By order of the Bank ruptcy Appe llate Panel, the prec edential effec t of t his de c isi on is l im ite d to thec as e an d p ar tie s p ur su an t to 6th C i r
. B A P L B R 8 0 1 3 -1 (b). S

ee a l s o 6 th C i r
. B

A P L B R 8 0 1 0 -1 (c).
F ile Nam e: 11b0007n.06
BA NK RU P TC Y A P P ELLA TE P AN EL OF THE SI XT H C IR CU IT
In re: KI MBERLY C. EMERSON,

Debtor.

______________________________________ THOMAS C. RI CHARDSON, TRUSTEE,

Pla int if f- Ap pe lla nt,

v
. CI TI MORTGAGE, I

NC. , Def endant- Appellee

.

______________________________________ ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) No. 11-8015

Appea l from the United States B ankruptc y Court fo r t he Wes te rn

Di str ic t of

Mic hig an, at G ra

nd Ra pid s
. Ba nkruptcy Case No. 09- 09534; Adversa ry Case No. 10- 80055

. Argued : August 17, 2011
Dec ided and F iled: October 7, 2011
B e fo re : B OSWE L L , RH OD ES, SHE A- STO NU M , B ank ru ptc y Ap pe llate Pane l Judg e s.

____________________ CO UN SEL
A R G U ED : J oh n T . P iggin s, MI L L ER J OHN S ON, Gran d R api ds , M ich igan, for App ell ant . Mel iss a C. B rown, DYKEMA GOSSETT PL L C, Grand Rapids, Michig an, for Appellee

. O N B RI E F: J ohn T. Pig g in s , M I L L E R JO HN SO N , G r an d Ra p id s , M ic h ig an , f

o r Ap p e ll an t. M e li s s a

C. B r o wn, DYKEMA G OSSETT PL L C, Grand Rapids, Michig an, for Appellee

.- 2- ____________________ OP IN ION

____________________ MA RI L YN SH E A

- ST O N U M , B an kr u p tc y Ap p e ll ate Pa

n e l Ju d g e
. T h is is an a

p peal by Thomas C. Richardson, the Chapte r 7 Trustee (the “Truste e”) , from an orde r of the ba nkruptcy court g rantingsummary judgme nt to Citi mortg ag e, I nc. (“Citim ortg ag e”) and deny ing summar

y judgme nt to the Trustee on his avoidance action pursua nt to 11 U.S.C. § 544(a) (3). The Tr ustee a rgues that Citi mortg ag e’s mortg ag e on the debtor’s Property (def ined below) was rele ased upon the filing of a “Ce rtificate of Discha

rg e” a nd that Citi mor t gage’s attempt to “re perf ect” the mortg ag e fa iled. There fore , th e T r

u s te e ar g u e s th at a s a

h y p o th e ti c a l b o n a

f id e p ur c h a s e r

h e h a s p r io r it

y o v e r the interest of Citimortga g e in the debtor’s Property

. For the reasons set forth below, we AF FI RM the

or de r o f t he ba nk ru ptc y c ourt

. I. ISS UE ON AP P EAL
Whether the ba

nkruptcy court e rre d when it held t hat under Michig an law a trustee , standing in the shoes of a

hy pothetical bona f

ide purc haser, h ad co n s tructive notice of a mortg ag e that had been e rrone ously

discharg ed by

a ce rtificate of dischar g e that wa s subsequently resc inded.

II. JU RI SDI CT ION AND STANDARD OF RE VI EW
The B ankruptc y

Appellate Pane l of the Six th Circ uit ( the “B AP”) has jurisdiction to decide this appeal. The United S tates Dist rict C ourt for the Western Dis trict of Michig an has a uthorized

a pp e a ls t o th e B AP a

nd no ne of the pa rt ie s e le c te d to have thi s a pp e a l he ard

by th e di st ri ct c ourt

. 28 U. S .C

. § 15 8(b )(6) , ( c )( 1) . Aba nk ru ptc y c ourt ’s fi na l or de r m ay

be a pp e a le d a s o f r ig ht. 28 U.S.C. § 158(a)(1) , (b)( 6) and (c) (1). For purposes of an appe al, a f inal order “ends the litigation

o n the merits and lea

ves nothing for the c ourt to do but ex ecute the judg ment.” M i d la n d A s p ha lt Co r p
. v
. U n ite d S tates , 4 8 9 U.S. 794, 798, 109 S. C t. 1494, 1497 (1989) (c itations omi tted). The bankruptc y

co u rt ’s order

denying the Trustee ’s motion for summary judgme nt and g ranting Citi mortg ag e’s motion for summary judgme nt is a final orde r. See Thomas v. Un ited States , 166 F.3d 825, 828 ( 6th Cir. 1999) (denia l of summary judgme nt presente d toge ther with an a ppeal from a grant of summar

y judgme nt is final and appe alable)

