       RECOMMENDED FOR FULL-TEXT PUBLICATION              2    In re Biggs                                No. 03-5626
            Pursuant to Sixth Circuit Rule 206

    ELECTRONIC CITATION: 2004 FED App. 0250P (6th Cir.)                      _________________
                File Name: 04a0250p.06
                                                                                  COUNSEL
UNITED STATES COURT OF APPEALS                            ARGUED: Frank H. Reeves, HIX & GRAY, Nashville,
                                                          Tennessee, for Appellant. Jeanne Burton Gregory, GIBSON,
              FOR THE SIXTH CIRCUIT                       GREGORY & GWYN, Nashville, Tennessee, for Appellee.
                _________________                         ON BRIEF:         Thomas W. Lawless, WILSON &
                                                          ASSOCIATES, Nashville, Tennessee, for Appellant. Jeanne
In re: RICHARD GLENN BIGGS X                              Burton Gregory, GIBSON, GREGORY & GWYN, Nashville,
and KATHY JEAN BIGGS, a/k/a -                             Tennessee, for Appellee.
KATHY JEAN MELTON,                -
                                  -   No. 03-5626                            _________________
                       Debtors. -
________________________ >                                                       OPINION
                                  ,                                          _________________
                                  -
JEANNE BURTON GREGORY ,           -                         SUTTON, Circuit Judge. In this bankruptcy case, Ocwen
Trustee,                          -                       Federal Bank claims that a deed of trust is valid against
             Plaintiff-Appellee, -                        subsequent purchasers of the property, even though the
                                  -                       required acknowledgment omits the names of the individuals
                                  -                       purporting to acknowledge their signatures on the deed. The
            v.
                                  -                       bankruptcy and district courts each held that a deed of trust
                                  -                       omitting this information was invalid under Tennessee law,
OCWEN FEDERAL BANK,               -                       and so do we. We affirm.
          Defendant-Appellant. -
                                  -                                                    I.
                                 N
       Appeal from the United States District Court         On November 6, 1997, Richard and Kathy Biggs (the
    for the Middle District of Tennessee at Nashville.    “debtors”) executed a deed of trust on their Tennessee home,
     No. 02-00904—Aleta A. Trauger, District Judge.       securing a $65,000 loan and naming Seacoast Equities, Inc.
                                                          as the beneficiary. The deed of trust consisted of four pages
                 Argued: June 16, 2004                    and contained the following partially completed, standard
                                                          acknowledgment form on the last page:
           Decided and Filed: July 29, 2004

Before: SILER, DAUGHTREY, and SUTTON, Circuit
                   Judges.


                            1
No. 03-5626                                   In re Biggs     3    4      In re Biggs                                No. 03-5626

  STATE OF TENNESSEE                  County ss: Davidson          before the notary.” Bankr. Ct. Order Avoiding Lien. Ocwen
                                                                   appealed the decision to the district court, which affirmed.
    On this 6 day of November 1997, before me                      “The omission of the names in the acknowledgment,” the
  personally appeared                                              district court determined, “cannot be viewed . . . as [a]
                                                                   harmless or minor deviation[] from the standard form
                            [blank]                                language set out in the statutes. It is at the core of what an
                                                                   acknowledgment is meant to do.” D. Ct. Op. at 5.
  to me known to be the person(s) described in and who
  executed the foregoing instrument, and who                                                      II.
  acknowledged the execution of the same to be [blank]
  free act and deed. Witness my hand and official seal.              In reviewing a bankruptcy decision appealed to the district
                                                                   court, “[w]e accord no deference to the district court’s
  My Commission Expires: Indefinite                                decision [and] review de novo the bankruptcy court’s
                                                                   conclusions of law.” In re Kenneth Allen Knight Trust, 303
                       (illegible signature and notary seal)       F.3d 671, 676 (6th Cir. 2002).
                                            Notary Public
                                                                                                  A.
JA 24 (emphasis added to handwritten words). On
January 12, 1998, Seacoast Equities recorded the deed of             Commonly referred to as the “strong-arm clause,” section
trust, then sold its interest in the deed to Ocwen Federal Bank.   544(a) of the Bankruptcy Code allows the trustee to “avoid
                                                                   any transfer of property of the debtor or any obligation
   On April 9, 2001, the debtors filed a bankruptcy petition       incurred by the debtor that is voidable by . . . a bona fide
under Chapter 7, after which the bankruptcy court assigned         purchaser of real property . . . from the debtor, against whom
Jeanne Burton Gregory to be the trustee. As trustee, Gregory       applicable law permits such transfer to be perfected, that
obtained the rights of “a bona fide purchaser of real property     obtains the status of a bona fide purchaser and has perfected
. . . from the debtor [who] has perfected such transfer at the     such transfer at the time of the commencement of the case,
time of the commencement of the case, whether or not such          whether or not such a purchaser exists.” 11 U.S.C. § 544(a).
a purchaser exists.” 11 U.S.C. § 544(a)(3). Believing that the     More simply, the trustee hypothetically purchases the debtor’s
acknowledgment was defective and that her status as a bona         property at the commencement of the bankruptcy case, then
fide purchaser gave her a superior interest in the debtors’        determines whether it is subject to any valid prior interests.
home under Tennessee law, Gregory filed a complaint in the         Here, then, the question is whether Ocwen’s deed of trust
bankruptcy court to avoid the deed of trust held by Ocwen.         amounts to a valid prior interest.
  The parties moved for summary judgment, and the                    To be valid under Tennessee law, a deed of trust must be
bankruptcy court granted Gregory’s motion. In the absence          registered and acknowledged:
of the debtors’ names, the bankruptcy court reasoned, the
acknowledgment was “not in substantial compliance [with                Any of such instruments [including deeds of trust] not so
Tennessee law] and that in order for a notarization to be              . . . acknowledged and registered, or noted for
effective, it must include the names of the people who appear          registration, shall be null and void as to existing or
No. 03-5626                                 In re Biggs        5   6      In re Biggs                                  No. 03-5626

