            By order of the Bankruptcy Appellate Panel, the precedential effect
                of this decision is limited to the case and parties pursuant to
            6th Cir. BAP LBR 8013-1(b). See also 6th Cir. BAP LBR 8010-1(c).

                                  File Name: 07b0016n.06

          BANKRUPTCY APPELLATE PANEL OF THE SIXTH CIRCUIT

In re: SAMUEL G. WILSON and                     )
LIZA F. WILSON,                                 )
                                                )
            Debtors.                            )
________________________________________        )
                                                )
BEVERLY BURDEN, Trustee,                        )
                                                )            No. 06-8065
            Plaintiff-Appellee,                 )
                                                )
v.                                              )
                                                )
THE CIT GROUP/CONSUMER FINANCE INC.,            )
and SELECT PORTFOLIO SERVICING, INC.,           )
                                                )
            Defendants-Appellants.              )
________________________________________        )


                     Appeal from the United States Bankruptcy Court
                  for the Eastern District of Kentucky, Ashland Division.
                             No. 05-10032; Adv. No. 05-1014.

                                    Argued: May 2, 2007

                         Decided and Filed: November 14, 2007

        Before: AUG, LATTA, and PARSONS, Bankruptcy Appellate Panel Judges.

                                  ____________________

                                        COUNSEL

ARGUED: John P. Brice, WYATT, TARRANT & COMBS, Lexington, Kentucky, for Appellants.
John D. Kermode, ATKINSON, SIMMS & KERMODE, Lexington, Kentucky, for Appellee. ON
BRIEF: John P. Brice, WYATT, TARRANT & COMBS, Lexington, Kentucky, for Appellants.
John D. Kermode, ATKINSON, SIMMS & KERMODE, Lexington, Kentucky, for Appellee.
                                     ____________________

                                           OPINION
                                     ____________________

       J. VINCENT AUG., JR., Chief Bankruptcy Appellate Panel Judge. The CIT Group/
Consumer Finance, Inc. (“CIT”) and Select Portfolio Servicing, Inc. (“Select Portfolio”) (collectively
the “Creditors”), appeal the bankruptcy court’s Memorandum Opinion and the accompanying
Judgment granting summary judgment for Beverly Burden, the chapter 13 trustee (the “Trustee”),
based on the court’s determination that CIT’s mortgage did not provide constructive notice to
subsequent purchasers or creditors because it was not properly acknowledged under Kentucky law.
Thus, it was subject to avoidance by the Trustee pursuant to 11 U.S.C. § 544. For the reasons that
follow, the Memorandum Opinion and Judgment are AFFIRMED.
                                    I. ISSUES ON APPEAL
       At issue is whether the grant of summary judgment in favor of the Trustee is reversible error.
Essential to this determination is whether the mortgage at issue was sufficiently acknowledged so
as to be capable of recordation, thus giving constructive notice to subsequent creditors or purchasers
and defeating the Trustee’s avoidance powers.
                    II. JURISDICTION AND STANDARD OF REVIEW
       The Bankruptcy Appellate Panel (“BAP”) of the Sixth Circuit has jurisdiction to decide this
appeal. By order entered September 8, 2006, the United States District Court for the Eastern District
of Kentucky authorized appeals to the BAP. A final order of the bankruptcy court may be appealed
as of right. 28 U.S.C. § 158(a)(1). For purposes of appeal, a final order “ends the litigation on the
merits and leaves nothing for the court to do but execute the judgment.” Midland Asphalt Corp. v.
United States, 489 U.S. 794, 798, 109 S. Ct. 1494, 1497 (1989) (citations omitted). The bankruptcy
court’s order granting the Trustee’s motion for summary judgment resulting in the avoidance of
CIT’s mortgage lien is a final order and states conclusions of law which are reviewed de novo,
viewing all the evidence in the light most favorable to the non-moving party. Treinish v. Norwest
Bank Minn., N.A. (In re Periandri), 266 B.R. 651, 653 (B.A.P. 6th Cir. 2001); Tinsley v. Gen.
Motors Corp., 227 F.3d 700, 703 (6th Cir. 2000). “De novo means that the appellate court




                                                 -2-
determines the law independently of the trial court’s determination.” In re Periandri, 266 B.R. at
653.
       “There are no factual disputes. Hence, summary judgment is appropriate for one of the
parties.” Rogan v. Am.’s Wholesale Lender d/b/a Countrywide Home Loans, Inc. (In re Vance), 99
F. App’x 25, 27 (6th Cir. 2004).
                                          III.   FACTS
       On or about May 8, 2001, Samuel and Liza Wilson financed a $65,741 loan with CIT,
secured by a mortgage lien against their house and lot located on 2721 County Road, Ashland,
Kentucky. They executed mortgage documents that were then recorded in the Boyd County Clerk’s
office on May 16, 2001. Select Portfolio is servicing the mortgage. The mortgage contains the
following acknowledgment:
               IN WITNESS WHEREOF, the undersigned (has-have) signed this instrument
       on the date and year first above written.