.- 3-

The B AP review s the bankruptc y court’s f inal order g rantingCiti mortg ag e’s motion for

summa ry jud g me nt a

nd de nyingthe Tr

us te e ’s mot ion for su mm ary jud g me nt de novo , using the same standa

rd applied by

the trial cour

t . B.F. Goodrich Co. v. U.S. Filter Corp. , 245 F.3d 587, 595- 96 (6th Cir. 2001). Thus, an appellate court decide s the issues of law inde pendently of, and w ithout defe renc e to, a tria l co urt’s dete rminations. Drown v. Nat’l Cit y Bank ( In reInge rso ll), 42 0 B .R. 414, 415 (B .A.P. 6th Ci r. 2009). The bankruptc y court' s findings of

fac t are re v i ew ed u n der the clea r-e rror standard. Behlkev. Eisen ( In re Be hlke ), 3 58 F.3 d 429, 43 3 ( 6th Cir . 2 00 4) . Cr os smotions for summary judgme nt do not a lter this standard. See W ells Real Estate Inv . Trust II, Inc.

v . Ch ar do n/H ato Re yP’ sh ip , S.E ., 615 F.3d 45, 51 ( 1st Cir. 2010).

III . F AC TS
Th e fa c ts in thi s c a se are no t di sp ute d. Ki mbe rl y Em e rs on (t he “ De bto r” ) o wn s r e a l pr op e rt y located a t 433 S u n n y shores Dr ., Coldwater, MI 49036 (the “ Property”). O n J uly 31, 2007, the Debtor grante d AB N AMRO Mortg ag e Gr oup Inc. (“ AB N AMRO”) a mortg ag e on the Property (the “Mortg ag e”)

. On August 10, 2007, the Mortg ag e wa s rec orded by the B ranc h County

Reg ister of Dee d s (“ R egi s ter of D eeds” ). As a r esult of a mer g er in late August 2007, Cit imortga g e is the

succe ssor in interest of AB N AMRO to the Mortg ag e. All of the pa rties agree that in Aug ust 2007 the Mortg ag e wa s proper ly perf ecte d and unavoida

ble by a bankr uptcy trustee. Although the Debtor’ s pay ment obligation had not been satisfied, Citi mortg ag e executed a Ce rt if ic ate of Di sc ha rg e on De c e mbe r 1 7, 20 07 (t

he “ Di sc ha

rg e ” ) and c a us e d it to b e re c or de d w ith the Reg ister of De eds on De cembe r 26, 2007. The e rrone ous Dischar g e was signe d by an executive of Citimortgag e, prope rly notarized and re corde d. All of the parties ag ree that the re cordingof the Dischar g e re ndere d the Mortg ag e unper fec ted. The D ebtor c ontinued to make pay ments as agree d under the note sec ured by the Mortg ag e until J uly

2009.

I n Februar

y 2008, Citi mortg ag e re alized that it had mist akenly executed and r ecor ded the Dischar g e. The rea fter, on F ebrua ry 25, 2008, Citi mortg ag e executed a document titled a Rescission of Relea se of Mortg ag e and Reinstatement of Mortg ag e (the “Rescission”) which provides that the Dischar g e “w as executed in e rror , and that said De ed of Trust has not bee n fully satisfied or pa id,

and that sa id R e le a se of

Mo rt g a g e is h e re by

wi thd ra wn , c anc e lle d a

nd de c lare d of no fo rc e or

e ff e c t, and the lien of

said Dee d of Trust on the pr operty d escribed her ein shall be una ffe cted by suchT h e T r u s t ee c i t es t o Tur ner Le wi s v. Pub. Ser v. Cr edi t Uni on ( I n r e Neal ), 40 6 B

. R

. 28 8 (B ankr. 1 E

. D

. M i ch. 20 0 9 ). In Neal , t he b ankruptcy co urt d eal t wi t h cross m o t i o ns f o r summ ary judgm ent i n t he t rus t ee’ s ad vers ary pro ceed i ng seeki ng t o avo i d t he cred i t uni o n’ s m o rt gage o n t he d eb t o r’ s res i d ence. T he p ub l i shed o p i ni o n i s t he res ul t of t he co urt ’ s anal y si s und er 54 4 (a)( 1 ). I n t he p ub l i shed o p i ni o n, t he