  subsequent creditors of, or bona fide purchasers from, the           Any certificate clearly evidencing intent to authenticate,
  makers without notice.                                               acknowledge or verify a document shall constitute a
                                                                       valid certificate of acknowledgment for purposes of this
Tenn. Code Ann. § 66-26-103 (emphasis added). “[A]n                    chapter and for any other purpose for which such
acknowledgment . . . is the formal statement of the person             certificate may be used under the law. It is the legislative
signing the document that his [or her] signature was freely            intent that no specific form or wording be required in
done.” In re Marsh, 12 S.W.3d 449, 453 (Tenn. 2000)                    such certificate and that the ownership of property, or the
(quotation omitted).                                                   determination of any other right or obligation, shall not
                                                                       be affected by the inclusion or omission of any specific
   To facilitate real-estate transactions, the Tennessee               words.
legislature has provided statutory forms that fulfill the
acknowledgment requirement, and all of the forms require the       Tenn. Code Ann. § 66-22-114(b) (emphasis added). We
notary to include the names of the individuals acknowledging       consider each savings statute in turn.
their signatures. See Tenn. Code Ann. §§ 66-22-107
(individuals), -108 (corporations and partnerships), & -114                                        B.
(agency relationships). While adherence to the statutory
forms guarantees that an acknowledgment will be treated as            Two recent decisions by the Tennessee Supreme Court, In
valid, the Tennessee legislature has said that “no specific        re Marsh, 12 S.W.3d 449 (Tenn. 2000), and In re Crim, 81
form or wording [is] required in such certificate and [] the       S.W.3d 764 (Tenn. 2002), point the way in explaining why
ownership of property, or the determination of any other right     Ocwen fails to satisfy the “substantial compliance” test. In re
or obligation, shall not be affected by the inclusion or           Marsh involved a missing notary seal on an acknowledgment
omission of any specific words.” Id. § 66-22-114(b). On top        to a deed of trust. In holding that the missing seal rendered
of this general relaxation of the acknowledgment requirement,      the deed of trust void against subsequent purchasers of the
Tennessee specifically forgives defective acknowledgments          property, the court explained the significance of
that in either “substance” or “intent” comply with the             acknowledgments. An acknowledgment “authenticates the
requirement. The first statute, the “substantial compliance”       due execution of a document and is the formal statement of
savings statute, reads:                                            the person signing the document that his [or her] signature
                                                                   was freely done,” and “aids in ensuring that the instrument
  The unintentional omission by the clerk or other officer         was not fraudulently executed.” In re Marsh, 12 S.W.3d at
  of any words in a certificate of an acknowledgment, or           453 (quotation omitted). A missing notary seal, the court
  probate of any deed or other instrument, shall in nowise         concluded, “is more substantial than the simple omission of
  vitiate the validity of such deed, but the same shall be         statutory language or the use of a different, yet equivalent
  good and valid to all intents and purposes, if the               word . . . . [A] seal is either affixed or not affixed; this
  substance of the authentication required by law is in the        requirement is not subject to substantial-compliance
  certificate.                                                     analysis.” Id. at 454.
Id. § 66-26-113; see also In re Akins, 87 S.W.3d 488, 492             In re Crim emphasized the importance of identifying the
(Tenn. 2002) (emphasis added). The second statute, the             parties who acknowledge the deed. Using a power of
“intent” savings statute, reads:                                   attorney, a wife attempted to sign a deed of trust on behalf of
No. 03-5626                                   In re Biggs     7    8    In re Biggs                                 No. 03-5626