                                             /s/Samuel G. Wilson             (Seal)
                                             SAMUEL G. WILSON

                                             /s/ Liza Wilson                 (Seal)
                                             LIZA WILSON

       STATE OF KENTUCKY
       COUNTY OF /hw/ Boyd ss.                                               (Seal)

       The foregoing instrument was acknowledged before me this 08 day of MAY, 2001.

       My commission expires /hw/ 11-30-02             /s/ Douglas Strayer
                                                       (Notary Public)

       Prepared by /s/ Douglas Strayer       /hw/ Bourbon            County, Kentucky.
                      (Signature)

       The Wilsons filed a voluntary petition for relief under chapter 13 of the Bankruptcy Code on
January 17, 2005. On May 13, 2005, the Trustee initiated an adversary proceeding against the
Creditors seeking to avoid the mortgage on the Debtors’ County Road property pursuant to
Bankruptcy Code § 544. According to the Trustee, the acknowledgment in CIT’s mortgage securing
the debt from the Debtors is defective because the notary’s statement does not identify the Debtors
as the individuals who acknowledged the execution of the mortgage. Therefore, under Kentucky


                                                 -3-
law, the mortgage does not provide constructive notice to subsequent lien creditors or purchasers
even though it was recorded. The Trustee filed a motion for summary judgment urging that
inasmuch as the mortgage was defectively acknowledged, it should be avoided and preserved for the
benefit of the estate under the holding of Vance, 99 F. App’x 25 (6th Cir. 2004).

       The Creditors disputed that the mortgage was defectively acknowledged and argued that the
mortgage provided constructive notice to subsequent creditors or purchasers because it was recorded
and was properly acknowledged even though the Debtors were not named in the notary’s certificate
of acknowledgment. According to the Creditors, the fact that Debtors’ names are the only omissions
distinguishes this mortgage acknowledgment from the one in Vance in which the date and place of
the acknowledgment were also omitted. The Creditors further argued that the Uniform Recognition
of Acknowledgments Act, as enacted in Kentucky, was not meant to replace Kentucky’s recording
statutes, which require that the notary only certify the fact and place of an acknowledgment. Rather,
the Uniform Act was meant to provide an additional method of proving notarial acts. The Creditors
finally argued that, if read together, several of the Kentucky acknowledgment statutes lead to the
conclusion that the acknowledgment without the Debtors’ names in the certificate itself substantially
complies with the statutory requirements rendering a deed capable of recordation and thus, sufficient
to provide constructive notice to subsequent purchasers.

       Relying on precedent from the Kentucky Supreme Court and the United States Court of
Appeals for the Sixth Circuit, the bankruptcy court determined as a matter of law that the
acknowledgment here does not satisfy applicable statutory requirements because it does not identify
the Debtors as the persons who acknowledged execution of the mortgage. Consequently, the
mortgage was not “acknowledged . . . according to law” as required by Kentucky Revised Statute
§ 382.270 in order to be “valid against a purchaser for valuable consideration, without notice thereof
. . . .” The bankruptcy court concluded, therefore, that the mortgage was insufficient to put the
Trustee as a hypothetical bona fide purchaser on notice of CIT’s lien and that summary judgment
in favor of the Trustee was appropriate. Accordingly, the Memorandum Opinion and Judgment were
entered on August 17, 2005, avoiding CIT’s lien and preserving it for the benefit of the estate. The
Creditors timely filed this appeal.




                                                 -4-
       The Creditors assert much the same arguments on appeal as they did before the bankruptcy
court. They complain that the bankruptcy court’s decision is an overly broad reading of the Sixth
Circuit’s Vance opinion and ignores the arguments and authorities they cite in support of a contrary
outcome. The Trustee responds that the issues and mortgage here are essentially the same as those
in Vance. She further contends that the additional authorities cited by the Creditors are not
applicable to the issues here and that the bankruptcy court’s application of Vance in this case was
correct.

