467 B.R. 114
E.D. Ky.2012Background
- John Gilchrist bought two lots in 1995, built the Residence, and later married Mary; the Residence is the marital home.
- In 2006 Mary executed a promissory note to a BOA predecessor for $256,000 secured by a Mortgage that lists Mary as Borrower; John signed the Mortgage but not the Note.
- John is a co-signer—named in the Mortgage body and Exhibit A, with the co-signor provision stating co-signers mortgage and convey their interest.
- In 2008 United foreclosed on unrelated property, then filed a judgment lien in Garrard County; United later sought to foreclose on its lien and asserted BOA’s Mortgage validity and priority.
- In 2010 the Gilchrists filed an adversary proceeding to avoid United’s lien under 11 U.S.C. § 522(f); United asserted BOA’s Mortgage validity and that its lien has priority.
- The Bankruptcy Court initially held BOA’s Mortgage valid as to Mary’s dower, then changed course, concluding inchoate dower can serve as a homestead exemption basis, and performed 522(f) calculations leading to impairment of Mary’s exemption but not John’s; the District Court reversed on the John-Gilchrist validity issue and remanded for §522(f) calculations consistent with that ruling.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether John Gilchrist’s interest is validly encumbered by BOA’s Mortgage | Gilchrists: John is identified in Exhibit A and the body, so he is named; co-signer intent shown. | BOA/United: lack of John’s execution of the Note undermines validity. | Mortgage valid as to John; remand for §522(f) calculations. |
| Whether United Bank had standing to challenge BOA’s Mortgage | Gilchrists/BOA: United sought to avoid but not essential to mortgage validity. | United acted to assert priority and validity against the lien. | United had standing to pursue priority concerns; not fatal to remand. |
| How §522(f) should be applied given the validity as to John | Apply 522(f) calculations consistent with John’s validity. | Proceed with impairment analysis per lien against Mary’s interest. | Remand to apply §522(f) calculations consistent with John’s validity. |
Key Cases Cited
- Shaver v. Ellis, 226 Ky. 806 ((1928)) (mortgagor identification required in body of deed)
- Stephens v. Perkins, 273 S.W. 545 ((Ky. 1925)) (specific names pass title in conveyance)
- Christian v. Johnson, 556 S.W.2d 172 ((Ky.App.1977)) (names must be identified in body to pass title; incorporation supports)
- Whitaker v. Langdon, 195 S.W.2d 285 ((Ky.1946)) (conveyance naming grantors in body essential)