her husband, but the notary used an acknowledgment form            instrument,” In re Crim, 81 S.W.3d at 768, and for that reason
saying that both the husband and wife personally appeared          alone the acknowledgment fails substantially to comply with
before him and acknowledged their signatures. 81 S.W.3d at         Tennessee law. The “substantial compliance” test “addresses
766. Building on In re Marsh, the court held that “the             the unintentional omission of words by the officer taking an
discrepancy in this case between the certificate of                acknowledgment,” In re Akins, 87 S.W.3d at 493 (emphasis
acknowledgment and the signatures on the deed of trust lends       added), not the unintentional omission of the names of the
uncertainty about the legal effectiveness of the instrument.”      acknowledging individuals.
Id. at 768; see also In re Marsh, 12 S.W.3d at 453 (“A
creditor or purchaser who examines a deed of trust should be         Ocwen’s arguments to the contrary do not hold. In re
able to assume that if it contains an acknowledgment . . . then    Akins, for example, did not involve the omission of names
it has been properly authenticated and is valid, that is, free     from the acknowledgment. It involved a failure by the notary
from apparent forgery or fraud.”). “Substantial-compliance         to indicate that she was personally familiar with the
analysis is not proper” in a setting like this one, the court      individual acknowledging the signature. This omission was
reasoned, because “the notary failed to use the prescribed         not fatal, the Tennessee Supreme Court held, because the
statutory form of acknowledgment, with the result that the         word “unmarried” next to the individual’s name in the
certificate of acknowledgment contains false statements and        acknowledgment indicated that the notary had some
indicates a lack of compliance [with Tennessee law].” In re        familiarity with the grantor. 87 S.W.3d at 495. That In re
Crim, 81 S.W.3d at 769–70.                                         Akins says Tennessee has “relaxed the requirements regarding
                                                                   the extent of a notary’s knowledge of the identity of an
   As In re Marsh and In re Crim indicate and as earlier           individual” acknowledging a signature, id. at 494, does not
decisions confirm, the authentication of a deed of trust is not    mean that Tennessee has relaxed the requirement that the
a purposeless formality. The procedure serves to verify the        name of the individual appear on the acknowledgment. This
identity of the individual signing the instrument and to           further step, in our view, would not relax the acknowledgment
establish a fraud-free system for recording the ownership of       requirement but remove it altogether.
real property—a necessary prerequisite to any free market.
See Figuers v. Fly, 193 S.W. 117, 120 (Tenn. 1917) (“A                Chronology alone makes In re Grable, 8 B.R. 363 (Bankr.
certificate of acknowledgment is an act which must in the          E.D. Tenn. 1980), a suspect basis for reversal. The case
nature of things be relied on with confidence” by buyers and       predates several recent decisions by the Tennessee Supreme
sellers.). In this instance, the integrity of the acknowledgment   Court on this topic, including In re Marsh and In re Crim.
is placed in doubt because it omits the most important             Even if that were not the case, however, we would not follow
information on the acknowledgment form: who, if anyone, is         the trail marked by the decision. In holding that the omission
doing the acknowledging? Failing to name the individuals           of names from the acknowledgment was not fatal to the deed
who signed the deed of trust bears directly on the ability of a    of trust, the court relied on the fact that the acknowledgment
subsequent purchaser of real property to verify that the           mentioned “the within named bargainor[s]” and indicated that
instrument was signed by the true property owners. Without         “they” executed the deed of trust. Id. at 365–66. The deed of
it, a purchaser is left to wonder who appeared before the          trust in turn described the debtors, the court held, and that
notary, if indeed anyone appeared before the notary, to            sufficed to establish that the notary adequately identified the
acknowledge their signatures. In this sense, the missing           individuals acknowledging their signatures. Id. at 366.
names “lend[] uncertainty about the legal effectiveness of the     Similarly, Ocwen argues, the form-printed phrase in this
No. 03-5626                                  In re Biggs     9    10   In re Biggs                                  No. 03-5626

