                 ELECTRONIC CITATION: 2008 FED App. 0005P (6th Cir.)
                              File Name: 08b0005p.06

          BANKRUPTCY APPELLATE PANEL OF THE SIXTH CIRCUIT

In re: CHRISTOPHER PATRICK NOLAN                )
       and CAROLYN ANN NOLAN,                   )
                                                )
            Debtors.                            )
______________________________________          )
                                                )
THOMAS J. GEYGAN, Trustee,                      )
                                                )             No. 07-8013
            Plaintiff-Appellee,                 )
                                                )
            v.                                  )
                                                )
WORLD SAVINGS BANK, FSB,                        )
                                                )
            Defendant-Appellant.                )
______________________________________          )



                      Appeal from the United States Bankruptcy Court
              for the Southern District of Ohio, Western Division, Cincinnati.
                          No. 05-12017; Adversary No. 05-1283.

                                  Argued: November 14, 2007

                           Decided and Filed: March 12, 2008

       Before: GREGG, PARSONS, and SCOTT, Bankruptcy Appellate Panel Judges.

                                   ____________________

                                         COUNSEL

ARGUED: J. Michael Debbeler, GRAYDON, HEAD & RITCHEY, Cincinnati, Ohio, for
Appellant. Henry E. Menninger, WOOD & LAMPING, Cincinnati, Ohio, for Appellee. ON
BRIEF: J. Michael Debbeler, GRAYDON, HEAD & RITCHEY, Cincinnati, Ohio, David A.
Freeburg, McFADDEN & FREEBURG CO., L.P.A., Cleveland, Ohio, for Appellant. Henry E.
Menninger, WOOD & LAMPING, Cincinnati, Ohio, for Appellee.
                                     ____________________

                                           OPINION
                                     ____________________

       JOSEPH M. SCOTT, JR., Bankruptcy Appellate Panel Judge. World Savings Bank, FSB
(“WSB”) appeals the bankruptcy court’s order granting summary judgment to the bankruptcy trustee
(the “Trustee”) on his complaint to avoid the mortgage lien of WSB. The bankruptcy court held that
the mortgage’s certificate of acknowledgment did not comply with Ohio law and the Trustee was
a bona fide purchaser under the Bankruptcy Code. For the reasons that follow, the bankruptcy
court’s order is AFFIRMED.

                                   I. ISSUES ON APPEAL

       The issues presented are whether the bankruptcy court was correct in ruling that the phrase
“witness my hand” was not the substantial equivalent of the phrase “acknowledged before me” under
Ohio law regarding acknowledgments and that the Trustee acquired bona fide purchaser status under
the Bankruptcy Code.

                    II. JURISDICTION AND STANDARD OF REVIEW

       The Bankruptcy Appellate Panel of the Sixth Circuit (“BAP”) has jurisdiction to hear and
decide this appeal. 28 U.S.C. § 158. The United States District Court for the Southern District of
Ohio has authorized appeals to the BAP, and neither party has timely elected to have this appeal
heard by the district court. 28 U.S.C. §§ 158(b)(6), (c)(1). A final order of a bankruptcy court may
be appealed by right under 28 U.S.C. 158(a)(1). An order is final if it “‘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). An order
granting a trustee’s motion for summary judgment resulting in the avoidance of a mortgage lien is
a final order. Treinish v. Norwest Bank Minn., N.A. (In re Periandri), 266 B.R. 651, 653 (B.A.P. 6th
Cir. 2001).

       A bankruptcy court’s grant of summary judgment is reviewed de novo. Id. Likewise, the
court’s interpretation and application of the Bankruptcy Code and state law are reviewed de novo.
Ruskin v. DaimlerChrysler Servs. N. Am., L.L.C. (In re Adkins), 425 F.3d 296, 298 (6th Cir. 2005);

                                                -2-
Van Aken v. Van Aken (In re Van Aken), 320 B.R. 620, 623 (B.A.P. 6th Cir. 2005). “De novo means
that the appellate court determines the law independently of the trial court’s determination.” O’Brien
v. Ravenswood Apartments, Ltd. (In re Ravenswood Apartments, Ltd.), 338 B.R. 307, 310 (B.A.P.
6th Cir. 2006) (citations omitted). “No deference is given to the trial court’s conclusions of law.”
Mktg. & Creative Solutions, Inc. v. Scripps Howard Broad. Co. (In re Mktg. & Creative Solutions,
Inc.), 338 B.R. 300, 302 (B.A.P. 6th Cir. 2006).

