619 B.R. 177
Bankr. E.D. Ky.2020Background
- Debtors Dwayne and Anna Wells own residential property in Lexington, KY; Anna executed a $134,500 note to UKFCU dated Feb. 14, 2014, secured by a recorded mortgage that names only Anna as the defined “Borrower.”
- Dwayne signed and initialed the mortgage form but is not identified anywhere in the mortgage text or granting clause as a mortgagor or "Borrower."
- Chapter 7 Trustee (Mark Miller) moved for summary judgment seeking to avoid the mortgage as unenforceable against Dwayne under 11 U.S.C. § 544(a); Trustee concedes a 2017 second mortgage is valid.
- UKFCU argues other indicia (signatures, form language, legal description, Paragraph 13 co‑signer clause) suffice to bind Dwayne.
- The court held the first mortgage is unenforceable as to Dwayne (Trustee granted summary judgment on that issue) but granted UKFCU summary judgment on the admitted-valid second mortgage; other relief (sale, preservation of lien for estate) reserved for status conference.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Enforceability of the first mortgage as to Dwayne | Omission of Dwayne from the mortgage covenants means it creates no lien on his interest; Trustee may avoid under §544 | Dwayne’s initials/signature and other form indicators identify him as a Borrower or co‑signer, making the lien enforceable against him | Mortgage not enforceable against Dwayne; Trustee entitled to summary judgment; UKFCU’s first counterclaim denied |
| Whether the mortgage is ambiguous (necessitating parol evidence) | Text is unambiguous: only Anna is defined Borrower; no parol needed | Signature/initials create an ambiguity about Dwayne’s role | Court: mortgage is not ambiguous under Kentucky law; no parol evidence required |
| Do other parts of the instrument identify Dwayne (rider, signature block, Paragraph 13, Exhibit A) | No rider exists; signature block does not label him a Borrower; Paragraph 13’s co‑signer definition presumes one is a Borrower; legal description does not pledge his interest | UKFCU points to signature/initials, Paragraph 13, and Exhibit A/legal description as sufficient indicia | Court: none of those items identify Dwayne as a Borrower or mortgagor; Paragraph 13 cannot convert him into a co‑signer absent definition as Borrower |
| Relief: avoidance, preservation, sale, and related remedies | Trustee seeks avoidance of lien, preservation for estate, and authority to sell the property | UKFCU opposes sale and seeks abandonment/reaffirmation options; parties may negotiate | Avoidance of lien permitted as to Dwayne; sale/preservation issues reserved for status conference; second mortgage remains valid against both debtors |
Key Cases Cited
- Anderson v. Liberty Lobby, 477 U.S. 242 (summary judgment standard)
- Matsushita Elec. Indus. Co. v. Zenith Radio, 475 U.S. 574 (summary judgment inferences)
- Rogan v. Fifth Third Mortg. Co. (In re Rowe), 452 B.R. 591 (B.A.P. 6th Cir.) (national‑form mortgage analysis)
- In re Cook, 457 F.3d 561 (6th Cir.) (interpretation under Kentucky law)
- Gilchrist v. United Bank & Trust Co. (In re Gilchrist), 467 B.R. 114 (E.D. Ky.) (distinguishable ruling upholding mortgage where other parts identified co‑owner)
- Goodrum’s Guardian v. Kelsey, 50 S.W.2d 932 (Ky. 1932) (longstanding Kentucky rule: instrument must name grantor/mortgagor)
- Rowe v. Bird, 304 S.W.2d 775 (Ky. 1957) (conveyance signed by person not named in instrument is ineffectual as to that person)
- Whitaker v. Langdon, 195 S.W.2d 285 (Ky. 1946) (necessity of naming grantors in the body of instrument)