- 4- err oneous Relea se of Mortg ag e.” T he Rescission containe d the sig nature of an of fice r of Citi mortg ag e and was prope rly notarized. The Resc ission was rec orded w ith the Reg ister of De eds on Marc h 5, 2008.
The De btor filed a voluntar y petition for re lief under Chapter 7 of the B ankruptc y Code on August 11, 2009 (the “Petition Date” ), more tha n one y ear

afte r the Resc ission was rec orded.
Thomas C. Richardson wa s appointed as the Cha pter 7 trustee

. The Tr ustee filed a

n adver sary

proce eding s ee k i n g t o avoid Citim ortg ag e’s inter est in the Property pursuant to his strong -ar

m powers pr ovided for in 11 U.S.C. § 544(a) (3). Cross-motions for summary

judgme nt were filed. F ollowing a leng thy oral de cision, the bankruptc y court e ntere d an orde r g ranting summary judgme nt in favor of Citimortgag e and a g ainst the Trustee . The Tr ustee timely filed a notice of appe al

IV . D ISC USS ION
Th e Tr us te e argue s th at w he n Ci tim or tg a g e re c or de d th e Di sc ha rg e , th e Mo rt g a g e be c ame unperfected, and Citimortgag e’s Resc ission did not “re -per fec t” the Mortg ag e. Thus, the Tr ustee

argue s th at un de r 1 1 U .S. C. § 54 4( a )( 3) he can avo id C iti mor

tg a g e ’s un

pe rf e c te d s e c ur ity

int e re st in the Property . The T ru stee a cknowledg es that, under Michig an law a

n err oneously

discharg ed mortg ag e ma y , i n certain circ umstances, be come “ re- perf ecte d,” but ar g ues that, in this case, the R es ci s s i o ni s i n ef

fe ct i v e b ec au s e i twa s n o t s i g n e d b y th e m o rt gago r. Inco n tra s t , C i t i m o rt gage argues that bec ause the Mortg ag e wa s proper ly perf ecte d orig inally , the Discha rg e and Re scission

wer e prope rly

executed conve y ance s under Michig an law and operated to “re -per fec t” t he Mortg ag e. As ar e s u l t , C i t i m o rt g a g e ’ s ar g u m e n tc o n t i nu e s , th e T r u s t e e c an n o tav o i d

C i t i m o rt g a g e ’ s i n t e re st using 11 U .S.C. § 544(a)(3)

. Se c tio n 5 44 of

the B ank ru ptc y Cod e g ive s th e Tr

us te e the po we r t o avo id a mor tg a g e , if

un de r a pp lic a ble state law, a hy

po the tic a l bo na fi de purc ha se r c ou ld avo id the mor tg a g e . 1 1 U .S. C. § 5 44 (a )( 3)

. Thus , th e qu e sti on is whe the r a

bo na fi de purc ha se r u

nd e r M ic hig an la

w c ou ld a vo id 1b ankruptcy co urt anal y zed whet her t he cred i t uni o n had a pro p erl y pe rf ect ed m o rt gage i nt erest s uf f i ci ent to o v e rc o m e the inte re st o f a ju d ic ia l lien c re d ito r. T h e b a n k ru p tc y c o u rt fo u n d tha t re c o rd ing a n a ff id a v it o f l o st m o rtg a g e w a s ins u ff ic ie n t t o p e rfe c t a m o rtg a g e inte re st a s if th e o rig ina l ha d b e e n p ro p e rly rec o rd ed

. T he refo re, t he b an kru p t cy co urt f o un d t h e m o r tg a g e a vo i d ab l e u nd er § 5 4 4 (a)(1 ) an d as a p ref erence und er § 5 4 7 (b). I n an unpub l i shed o rder o n t he cross m o t i o ns f o r s um m ary judgm ent , t he b ankruptcy co urt previ o usl y had f o und agai nst t he tru ste e und er § 5 4 4 (a)( 3 ) and grant ed s um m ary ju d g m e n t t o the c re d it u n io n a s to the tru ste e ’s cla im un d e r § 5 4 4 (a )( 3 ). I n r e Ne al , A dv