                                                    III.   FACTS

         On May 23, 2000, Christopher and Carolyn Nolan (the “Debtors”) signed a note in the
amount of $327,600 in favor of WSB for property located in West Chester, Ohio (the “Property”).
On the signature page of the mortgage, below the signatures of the Debtors and handwritten beside
the signature of Tina Harrison (“Harrison”), a notary public in the state of Ohio, is the phrase
“Witness my hand this 23rd day of May, 2000.”1 Harrison’s name is hand-printed below her
signature. Below Harrison’s name is the printed phrase “ATTACH INDIVIDUAL NOTARY
ACKNOWLEDGMENT,” beside of which are the handwritten words “See Attachment,” although
no notary acknowledgment is attached. The following page has the signatures of William Tinker and
Harrison as witnesses, and the next page has a notary stamp for Harrison.

         On December 30, 2002, the Debtors transferred the Property to the Nolan Family Limited
Partnership (the “Partnership”), and approximately one year later, on December 11, 2003, the
Partnership transferred the Property to Carolyn Nolan, Trustee of the Carolyn Nolan Trust
Agreement dated December 9, 1988 (the “Trust”).

         On March 23, 2005, the Debtors filed their joint voluntary petition for relief under chapter
7 of the Bankruptcy Code.2 The Debtors listed the Property on Schedule A and indicated that the
nature of their interest was an “equitable interest.”


         1
             Although there is dispute concerning who wrote the phrase because Harrison states in her affidavit that she
did not write it, and counsel for WSB states in briefing that the Debtors wrote it, who wrote the phrase is not a material
fact, as noted by the bankruptcy court, because it is not outcome-determinative of whether the phrase complies with Ohio
law regarding acknowledgments.
         2
            Because the Debtors filed their bankruptcy petition prior to October 17, 2005, the case is governed by the
Bankruptcy Code without regard to the amendments made by the Bankruptcy Abuse Prevention and Consumer Protection
Act of 2005. All statutory references are to the Bankruptcy Code, 11 U.S.C. §§ 101 to 1330 (2004), unless otherwise
specifically noted.

                                                           -3-
       On August 16, 2006, the Trustee filed a complaint against Carolyn Nolan, as Trustee of the
Trust, and the Debtors, individually and as general partners of the Partnership, seeking to avoid the
transfers of the Property as fraudulent conveyances. The bankruptcy court entered a consent
judgment in that adversary proceeding on August 28, 2006, avoiding the transfers and “thereby
vesting title” in the Trustee. (Jt. App. at 478.)

       The Trustee commenced this instant adversary proceeding against WSB on December 20,
2005, alleging that the mortgage was not executed in accordance with Ohio law and, therefore, was
avoidable pursuant to 11 U.S.C. § 544(a)(3). The bankruptcy court entered an order on March 21,
2007, granting the Trustee’s motion for summary judgment and denying WSB’s motion for summary
judgment. The court held that the phrase “witness my hand” does not satisfy the requirements for
an acknowledgment under Ohio law, thus making the purported acknowledgment defective such that
the Trustee, as a bona fide purchaser, could avoid the mortgage lien under the Bankruptcy Code.
WSB timely filed this appeal.

                                        IV.    DISCUSSION

A.     Whether the bankruptcy court was correct in ruling that the purported certificate of
       acknowledgment does not comply with the requirements of Ohio law regarding
       acknowledgments.
       Ohio Revised Code § 5301.01(A) states that a mortgage “shall” be signed by the mortgagor,
and that “[t]he signing shall be acknowledged by the . . . mortgagor . . . before a judge or clerk of a
court of record in this state, or a county auditor, country engineer, notary public, or mayor, who shall
certify the acknowledgment and subscribe the official’s name to the certificate of the
acknowledgment.”

       Ohio Revised Code §§ 147.53, 147.54, and 147.55 prescribe what is required of an
acknowledgment. Section 147.53 requires that the person taking an acknowledgment certify:
       (A) The person acknowledging appeared before him and acknowledged he executed
       the instrument;
       (B) 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.
Section 147.54 states that a certificate of acknowledgment is acceptable if it is in a form prescribed
by Ohio law or by the law of the place in which the acknowledgment is taken or has the words

                                                    -4-
“‘acknowledged before me,’ or their substantial equivalent.”         The prescribed form of an
acknowledgment for an individual under Ohio law is set forth in Section 147.55:

               State of _______
               County of _______

       The foregoing instrument was acknowledged before me this (date) by (name of
       person acknowledged).
                                      (Signature of person taking acknowledgment)
                                             (Title or rank)


