AUDREY R. EVANS, Bankruptcy Judge.
Now before the Court is the Plaintiffs' Motion for Summary Judgment filed on February 1, 2012. On February 21, 2012, Citimortgage, Inc. ("
This Court has jurisdiction pursuant to 28 U.S.C. §§ 157(a) and 1334. This is a core proceeding within the meaning of 28 U.S.C. § 157(b)(2)(K).
Rule 56 of the Federal Rules of Civil Procedure, as applied to these proceedings through Federal Rule of Bankruptcy Procedure 7056, provides that summary judgment shall be granted "if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(a). A genuine issue of
Based on the evidence submitted, the Court finds the following facts are not in dispute:
1. In 2004, Rickey and Telesa Huskey (the "
2. The Seller executed a deed to convey the property to the Plaintiffs. However, the legal description in the deed only included 45 acres (the "
3. The Plaintiffs built a home on the 20 Acre Tract.
4. At some point between the years 2004 and 2007, the Plaintiffs executed a note and mortgage in favor of Ameriquest Mortgage Company ("
5. On April 13, 2007, the Plaintiffs refinanced their debt with Ameriquest by executing a note (the "
6. The Mortgage was filed in the real property records for Independence County. The legal description on the Mortgage described only the 45 Acre Tract, and specifically excluded the 20 Acre Tract. The Mortgage states that the encumbered property is located in White County, but the encumbered property is actually located in Independence County.
7. The same day the Plaintiffs executed the Note, April 13, 2007, Gecko transferred the Note to Citi by signing an allonge (the "
8. Gecko also transferred the Mortgage to Citi by signing an Assignment of Mortgage (the "
9. The Assignment was filed in the real property records for Independence County. The Assignment states that the mortgaged property is located in White County.
10. On July 2, 2008, Seller conveyed the 20 Acre Tract to the Plaintiffs through a Warranty Deed.
11. On July 3, 2009, the Plaintiffs filed a Chapter 13 bankruptcy case.
12. The Plaintiffs filed a Chapter 13 Plan (the "
13. On July 27, 2009, Citi filed a secured proof of claim for $150,410.65 in the Plaintiffs' bankruptcy case. Citi attached the Note, Allonge, Mortgage, and Assignment as support for its claim.
14. The Plan was confirmed on August 19, 2010.
15. Two days prior to confirmation, on August 17, 2010, the Plaintiffs filed an adversary proceeding requesting a determination as to the validity, priority, and extent of Citi's lien; seeking to avoid Citi's lien under 11 U.S.C. § 544; and objecting to Citi's proof of claim.
16. On February 1, 2012, the Plaintiffs filed this Motion for Summary Judgment in the adversary proceeding.
Although the Court ultimately denies this Motion for Summary Judgment, after reviewing the evidence presented, the Court makes the following findings of fact and conclusions of law:
1. From a visual comparison of Mr. Keever's signatures on the Allonge and the Assignment, the Court concludes that it is not possible that the same person signed the two documents. As a result, the Court finds that at least one of the two signatures is a forgery.
2. The legal description on the Mortgage specifically excluded the 20 Acre Tract. As a result, the Court finds that Citi does not presently have a lien on the 20 Acre Tract.
In their Motion for Summary Judgment, the Plaintiffs argue that Citi does not have the right to enforce the Note or the Mortgage. The Plaintiffs argue that Citi cannot enforce the Note because the Allonge was not properly endorsed, and failed to effectively transfer the Note from Gecko to Citi. The Plaintiffs argue that Citi cannot enforce the Mortgage because the Plaintiffs can avoid the Mortgage under 11 U.S.C. § 544, and because errors in the property description make the Mortgage invalid. Following a thorough review of the arguments and evidence, the Court denies the Plaintiffs' Motion for Summary Judgment. The Court discusses its determination with regard to each of the Plaintiffs' arguments in greater detail below.
The Plaintiffs assert that Citi does not have authority to enforce the Note because the Allonge (which purports to transfer the Note from Gecko to Citi) was not properly endorsed, and thus, failed to effectively transfer the Note to Citi. The Plaintiffs argue that the signature of the Gecko representative signing the Allonge, Charles Gabriel Keever, is a forgery. Mr. Keever's signature appears on the Allonge as the Gecko representative authorizing the transfer to Citi. Mr. Keever's signature also appears on the Assignment, although only as a witness to the Assignment, and not as the person actually authorizing the transfer to Citi. The Plaintiffs point out that Mr. Keever's signature on the Allonge and his signature as a witness to the Assignment are drastically different.