. Cas e N o. 08- 5 1 4 7 (B ankr. E

. D

. M i ch. Feb

. 18 , 20 0 9 , O rder R egard i ng C ross M o t i o ns f o r Sum m ary Jud gm ent ). T he b ankruptcy co urt t hen scheduled ad d i t i o nal bri ef i ng wi t h res p ect t o t he t rus t ee’ s cl ai m s und er § 5 4 4 (a)( 1 ). T h e p u b lishe d o p inio n c ited a b o v e a p p e a rs to b e the C o u rt’s a n a lysis un d e r § 5 4 4 (a )( 1 ). I n r e Neal i s also di s t i n g u i s h abl e f

r om t h e f

ac t s i n t h i s ca s e, gi v en t h e a g r ee men t t h at t h e M or t g ag e, wh i ch i s t h e s u bj ec t of this a p p e a l, a s re c o rd e d o n A u g u st 1 0 , 2 0 0 7 w a s a p ro p e rly e x e c u te d m o rtg a g e tha t p e rfe c te d the se c u rity inte re st a n d p ro v id e d no tice , ac tua l an d c o n stru c tive , t o the w o rld

.

- 5- the Mo rt g a g e and wh e the r the Tr us te e wo uld be c on sid e re d a bo na fi de purchaser o f t he Prop e rt y under Michig an law. Treinish v. Norwest Bank Minn. ( In rePe ria nd

ri ), 266 B .R. 651, 655 (6th Cir. 2001) (“ [S ]t ate law

deter mines the extent of the trustee’ s rig hts under § 544(a )(3) .”). As discussed below, unde r Mi ch i gan law a n err oneously

discharg ed mortg ag e ca

n have pr ior ity ov e r a su bs e qu e nt l ie nh old e r, e ve n on e wi tho ut no tic e
. “ Th e re are many c ir c ums tanc e s in which equity

may be jus tified in restoring or reinstating a mortg ag e which has bee n discharg ed of

re c or d, at le a st i f t

he interes ts o f i nn oc e nt t hir d p art ie s d o n ot i nte rv e ne .” C. C . M arv e l, Reinstatement and Re

storation of

Mortgages Rele ased or Discharged W ithout Authori

zation, As Against Subsequent Purchasers, Lienholde r s , Judgme nt Creditors and T he Like, W

ithout N otice , 35 A.L .R. 2d 948, § 2 (orig inal l y published in 1954) (footnote omitted). In decidingwhether a mortg ag e can or cannot be restore d or reinstated, the touchstone for most courts has bee n the extent of the mor tg a g e e ’s inv olv e me nt in the mis take n dis c ha rg e and the imp a c t on

su bs e qu e nt l ie nh old e rs
. Id. [I ]tis the overwhe lming we ight of authority that a mortg ag e re lease d or dischar g ed entirely without the a

uthority , knowledg e, or fa ult of the mortg ag ee, ma

y be re stored, reinstated, fore closed, or g iven prec edenc e, even as ag ainst the rig hts of a subseque nt purcha ser or

encumbr ance r entire ly

without notice of the illeg al nature of the re lease

. A theory advanc ed in support of this p o s ition has been that, both par ties being inn oc e nt, the e qu iti e s are ba lanc e d a nd ri g hts in o rd e r o f t ime mus t pr e va il. Th e mos t common ty

pes of situations are those in which one entr usted with the public rec ord made e ntry of satisfac tion or discharg e by mistake, or in which the same officia l was i n d u c e d t o m ak e s u c he n tr

y u p o n p r e s e n t at i o n o f

a f o r g e d s at i s f a c t i o no r r e l e a s e
. In the latter c ase, the courts ar e firm in their r efusa l to allow one to b e d ep ri v ed of proper ty throug h the equivale nt of a theft. The position of a mer e judg ment cre ditor a s c on tr a ste d w iththa

t of a purc ha se r or on e wh o ha s loane d mone y on the str e ng th- 6-

of the re cord- clea

r sec urity is even we aker , since he has given up nothing in re liance upon the re cord, but mer ely seeks to have satisfac tion out of available pr operty

