether there was substantial compliance with ยง 5301.01 and if not, whether the mortgage as executed and recorded was sufficient to give constructive notice to bona ...


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