A visual comparison of the two signatures leaves no question that they cannot both be Mr. Keever's signature. From the stark discrepancy between the two signatures, the Court finds that at least one of the two signatures is a forgery. However,
The Plaintiffs assert that Citi does not have the right to enforce the Mortgage because the errors in the property description either (1) allow the Plaintiffs to avoid Citi's lien under 11 U.S.C. § 544, or (2) cause the property description to be so defective that the Mortgage is invalid. There are two errors on the Mortgage that form the basis of these arguments. The first is that the Mortgage states that the property is located in White County; it is actually located in Independence County. The second is that the property description specifically excludes the 20 Acre Tract from the Mortgage. Neither party disputes that these errors exist on the face of the Mortgage.
Under the facts and circumstances of this case, the Plaintiffs do not have standing to avoid Citi's lien under § 544. Section 544(a)(3) states:
11 U.S.C. § 544(a)(3). The language of § 544(a)(3) only refers to "the trustee" as having the avoidance power; it does not make a similar reference to the Chapter 13 debtor. While the Eighth Circuit has not conclusively determined whether the term "trustee" might be interpreted to include the Chapter 13 debtor, the Court's review of Eighth Circuit authority strongly encourages a narrow interpretation. See In re Lauer, 98 F.3d 378, 388 (8th Cir.1996) (interpreting the term "trustee" in § 548 to exclude creditors); In re Merrifield, 214 B.R. 362, 364 (8th Cir. BAP 1997) ("While we acknowledge that some courts have allowed Chapter 13 debtors to exercise the trustee's avoidance powers, we think those cases are inconsistent with the bankruptcy code."); In re Hart, 2010 WL 2509918 (Bankr.D.Neb.2010) ("Courts in the Eighth Circuit tend to follow the plain language of the statute and hold that debtors do not have standing to bring a § 547 action.").
As an alternative to avoiding the lien under § 544(a)(3), the Plaintiffs claim that the errors cause the property description to be so defective that the Mortgage is invalid. There are certain components of a mortgage document that are essential to the validity of the mortgage. One such component is a description of the property encumbered by the mortgage. 59 C.J. S. Mortgages § 146 ("A mortgage or deed of trust, in order to be effective, must contain some description of the land intended to be covered."). This Court has previously discussed the legal standard for determining whether a property description is valid:
In re Allen, No. 1:04-ap-1021 (Bankr. E.D.Ark. May 11, 2005).
Where a deficient description makes the mortgage invalid, the mortgage holder may have an opportunity to correct the deficiency through reformation. "Reformation is an equitable remedy which is available when the parties have reached a complete agreement but, through mutual mistake, the terms of their agreement are not correctly reflected in the written instrument purporting to evidence that agreement." Lambert v. Quinn, 32 Ark.App. 184, 187, 798 S.W.2d 448, 449 (Ark. Ct.App.1990); In re Stewart, 422 B.R. 185, 190 (Bankr.W.D.Ark.2009) ("In Arkansas, reformation of instruments is an equitable remedy that is appropriate when the instrument evidencing the agreement does not reflect the terms of the agreement due to mutual mistake of the party.").
The Court cannot determine from the record provided whether the error of using the wrong county name makes the property description defective. The Court is unable to make that determination because the full legal description of the property was not provided as part of the summary judgment pleadings.
The analysis is slightly different (although ultimately ending with the same result) when determining whether the error of excluding the 20 Acre Tract makes the property description defective. It is not disputed that the 20 Acre Tract was excluded from the property description. See Plaintiffs' Requests for Admissions, Admission No. 1 ("The 20 acre tract where the Plaintiffs' house is located at 1899 Thida Road was excluded from the legal description contained in the Mortgage."). There is no need to analyze whether the 20 Acre Tract can be identified from the Mortgage.
However, that determination does not bring this case to an end. The Court cannot make a determination based on the record before it as to whether Citi has the right to correct that error through the
The Plaintiffs assert that attorney fees should be awarded in this matter pursuant to the Court's authority, under 11 U.S.C. § 105, to prevent an abuse of the bankruptcy process. However, the Plaintiffs' argument that the Defendants have abused the bankruptcy process hinges on their allegations that the Note is unenforceable. As discussed above, that issue is not appropriate for determination on summary judgment, and thus, neither is an award of attorney fees based on that determination. Therefore, the Plaintiffs' request for attorney fees is denied.
Accordingly, it is hereby