. Where ther e ar e ele ments of neg lige nce on the par t of the mortg ag ee which may be said to have e nhance d the possibi l i t y of the una

uthorized relea se, a subse quent purcha ser or

encumbr ance r without notice may be prote cted, f

reque ntly on the theory that, of two innoce nt pa

rties, the loss should fall upon the one whose conduct made the loss possible. Id. (citations and f

ootnotes omitt ed). W here , as her e, the r elea se is the re sult of the mortg ag ee’ s
a c tio ns ,The right of the mortga gee t o have his mortg ag e re instated or its prec edenc e ma int a ine d a s a g a ins t su bs e qu e nt p ur c ha se rs or

e nc umb ra

ncers w ith out no tic e is qualified upon his f

re ed om from neg lige nce w ith respec t to the cre ation of the c ir c ums tanc e s w hic h ma de po ssi ble the re le a se o r dis c ha rg e wi tho ut h is authoriza t ion. The pre sence of neg lige nce ma y g ive rise to an e stoppel ag ainst the mortg ag ee to a ssert his prior lien, fre quently under the rule that whe re a loss mustbe borne by one of two innoc ent par

ties, the loss will fall upon the one whose c onduct enable d the loss to be occa sioned. Id. at § 6. Michig an law a dhere s to these principles. See J ohns v. Dov er , Case No. 2007- 080637-CH, 2010 WL2696656 (Mich. Ct. App. J uly 8, 2010)(unpublished). [A] f or g e d d isc ha

rg e of mor tg a g e , thro ug h n o f

a ult of the mor tg a g e e , ha s n o e ff

e c t. Ke lle r v
. Hannah , 5 2 Mich. 535, 536; 18 NW 346 (1884). Moreove r, a r ecor ded forg ed discha

rg e does not a llow a subsequent mort gage e t o have pr iority over the first-in-time mortg ag ee. Id. The rationale for this principle is that the origina l mor tg a g e e sh ou ld n ot b e punis he d wh e n it wa s no t the fi rs t- in- tim e mor tg a g e e ’s fa

ult that the latter mortg ag ee w as dec eived. Id . This ty pe of tre atment of for g ed do c um ent s is pe rv a siv e thr ou g ho ut M ic hig an c a se law, wh e re e ve n a g oo d- fa ith purc ha se r i s a ff

or de d no pro te c tio ns wh e n a fo rg e d d e e d is us e d to a c qu ir e pr op e rt y interests. See Ho r va t h v. Nat’l Mortgage Co. , 238 Mich. 354, 360; 213 NW 202 (1 92 7) ; Sp e c ial Prop e rty VI v . W oo dr uff , 273 Mich. App 586, 591; 730 NW2d 753 (2 00 7) ; Va nd

e rW all v . M idk iff , 166 Mich. App 668, 685; 421 NW2d 263 (1988) .

. . . [C]as e s su c h a s Lowr

yv . B e nn e tt , 119 Mich. 301; 77 NW 935 (1899), and Ferguson v . G las sfo rd , 6 8 M ic h. 36 ; 35 NW 8 20 (1 88 8) , ma nd ate that [su

bs e qu e nt m or

tg a g e e s] should prevail bec ause the y aff ord protec tion s t o b ona fide purcha sers. How ever , these c ases de alt expli citly with discharg es that we re r ecor ded intentionally , but mistakenly , by the orig inal mortg ag ee. Lowr y , 1 19 Mic h. at 30 2; Ferguson , 68 Mich. at 37, 39.- 7-

Johns , 2010 WL2696656, at *2. Citi mortg ag e conce des, had the bankruptc y been f iled in betwee n the re cordingof the Discha rg e and the Rescission, it is likely that the T ru s t ee would preva il in an action ag ainst Citi mortag e.
Howeve r, unlike those ca ses wher e an inter veninginterest arose before the rec ord had be en
c or re c te d, th is ban kr

up tc y c a se wa s f

ile d lo nga ft e r C iti mor

tg a g e too k a c tio n to c or

re c t th e pu

bli c
rec ord by filing its Rescission. The state of the re al estate rec ord wa s clarif ied well in a dvance of the Petition Date. As the ba nkruptcy court no ted, the re al estate rec ords in this case would r evea l the Mortg ag e, the Disc harg e and the Rescission. The langua g e of the Rescission states clea rly the mortg ag ee’ s belief that the Dischar g e was mistakenly rec orded and should be consider ed to be of no further eff

ect. Under Michig an law, “whe n a person has knowledg e of such fac ts as would lead a ny honest man, usingordinary caution, to make f

urther inquirie s conce rningthe possible rig hts of another in rea l estate, and fails t o make them, he is char g eable with notice of what such inquiries and the exercise of

ordinary caution would have disclosed.” Richards v. Tibaldi , 726 N.W.2d 770, 780 (Mich. Ct. App. 2007). The Rescission announce d that the Discha rg e wa s mistaken. Any

purcha ser looking at the rec ord would be a war e of the Mortg ag e, the Disc h ar ge an d t h e Rescission. As the bankruptc y

judge noted in his oral dec ision, [T] here is a mortgag e on rec ord; it was not expunged. And any body who l ooks at the rec ord will see [a] valid mortg ag e, discha rg e of mortg ag e, re scission of the dischar g e, in effe ct, wiping out the di schar g e....The trustee will see that. The re al estate person will se e it. The title c ompany will se e it. And so, in this i n s t an ce , t here ’s constructive notice

. Transc ript, pag e 31.

