Trauner v. First Tennessee Bank National Ass'n (In re Simpson)

Citations: 544 B.R. 913; 2016 Bankr. LEXIS 320Docket: CASE NO. 15-56155-WLH; ADVERSARY PROCEEDING NO: 15-05311

Court: United States Bankruptcy Court, N.D. Georgia; February 3, 2016; Us Bankruptcy; United States Bankruptcy Court

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The Court addressed the Defendant's Motion to Dismiss and the Plaintiff's Opposition, treating them as cross-motions for summary judgment by mutual agreement. The central issue is the validity of a security deed under Georgia law, specifically whether it contains the necessary signatures and formalities. The Court determined the deed is invalid due to a clear defect, which fails to provide constructive notice to a bona fide purchaser. 

Jurisdiction is established under 28 U.S.C. §§ 1334 and 157, classifying this as a core proceeding. The facts are undisputed: on October 24, 2004, the Debtor executed a second priority security deed for a property in Atlanta, securing a home equity line of credit in favor of First Horizon Home Loan Corporation, which later merged with First Tennessee Bank, the current holder of the deed. The deed was recorded on November 8, 2004. 

A dispute arose regarding the signature page, which features two sections: one for the Debtor's signature and witness attestation, and another for an acknowledgment clause. The witness signature is illegible, and the acknowledgment lacks a date, raising questions about compliance with legal requirements. The Debtor filed for Chapter 7 bankruptcy on April 3, 2015, and the Chapter 7 Trustee initiated this adversary proceeding against First Tennessee on August 7, 2015, seeking to avoid the security interest and preserve the deed for the bankruptcy estate. The Trustee requested that the motion to dismiss be considered as a motion for summary judgment, leading to the current proceedings focused on the deed's validity.

Summary judgment is warranted when there is no genuine issue of material fact, and the moving party is entitled to judgment as a matter of law, as outlined in Federal Rule of Civil Procedure 56(c) and relevant case law. The substantive law determines which facts are material, and a factual dispute is deemed genuine if a reasonable jury could favor the nonmoving party. The moving party must inform the court of the basis for its motion and identify evidence that shows the absence of a genuine issue of material fact. The nonmoving party must present specific facts, rather than just allegations, to demonstrate a genuine dispute over material facts. Courts must view evidence in the light most favorable to the nonmoving party.

Under 11 U.S.C. 544(a)(3), a bankruptcy trustee can avoid property transfers that are voidable by a bona fide purchaser of real property, regardless of whether such a purchaser exists. A bona fide purchaser is not bound by deeds without constructive notice. According to Georgia law, a security deed with a patent defect does not provide constructive notice, and a patent defect is one that is obvious, while a latent defect is not apparent on the deed's face. A security deed must be attested or acknowledged according to specific legal requirements, including the need for an official witness and an unofficial witness. 

The key issue for determination is whether the Security Deed is patently defective. The Trustee argues it is defective due to the lack of proper attestation or acknowledgment by an official witness, while First Tennessee contends that the notary’s signature should be regarded as sufficient attestation, regardless of its placement on the document.

The validity of the unofficial witness signature is undisputed. Under Georgia law at the time the Security Deed was executed, both an official and an unofficial witness signature were required, with acknowledgment and attestation serving as alternative authentication methods (O.C.G.A. 44-14-33). Attestation involves witnessing the execution of a document and signing as a witness, while acknowledgment entails a grantor declaring the document before a competent officer. Georgia law treats 'attesting' and 'attestation' synonymously, defining them as the act of witnessing a signature without requiring acknowledgment (O.C.G.A. 45-17-1(1)). There are no specific wording requirements for either attestation or acknowledgment, but certain common phrases help distinguish them. Valid attestations often include phrases indicating that the witness saw the signing. For instance, phrases like "in presence of" have been upheld as sufficient for attestation (Hansen v. Owens, 132 Ga. 648; Hooten v. Goldome Credit Corp., 224 Ga. App. 581). Acknowledgments are typically identified by language in a jurat or acknowledgment certificate, confirming that a signer appeared before a notary to affirm the document's assertions (91 AmJur. Proof of Facts 3d 345). The signature page signed by notary Charles Weldon includes language indicating an acknowledgment. The attestation language is interrupted by the acknowledgment portion, leading the Court to conclude that Weldon’s signature represents an attempted acknowledgment rather than an attestation.

Both parties examined the relevance of *Bloodworth v. McCook*, which determined that an individual who signed above the attestation clause of a will can still serve as a valid witness, as the clause is not mandatory. Subsequent cases reference *Bloodworth* to assert that all witnesses must be produced for probate in solemn form. However, some legal interpretations suggest that formal recitals may not be necessary for valid attestation. 

The court emphasized the significance of notary Charles Weldon's signature placement within the acknowledgment certificate, asserting it indicates acknowledgment rather than mere attestation. Under Georgia law, notaries are mandated to sign their certification with their commission name and record the date of the notarial act, but this date requirement does not apply to attestations of deeds. Weldon signed and sealed the acknowledgment but did not include a date. 

The court must assess whether this omission invalidates the acknowledgment, potentially rendering the Security Deed defective. Case law indicates a strict adherence to statutory requirements for notarial acts, including the necessity of recording dates. Instances have demonstrated that courts have invalidated acknowledgments due to missing dates. This court concluded that Weldon's failure to include the date invalidates the acknowledgment, emphasizing the importance of the acknowledgment date in relation to the deed's validity and authenticity.

Failure to include the date in a notary acknowledgment is treated as a defect under Georgia law, making the deed ineligible for recording if it lacks proper attestation or acknowledgment. According to O.C.G.A. 45-17-8.1, a valid acknowledgment must include the date of the notarial act. O.C.G.A. 44-2-18 allows certain execution defects in a security deed to be remedied by an affidavit from a subscribing witness, provided it meets statutory requirements and is made before an authorized officer. This provision supports substantial compliance, allowing for some leniency in the language used, as long as there is no suspicion of fraud.

However, in the present case, the remedial provision does not apply because no subscribing witness affidavit was submitted with the Security Deed. The only documents following the Signature Page were the Waiver, Rider, and property description, none of which confirm the execution or attestation of the Security Deed. The Waiver merely reflects the Debtor's agreement to certain terms and does not serve as an acknowledgment of the Security Deed's execution. Previous case law indicates that such a waiver cannot replace the required attestation of the deed itself, reinforcing that the absence of a proper subscribing witness affidavit invalidates the deed's eligibility for recording.

In Wells Fargo Bank, N.A. v. Gordon (In re Codrington), the court denied First Tennessee’s Motion to Dismiss and granted judgment for the Trustee. First Tennessee’s security interest was avoided under 11 U.S.C. § 544, and the Security Deed was preserved for the benefit of the Debtor’s bankruptcy estate pursuant to 11 U.S.C. §§ 550 and 551. The excerpt also notes an amendment to O.C.G.A. § 44-14-33, effective July 1, 2015, which requires that a mortgage be signed by the maker and attested by an officer and one additional witness for recording. The amendment clarifies that only attestation is sufficient for recording and executing deeds, removing the previous acknowledgment requirement. Additionally, the precedent set in Magarahan was overruled by Leeds Bldg. Prods. Inc. v. Sears Mortg. Corp. regarding the impact of a latently defective attestation on constructive notice for improperly recorded deeds.