                                       IV. DISCUSSION

       Pursuant to the Bankruptcy Code, in effect at the time the Debtors’ filed their petition,1 the
Trustee is considered a bona fide purchaser of the Debtors’ real estate and may therefore avoid
certain obligations placed on the property that are voidable under state law. 11 U.S.C. § 544; see
also Rogan v. Bank One, N.A. (In re Cook), 457 F.3d 561, 566 (6th Cir. 2006). Kentucky law
governs the question of whether CIT’s security interest is superior to the Trustee’s interests in the
Debtors’ real estate. Id. It does not matter whether the Trustee personally knew of the mortgage.
“Rather, the inquiry focuses on whether a bona fide purchaser would have notice” under Kentucky
law. Thacker v. United Cos. Lending Corp., 256 B.R. 724, 728 (W.D. Ky. 2000).

       At the time the Debtors executed the mortgage and through the time the bankruptcy court
entered its Memorandum Opinion and Judgment awarding summary judgment in favor of the
Trustee, Kentucky Revised Statute § 382.270 provided:

       382.270 Instruments not valid against purchasers or creditors unless recorded
       No deed or deed of trust or mortgage conveying a legal or equitable title to real
       property shall be valid against a purchaser for a valuable consideration, without
       notice thereof, or against creditors, until such deed or mortgage is acknowledged or
       proved according to law and lodged for record. As used in this section “creditors”
       includes all creditors irrespective of whether or not they have acquired a lien by legal
       or equitable proceedings or by voluntary conveyance.


       1
         Because the Debtors filed their bankruptcy petition prior to October 17, 2005, the case is
governed by the Bankruptcy Code without regard to the 2005 amendments. See Bankruptcy Abuse
Prevention and Consumer Protection Act of 2005, Pub. L. No. 109-8, § 150(b)(1), 119 Stat. 23, 216
(2005). All statutory references are to the Bankruptcy Code, 11 U.S.C. §§ 101 to 1330 (2004),
unless otherwise specifically noted.

                                                 -5-
Ky. Rev. Stat. Ann. § 382.270.2 Another statute that is relevant to this case, Kentucky Revised
Statute § 423.130, provides:

       423.130 Certificate of person taking acknowledgment
       The person taking an acknowledgment shall certify that:
       (1) The person acknowledging appeared before him and acknowledged he executed
       the instrument; and
       (2) The person acknowledging was known to the person taking the acknowledgment
       or that the person taking the acknowledgment had satisfactory evidence that the
       person acknowledging was the person described in and who executed the instrument.

       In State Street Bank, the Kentucky Supreme Court interpreted the phrase “without notice
thereof” as used in Kentucky Revised Statute § 382.270 to mean “without actual knowledge of the
existence of a mortgage, either unrecorded or improperly recorded, or knowledge of such facts as
would lead a reasonably prudent person under like circumstances to inquire into the matter and
discover the existence of that mortgage.” State Street Bank & Trust Co. v. Heck’s, Inc., 963 S.W.2d
626, 630 (Ky. 1998). As explained by the district court in Thacker,

       In State Street Bank, an improperly executed mortgage had been recorded. The court
       found that “the recordation of an unrecordable instrument does not constitute
       constructive notice.” [State Street Bank, 963 S.W.2d at 630]. The court concluded
       that the inquiry did not end; other factors apart from the recording itself could
       provide notice. In State Street, the mortgage at issue was referenced in another
       mortgage and the subordination agreement between the parties had been duly
       recorded. These factors wholly separate from the recorded document gave notice.

Thacker, 256 B.R. at 729. In Thacker the district court interpreted the State Street Bank holding that
an unrecordable instrument does not constitute constructive notice to also mean that the unrecordable




       2
           The statute was amended effective July 12, 2006, to provide that:
       [I]f a deed or deed of trust or mortgage conveying a legal or equitable title to real
       property is not so acknowledged or proved according to law, but is or has been, prior
       to July 12, 2006, otherwise lodged for record, such deed or deed of trust or mortgage
       conveying a legal or equitable title to real property or creating a mortgage lien on real
       property shall be deemed to be validly lodged for record for purposes of KRS
       Chapter 382, and all interested parties shall be on constructive notice of the contents
       thereof.

