Terlecky v. Crevecor Mortgage, Inc. (In Re Trahan)
444 B.R. 865
Bankr. S.D. Ohio2011Background
- Trustee seeks to avoid a mortgage under 11 U.S.C. § 544(a)(3) based on a blank certificate of acknowledgment on the mortgage executed by Debtors.
- Mortgage was granted to Crevecor Mortgage, Inc. and later assigned to HSBC Mortgage Services, Inc. but the assignment was not recorded.
- Certificate of acknowledgment omits the identity of the person who acknowledged the signature, triggering the blank-acknowledgment issue under Ohio law.
- The court previously entered a default judgment avoiding the mortgage under § 544(a)(3); Crevecor did not seek relief from that order, so the lien avoidance would remain effective absent other changes.
- Crevecor sought certification to the Ohio Supreme Court on whether URAA supersedes Smith's Lessee, while Trustee moved for summary judgment; the court denied certification and granted in part and denied in part the Trustee’s summary-judgment motion.
- The court ultimately held that the blank-acknowledgment basis supports avoidance of the Mortgage under § 544(a)(3), but mootness precluded relief on Count I; the Trustee could reclassify HSBC’s claims as unsecured pursuant to the avoidance.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether blank acknowledgment permits § 544(a)(3) avoidance | Trustee relies on defective certificate to avoid. | Defect does not defeat validity or notice. | The Mortgage is avoidable under § 544(a)(3). |
| Whether URAA supersedes Smith's Lessee and merits certification | Certification unnecessary; Smith's Lessee controls. | URAA could change governing law; certification warranted. | Certification denied. |
| Whether Count I remains live given mootness after avoidance | HSBC has interests requiring resolution as to record ownership and distribution. | Avoidance moots record-ownership and distribution issues. | Count I denied as moot. |
| Whether HSBC's claims can be reclassified as unsecured after avoidance | Avoidance supports reclassification of claims. | Reclassification unnecessary or improper if avoidance not granted. | Reclassification of HSBC's claims as unsecured, nonpriority is granted. |
Key Cases Cited
- Baldwin v. Snowden, 11 Ohio St. 203 (Ohio 1860) (certificate of acknowledgment generally conclusive absent fraud)
- Hardesty v. Citifinancial, Inc. (In re Roberts), 402 B.R. 808 (Bankr.S.D.Ohio 2010) (courts reject arguments that URAA supersedes Smith's Lessee)
- In re Sauer, 417 B.R. 523 (Bankr.S.D.Ohio 2009) (avoidance and reclassification of claims after mortgage avoidance)
- Noland v. Burns (In re Burns), 435 B.R. 503 (Bankr.S.D.Ohio 2010) (addressed related issues in Ohio bankruptcy context)