600 B.R. 584
6th Cir. BAP2019Background
- Debtors Vodrick and Marcy Perry owned real property as joint tenants and refinanced in 2007; Vodrick signed the note, Marcy did not sign the note but signed and initialed the mortgage instrument's signature page as "Borrower."
- The mortgage body defined "Borrower" as Vodrick only, while Marcy's name did not appear in the body of the mortgage; the mortgage was recorded and later assigned to Bank of New York Mellon.
- Chapter 7 trustee Susan Rhiel sought a declaratory judgment that the refinance mortgage did not encumber Marcy’s interest because she was not named as Borrower in the mortgage body.
- The bankruptcy court found the mortgage ambiguous as to identity of the mortgagor, admitted parol evidence, held a trial, and concluded the mortgage encumbered both Debtors' interests.
- The Bankruptcy Appellate Panel certified two Ohio-law questions to the Ohio Supreme Court about whether a signatory not named in the mortgage body can be a mortgagor and whether such a mortgage is invalid per se or whether parol evidence is admissible; the Ohio Supreme Court ruled such a mortgage is not invalid as a matter of law and parol evidence is admissible where ambiguous.
Issues
| Issue | Plaintiff's Argument (Rhiel) | Defendant's Argument (Bank) | Held |
|---|---|---|---|
| Whether mortgage ambiguity permits parol evidence | Mortgage unambiguously excludes Marcy because body names Vodrick as Borrower; parol evidence should be excluded | Ohio law allows parol evidence where instrument is ambiguous; signature/initials can show intent | Court: Mortgage ambiguous; parol evidence admissible to determine intent |
| Whether a signatory not named in the mortgage body is bound | Marcy’s omission from the body means she did not pledge her interest despite signing | Signature and initials can bind a signatory even if name not in body | Court: Signature/initials can render signatory a mortgagor; not invalid as matter of law |
| Whether mortgage is invalid as a matter of law when signatory not named in body | Mortgage invalid re: Marcy as a matter of law; no need for further evidence | Mortgage valid if properly signed, initialed, acknowledged; intent is a question | Court: Not invalid as matter of law; validity and scope depend on instrument and evidence |
| Whether the mortgage encumbered Marcy’s interest | Marcy intended only to release dower; therefore not mortgaged | Extrinsic evidence shows both intended to secure loan; lender required both signatures | Court: After evaluating parol evidence, both Debtors intended to encumber full interest; mortgage encumbered Marcy too |
Key Cases Cited
- Bank of New York Mellon v. Rhiel, 122 N.E.3d 1219 (Ohio 2018) (Ohio Supreme Court: a signatory not named in mortgage body can be a mortgagor if instrument and circumstances show intent; properly signed/initialed mortgages are not invalid per se and parol evidence is admissible for ambiguities)
- Kostelnik v. Helper, 770 N.E.2d 58 (Ohio 2002) (contracts require meeting of the minds on essential terms; signature identifies party to be charged)
- Westfield Ins. Co. v. Galatis, 797 N.E.2d 1256 (Ohio 2003) (ambiguity in written contract is a question of law; extrinsic evidence may be used if ambiguous)
- Midland Asphalt Corp. v. United States, 489 U.S. 794 (U.S. 1989) (finality rule for appellate jurisdiction)
- Ritzen Grp., Inc. v. Jackson Masonry, LLC, 906 F.3d 494 (6th Cir. 2018) (bankruptcy final order appeals guidance)
- Parrett v. American Ship Bldg. Co., 990 F.2d 854 (6th Cir. 1993) (whether a written agreement is ambiguous is a question of law)
- Lincoln Elec. Co. v. St. Paul Fire & Marine Ins. Co., 210 F.3d 672 (6th Cir. 2000) (factual findings resolving ambiguous contract terms reviewed for clear error)