       As concluded by the bankruptcy court, the purported acknowledgment, which has only the
phrase “witness my hand,” does not meet the requirements of Ohio Revised Code § 147.54. The
purported acknowledgment is not in the form prescribed by Section 147.55, and it does not contain
the words “acknowledged before me.” Moreover, the phrase “witness my hand” is not the
substantial equivalent of the phrase “acknowledged before me.” As set forth in Ohio Revised Code
147.541:
       The words “acknowledged before me” means that:
       (A) the person acknowledging appeared before the person taking the
       acknowledgment;
       (B) He acknowledged he executed the instrument;
       (C) In the case of :
               (1) A natural person, he executed the instrument for the purposes therein
               stated; [and]
       (D) The person taking the acknowledgment either knew or had satisfactory evidence
       that the person acknowledging was the person named in the instrument or certificate.
In contrast, the words “witness my hand” are not defined in the Ohio statutes, and left to their
ordinary meaning, indicate only that the witnessing individual observed the signing of the document
by another individual. Even if this language could be said to satisfy subsections (A) and (B) of
Section 147.541, see Wayne Building & Loan, Co. v. Hoover, 231 N.E.2d 873, 876 (1967) (“one who
signs his signature to a document in the presence of another thereby acknowledges his signing
thereof to the other”), in no way does it suggest either (C) or (D). And, the addition of the words
“See Attachment” suggests that there was no intention to rely on the words “witness my hand” as
an acknowledgment and that the parties intended to attach a formal acknowledgment.


                                                -5-
       Contrary to WSB’s argument, these deficiencies are not remedied by considering the
document as a whole, including the notary seal on the last page and the printed words under
Harrison’s signature, “Attach Individual Notary Acknowledgment. ” Neither this language nor the
seal nor the two considered in combination with the rest of the document stand for the proposition
that their presence indicated that the notary knew or had satisfactory evidence that the persons
signing were the persons named in the instrument.

       The bankruptcy court also concluded in this regard that even if the phrase “witness my hand”
was determined to be the substantial equivalent of “acknowledged before me,” the acknowledgment
is defective because the names of the borrowers are not recited. We agree. “Ohio Revised Code
§§ 147.53, 147.54 and 147.55 clearly require some identification of the person whose signature is
being acknowledged. This requirement satisfies the primary purpose of the acknowledgment on a
mortgage that the person signing the mortgage is indeed the person to whom the mortgage obligation
runs.” (Jt. App. at 336.)

       This Bankruptcy Appellate Panel recently has held on several occasions, albeit looking to
Kentucky law, that an acknowledgment in a recorded mortgage that does not identify the individuals
who signed the document is defective. Select Portfolio Servs., Inc. v. Burden (In re Trujillo), 378
B.R. 526 (B.A.P. 6th Cir. 2007); MG Invs., Inc. v. Johnson (In re Cocanougher), 378 B.R. 518
(B.A.P. 6th Cir. 2007); Burden v. CitGroup/Consumer Fin., Inc. (In re Wilson), 378 B.R. 416, 2007
WL 3374801 (B.A.P. 6th Cir. Nov. 14, 2007) (unpublished table decision); see also Gregory v.
Ocwen Fed. Bank (In re Biggs), 377 F.3d 515 (6th Cir. 2004) (holding that under Tennessee law,
acknowledgment for deed of trust that omitted debtors’ names from notarization section was
invalid). Although no Ohio court has specifically addressed this issue, the Ohio and Kentucky
statutes are virtually identical. As such, we find the case law construing the Kentucky statutes to be
highly persuasive in this regard.

       We also agree with the bankruptcy court’s conclusion that the failure of the purported
acknowledgment here is not saved by calling it a jurat. The Ohio Supreme Court has defined “jurat”
as a “[c]ertificate of officer or person before whom writing was sworn to.” Stern v. Bd. of Elections
of Cuyahoga County, 237 N.E.2d 313, 317 (Ohio 1968) (quoting Black’s Law Dictionary 990 (4th
ed.)); see Black’s Law Dictionary (8th ed. 2004) (A jurat is “[a] certification added to an affidavit


                                                 -6-
or deposition stating when and before what authority the affidavit or deposition was made.”).
Obviously, here we are not concerned with an affidavit or deposition. More significantly, a jurat
does not satisfy the acknowledgment requirements of Ohio law, as noted by the bankruptcy court.

