This decision was issued at the request of U.S. Bankruptcy
Court for the Southern District of Ohio, Eastern Division (the “Bankruptcy
Court”), who asked the Ohio Supreme Court (the “Ohio Court”) determine whether
ORC 1301.401, which provides that the recording of certain documents provides
constructive notice, applies to all mortgages recorded in Ohio and whether
1301.401 provides constructive notice of a recorded mortgage that was
deficiently executed under ORC 5301.01.
In this matter, Daren and Angela Messer (the “Messers”) took
out a loan in 2007 which was secured by a mortgage. The notary acknowledgement
was left blank bringing into doubt whether or not they executed the mortgage in
front of a notary. The mortgage containing incomplete notary section was recorded
with the Franklin Counter Recorder. In
2013 the mortgage was assigned to JP Morgan Chase Bank (the “Bank”).
The Messers subsequently filed a Chapter 13 bankruptcy and
commenced an adversary proceeding requested that the mortgage be avoided as
defectively executed under ORC 5301.01. If successful, the Bank would have lost
its secured position.
The Bankruptcy Court in this matter decided that the Ohio
Court should make the determination on the application of 1301.401, which is
part of Ohio’s Uniform Commercial Code (the “UCC”), to a recorded mortgage that
is clearly defectively executed under ORC 5301.01.
ORC 5301,01 provides that a mortgage must be signed by the
mortgagor and the execution must be acknowledged by the mortgagor in front of a
judge or clerk of court in Ohio, or a county auditor, county engineer, notary public
or mayor, who shall certify the acknowledgement and subscribe the official’s
name to the certificate of the acknowledgement.
ORC 1301.401(B) provides that the recording with any county
recorder of any document described in ORC 1301.401(A)(1) is constructive notice
to the whole world the existence and contents of that document as a public
record and of the transaction referred to in that public record. ORC
1301.401(C) further provides that any person contesting the validity or
effectiveness of any transaction referred to in a public record is considered
to have discovered that public record and any transaction referred to in the
record as of the time that the record was first tendered to the county recorder
for recordation.
The documents described in ORC 1301.401(A)(1) specifically
includes documents referenced in ORC 317.08, which expressly references
mortgages.
While the Messers argued that 1301.401 only applies to
transactions governed by the UCC and shouldn’t apply to mortgages since
mortgages are governed by Ohio contract law. The Court disagreed, finding that
the statute’s clear language indicated that it applied to any document
referenced in ORC 317.08, which included mortgages. Based on the express
language in the statute, the Court held that ORC 1301.401 applies to all
recorded mortgages.
The Court went on to disagree with the Messers other
contentions and further held that the portion of ORC 1301.401 that states the
act of recording provides constructive notice to the whole world of the
existence and contents of the mortgage document is compatible with provisions
of ORC 5301.01 and ORC 5301.23 and the rest of the Ohio Revised Code and the
fact that it is part of the UCC and not ORC Chapter 5301 does not prevent it
from applying to mortgages.
In
conclusion, the Court has clarified that ORC 1301.401 applies to all recorded
mortgages, and acts to provide constructive notice to the world of the
existence and contents of a recorded mortgage even if it was deficiently
executed under ORC 5301.01. This is a win for common sense.
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