Field v. Ocwen Loan Servicing, L.L.C. (In re Schlabach)
490 B.R. 555
Bankr. S.D. Ohio2012Background
- Debtors own residential property at 2034 Vizedom Road, Hamilton, Ohio, comprising Parcel 11 (2.04 acres) and Parcel 12 (0.2044 acre strip).
- First Mortgage: $145,000 to Ocwen (Dec 6, 2003) describing the property by street address with attached legal description referencing Parcel 11 and metes and bounds for Parcel 12.
- Second Mortgage: $55,000 to M&I (Feb 23, 2004) describing the property by street address with attached legal description referencing Parcel 11 and metes and bounds for Parcel 11.
- Trustee seeks to avoid the First Mortgage under 11 U.S.C. § 544(a)(3) due to allegedly defective property description; alternatively challenges extent/validity of both mortgages due to description irregularities.
- Court holds the First Mortgage provides constructive notice to a reasonably prudent purchaser that encumbers the entire property; thus § 544(a)(3) avoidance is denied and the extent/validity of the mortgages is not ambiguous.
- Trustee argues conflicted description creates ambiguity; Ocwen and M&I argue Ohio law permits a mortgage description with street address and mixed references.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Trustee may avoid the First Mortgage under § 544(a)(3). | Trustee contends description is ambiguous and lacks notice. | Ocwen asserts the mortgage contains sufficient description; no avoidance. | No; Trustee's § 544(a)(3) avoidance denied. |
| Whether the First Mortgage encumbers the entire Property despite conflicting descriptions. | Ambiguity prevents notice of encumbrance on entire property. | Description, taken with record and cross-reference, shows encumbrance of whole property. | Yes; First Mortgage encumbers the entire Property; no end-date reduction. |
| Whether the First Mortgage is valid/extends as claimed, and the extent of the lien. | Trustee may challenge validity based on conflicting data; liability could shift to Second Mortgage. | Mortgage descriptions are sufficient; lien extends to entire Property; disputes over extent are unfounded. | Summary judgment on extent/validity denied; description not ambiguous. |
Key Cases Cited
- In re Bunn, 578 F.3d 487 (6th Cir. 2009) (constructive notice; extent of lien matters for BFP analysis)
- In re Easter, 367 B.R. 608 (Bankr.S.D.Ohio 2007) (constructive knowledge in mortgage ambiguity context)
- In re Jared, 474 B.R. 521 (Bankr.S.D.Ohio 2011) (follows In re Bunn on constructive notice and description sufficiency)
- Thames v. Asia’s Janitorial Serv., Inc., 81 Ohio App.3d 579 (Ohio Ct.App. 1992) (constructive knowledge rules under two Ohio constructs; recording statute impact)