                                                  -6-
instrument does not provide subsequent purchasers with inquiry notice because the distinction
between the two would be illusory. Id.

       The case of Baker v. CIT Group/Consumer Fin., Inc. (In re Hastings), 353 B.R. 513 (Bankr.
E.D. Ky. 2006) is substantially similar to the appeal before the Panel. In Hastings, the bankruptcy
court concluded that a mortgage was void where the names of the mortgagors were left off the
acknowledgment and that the words “acknowledged before me”3 could not make an otherwise
deficient notary clause satisfactory for recording purposes:

       [Creditor] takes the position that the words “acknowledged before me” in subsection
       (3) render the certificate of acknowledgment valid, even though the certificate does
       not identify the Debtors. Likewise, subsection (3) does not recite a requirement that
       the notary sign his or her name to the acknowledgment, but we do not believe the
       Legislature intended to validate acknowledgments which are not signed by the notary.
       This provision is not a stand-alone indicia of validity. It is intended to be taken in the
       context of all the regular requirements for a valid certificate of acknowledgment.
       Use of the words “acknowledged before me” is therefore insufficient in the absence
       of the elements set out in KRS 423.130 which sets out the requirements for a proper
       acknowledgment clause.

In re Hastings, 353 B.R. at 516-17. The bankruptcy court’s reasoning is persuasive.

       In Vance, the Sixth Circuit was presented with the same issue that is before this Panel under
the same Kentucky statutes that are relevant to this appeal. The Sixth Circuit determined that a
notary acknowledgment is defective and does not provide notice to a bankruptcy trustee where the


       3
           The words "acknowledged before me" mean:
       (1) That the person acknowledging appeared before the person taking the
       acknowledgment;
       (2) That he acknowledged he executed the instrument;
       (3) That, in the case of:
             (a) A natural person, he executed the instrument for the purposes therein stated;
             ...
       (4) That the person taking the acknowledgment either knew or had satisfactory
       evidence that the person acknowledging was the person named in the instrument or
       certificate.
Ky. Rev. St. § 423.150 (West 2006).

                                                  -7-
acknowledgment does not provide: (1) the identity and/or names of those who signed the mortgage;
(2) the name of the county where the acknowledgment was taken; and (3) the date of the
acknowledgment. In re Vance, 99 F. App’x. at 26.

          Although the Vance decision was not published, it is instructive as to how the Sixth Circuit
would analyze and determine the issue before this Panel. Additionally, notwithstanding the
Creditors’ contrary argument, the circumstances in Vance are substantially similar to those in this
appeal. Furthermore, the Sixth Circuit similarly held in a published opinion addressing Tennessee
law that a bankruptcy trustee could avoid a mortgage because the notary acknowledgment failed to
provide the names of the individuals who had signed the mortgage. See Gregory v. Ocwen Fed.
Bank (In re Biggs), 377 F.3d 515 (6th Cir. 2004). We observe that Tennessee law on this issue is
not distinguishable from Kentucky law and find the Sixth Circuit’s discussion in Biggs regarding the
importance of naming the signor in the acknowledgment to be particularly helpful. The Sixth Circuit
stated:

          [T]he authentication of a deed of trust is not a purposeless formality. The procedure
          serves to verify the identity of the individual signing the instrument and to establish
          a fraud-free system for recording the ownership of real property–a necessary
          prerequisite to any free market. In this instance, the integrity of the acknowledgment
          is placed in doubt because it omits the most important information on the
          acknowledgment form: who, if anyone, is doing the acknowledging? Failing to
          name the individuals who signed the deed of trust bears directly on the ability of a
          subsequent purchaser of real property to verify that the instrument was signed by the
          true property owners. Without it, a purchaser is left to wonder who appeared before
          the notary, if indeed anyone appeared before the notary, to acknowledge their
          signatures. In this sense, the missing names “lend [ ] uncertainty about the legal
          effectiveness of the instrument and for that reason alone the acknowledgment fails
          substantially to comply with Tennessee law.”

Id. at 519 (citations omitted).

          We are constrained by the Sixth Circuit’s decisions in Biggs and Vance. The bankruptcy
court did not err in finding that the acknowledgment clause in this case was defective and therefore,
did not provide constructive or inquiry notice to the Trustee.

                                         V. CONCLUSION

          For the foregoing reasons, the decision of the bankruptcy court is AFFIRMED in all respects.

                                                    -8-