acknowledgment—“to me known to be the person(s)                   Ocwen’s argument. As the Tennessee Supreme Court
described in and who executed the foregoing                       recognized in In re Marsh, the failure to affix a notary seal
instrument”—adequately identifies the debtors as the people       renders the acknowledgment invalid, even when the parties do
whose names can be found on the deed of trust and excuses         not dispute the notary’s authority, 12 S.W.3d at 451 n.2, and
the failure to include their names on the acknowledgment.         even though “[t]he acts of a notary public are [] presumed to
                                                                  be performed correctly,” id. at 453. The presumption applies,
   In re Grable, however, misapprehends the role of an            in short, when notaries perform the core functions of their job,
acknowledgment. To permit the names in the deed of trust to       not when they fail to perform them.
satisfy the names-in-the-acknowledgment requirement is to
eliminate the acknowledgment requirement. No one doubts                                         C.
that the names of the individuals on the deed of trust are the
names of the individuals who should appear on the                   Ocwen fares no better under the “intent” test. For many of
acknowledgment. The very point of the acknowledgment is           the same reasons that it cannot satisfy the “substantial
to have their signatures confirmed in the presence of a notary.   compliance” test, it fails to satisfy this one as well.
When notaries, however, merely take pre-printed forms and
purport to notarize them without stating whose signatures            The “intent” test looks to “the intent of the person signing
they have notarized and who, if anyone, appeared before           a document to properly acknowledge his or her signature.” In
them, they not only undermine the Tennessee legislature’s         re Akins, 87 S.W.3d at 493 (emphasis added). As In re Akins
salutary purpose in creating statutorily-approved forms but       indicates, the statute “requires only that a certificate of
also fail to accomplish the signal reason for having an           acknowledgment clearly evidence the signer’s intent to
acknowledgment in the first place. Under Ocwen’s reading          authenticate, acknowledge or verify a document,” and the
of Tennessee law, a notary merely could notarize a                acknowledgment in that case “clearly show[ed] Ronald L.
statutorily-approved form—without filling in a single blank       Akins’ intent to acknowledge his signature on the deed of
space—and that alone would suffice to satisfy the                 trust.” Id. at 495 (emphasis added; quotations omitted). The
requirement. Far from being a finicky exaltation of form over     intent at issue, then, goes to the person or persons named in
substance, the requirement that the grantors’ names appear on     the acknowledgment. Because the notary in this instance
the acknowledgment is essential to giving the                     named no one in the certificate of acknowledgment and we
acknowledgment statute the modest substance that the              cannot determine who, if anyone, intended to acknowledge
Tennessee legislature thought it deserved.                        the signatures on the deed of trust, Ocwen cannot satisfy this
                                                                  test.
  Nor does it change matters that this pre-printed form not
only has a notary’s signature on it but a date as well. That         Conceding that “naming [the individuals] in the
date no more establishes that the debtors truthfully and          acknowledgment is a sufficient—indeed, the best—means of
willfully signed the deed of trust than it establishes the date   identifying the signers,” Appellant Br. at 12, Ocwen repeats
that a real-estate fraud occurred.                                its argument that the phrase “the person(s) described in and
                                                                  who executed the foregoing instrument” adequately
  The “presumption that a sworn public official has acted         establishes the debtors’ intent to acknowledge their
lawfully,” Manis v. Farmers Bank of Sullivan County, 98           signatures. Other than In re Grable, however, Ocwen offers
S.W.2d 313, 314 (Tenn. 1936), also does not advance               no case support for this argument, and in this setting the
No. 03-5626                                  In re Biggs    11    12   In re Biggs                              No. 03-5626

argument has even less to recommend it than it does in the        certification. Therefore, the district court was correct in
“substantial compliance” setting. Words from a pre-printed        finding that the acknowledgment failed to comport with
form, even words purporting to incorporate a document that        Kentucky law.”).
the debtors have signed (namely, the deed of trust), do not
establish an intent to acknowledge their signatures when their                                III.
names nowhere appear on the acknowledgment.
                                                                    For the foregoing reasons, we affirm.
   No more persuasive is Ocwen’s reference to signature
guarantees for investment securities under the Uniform
Commercial Code. See Tenn. Code Ann. § 47-8-306
(describing the warranties made by “a person who guarantees
a signature” under various circumstances involving
investment securities). Relying on the fact statement of an
unpublished Texas Court of Appeals case, Holmes v.
Nationsbank of Texas, N.A., No. 05-95-00525-CV, 1996 WL
479640, at *2 (Tex. Ct. App. Aug. 15, 1996), a less than
formidable invocation of precedent, Ocwen claims that it is
“customary” to omit the name of the person signing the
document and merely stamp “signature guaranteed” beneath
the signature. But Ocwen offers no explanation why this
practice under the Uniform Commercial Code, if indeed it
exists, has any bearing on acknowledgment requirements.
The Tennessee legislature addresses real estate transfers and
investment securities in separate statutory provisions, which
not surprisingly contain separate requirements. Compare
Tenn. Code Ann. § 66-22-107 (prescribing the statutory
acknowledgment form for “natural persons acting in their
own right,” which includes a blank space for the person’s
name) with Tenn. Code Ann. § 47-8-306 (describing various
warranties for signature guarantees but failing to provide a
statutory form). And the Tennessee Supreme Court has never
looked to the requirements of Tennessee Code § 47-8-306 in
determining the requirements of an acknowledgment. At all
events, if we were to look to decisions involving other States’
requirements in this and other areas, we would look to a
recent holding from this Court involving Kentucky law and
acknowledgments. See In re Vance, No. 02-6537, 2004 WL
771484, at *2 (6th Cir. Apr. 8, 2004) (per curiam) (“The
notary failed to include [the individuals’ names] in the