B.      Whether the bankruptcy court was correct in ruling that the Trustee acquired bona fide
        purchaser status and thus was entitled to avoid the mortgage lien.
        WSB argues in this appeal that the Trustee could not be a bona fide purchaser of the Property
under 11 U.S.C. § 544(a)(3) because the Debtors did not have legal title to the Property as of the
commencement of the case. See 11 U.S.C. § 544(a)(3) (“The trustee shall have, as of the
commencement of the case, . . . the rights and powers of, or may avoid any transfer of property of
the debtor . . . that is voidable by . . . a bona fide purchaser of real property . . . from the debtor . . .
that obtains the status of a bona fide purchaser at the time of the commencement of the case . . . .”).
However, WSB’s argument is misguided in that § 544(a)(3) does not require that the debtor have
legal title to the real property in question, only that the hypothetical bona fide purchaser be a
“purchaser of real property . . . from the debtor” at the time of the bankruptcy filing. See 2 David
G. Epstein, Steve H. Nickles & James J. White, Bankruptcy § 6-61, at 116 (1992) (“Section 544(a)
does not limit the trustee to avoiding interest in property that the debtor actually owns when the case
commences.”). As explained in Epstein, Nickles & White’s Bankruptcy:
                The trustee can use section 544(a) even against interests in property in which
        the debtor actually has no rights when the petition is filed. The section expressly
        permits avoiding prepetition transfers of the debtor’s property, and avoidance of such
        a transfer is possible through section 544(a) even if the transfer left the debtor
        without any rights to the property at the time of the bankruptcy. The key is whether,
        notwithstanding the transfer, a subsequent lien creditor or purchaser claiming
        through the debtor would, under local law, acquire rights to the property superior to
        the interest of the prior transferee.
Id. at 116-17 (emphasis added).

        “The legal fiction created by [Section 544(a)] assumes a transfer from the debtor to a bona
fide purchaser on the date of filing. The trustee is then clothed with whatever legal rights the bona
fide purchaser would possess.” Id. at 116 n.34 (quoting In re Granada, Inc., 92 B.R. 501, 504
(Bankr. D. Utah 1988)). Undisputably, if the Debtors had transferred (e.g., in a quitclaim deed)
whatever interest they had in the Property to a hypothetical bona fide purchaser on the date of the
bankruptcy filing, the interest of the bona fide purchaser would be superior to that of WSB, even
though the avoidance of WSB’s lien had not yet taken place.

                                                     -7-
       Moreover, it is clear that as of the bankruptcy filing the Debtors had an interest in the
Property, notwithstanding the previous fraudulent transfers. The Sixth Circuit Court of Appeals has
observed that an action by a bankruptcy trustee to recover property fraudulently transferred by the
debtor “is essentially an action to recover property that belongs to the debtor.” Nat’l Labor Relations
Bd. v. Martin Arsham Sewing Co., 873 F.2d 884, 887 (6th Cir. 1989) (citing In re MortgageAmerica
Corp., 714 F.2d 1266, 1275 (5th Cir. 1983) (observing that while the transferee may have colorable
title to the property, the equitable interest is considered to remain in the debtor). Similarly, it has
been noted that “Ohio law provides that fraudulently conveyed property remains in the debtor for
purposes of recovery by the creditors . . . [and that] [a]s to creditors, a fraudulent transaction is
void . . . .” Famous Supply Co. v. Cent. Heating & Air Conditioning, Inc. (In re Cent. Heating &
Air Conditioning), 64 B.R. 733, 736 (N.D. Ohio 1986) (citations omitted).

       Under bankruptcy law, as of the commencement of the bankruptcy case, the Debtors’ interest
in the Property, whether a legal or an equitable interest, became property of their bankruptcy estate
as provided by 11 U.S.C. § 541(a)(1). Property of the estate also includes any property that is
recovered under 11 U.S.C. § 550 or that is preserved for the benefit of the estate under 11 U.S.C.
§ 551. See 11 U.S.C. § 541(a)(3), (a)(4). Once a transfer is avoided, Section 550 allows a trustee
to recover the property from the initial transferee or any immediate or mediate transferee of such
initial transferee, while Section 551 preserves the avoided fraudulent transfer, with respect to the
property, for the benefit of the estate. See 11 U.S.C. §§ 550(a) and 551.

        Additionally, as noted by the bankruptcy court, “[u]nder principles of equity, the Debtors’
fraudulent acts may not be asserted by WSB as a defense to the Trustee’s lien avoidance action.”
(Jt. App. at 337.) To put it simply, WSB may not use the Debtors’ fraudulent acts either as a sword
or a shield in order to defeat the Trustee’s claim.

                                       V. CONCLUSION

       The order of the bankruptcy court is AFFIRMED.




                                                  -8-