In Fe rgus on v . G las sfo rd , 3 5 N .W. 82 0 ( Mic h. 18 88 ), the c ourt fo un d th at wher e a mor

tga g e has be en discha

rg ed fr om the rec ord throug h mistake, it may be restore d in equity , and g iven its origina l priority as a lien, whe n the rig hts of innocent third parties will not be affec ted. .

. . [T] he si mple canc ellation of a mortg ag e is not an absolute bar t o fore closure, unle ss there ha s been a ctual satisfa ction. I t is not conclusive e vidence

. Id. at 826. This sug g ests that under Michig an law, the impact of the D ischarg e on the Mortg ag e wa s not to expunge the Mortg ag e or make it a s if it ne ver had been filed. I t was to cha ng e the pe rfe cted status of the mor tg a g e e ’s lie n a s ag a ins t subs e qu e nt lie n hold e rs wh o re lie d on the state of the pu bli c
rec ords. The oblig ation betwee n the Debtor and C itimortgag e remained in plac e. See F rench v . De- 8-

Bow , 3 8 M ic h

. 7 0 8 ( 1 8 7 8 ) ( a mi s ta k e n ly d is c h ar g e d mo rtg a g e s h o u ld b e r e s to r e d in e qu ity), and W ood v. DePew , 230 N.W. 175 (1930) (dischar g ed mortg ag e restore d in equity). Relying on French and W ood , the Trustee argues that the Discha rg e not only

destroy ed the perf

ection of Citimortga g e’s interest i n t h e Proper

ty but also ext inguishe d the lien as a matter of la

w. Ther efor e, the Tr

ustee’s argu m en t co n tinues, the Rescission must be a conve y ance under Michig an law in or der f or Citi mortg ag e’s inter est to have pr iority over his intere st as a hy

pothetical bona f

ide purc haser

. As the Trustee h i m s elf re cog nized, however , equitable pr inciples allow for the re storation of a mortg ag e which ha s been discharg ed by mistake, if such restoration does not detrimentally aff ect th e r igh ts o f an inn o c e n t th ir d p arty , s u c h a s a b o n a f id e p ur c h a s e r o f r e a l p r o p e rty

. F erguson , 35 N.W. at 826. The Discha rg e, thoug h it altered the perf ection of Citimortga g e’s inter est in the Property , did not a ffe ct the Debtor ’s obligation to C itimortgag e. Unde r this authority , we f ind that a Michig an state court would, g iven the cir cumstance s of this case, g ive ef fec t to the Rescission, treat the Mortg ag e as r einstated a nd acc ord Citimortgage’s lien intere st priority over subse quent lie nh old e rs wh os e int e re sts aro se a ft e r t he Re sc iss ion

wa s f ile d. Whe the r th e Re sc iss ion wa s a convey ance un d e r M ic h ig an la w is n o t th e p o int. Ap p ly in g M ic h ig an la

w , th e e xis te n c e o f

the Rescis s i o n i n the public re cords, c oupled with the Mortg ag e, is sufficie nt to place a subsequent lie nh old e r o n in qu ir

y no tic e of the pr op e rl y

pe rf e c te d M or

tg a g e . T he re fo re , und e r t he fa c ts of

thi s
case and Michig an pre cede nt, the Trustee would be tre ated a s having const ructive notice of the Mortg ag e that had been erroneously discharg ed by

a ce rtificate of dischar g e once that discharg e wa s subsequently

resc inded. Thus, the Truste e cannot avoid Citi mortg ag e’s interest under § 544(a) (3).

V. CO NC LU SION
W e f i n d th atun d e r

th e f a c t s an d c i r c u m s t an c e s o f

th i s c a s e , a M i c h i g ans t at e c o urt , i ne qu i ty, would rec og nize the effic acy of a mortg ag ee’ s resc ission of the err oneously filed Discha

rg e and g ive the mor tg a g e e pr ior ity

ov e r h old e rs of

lie ns ari sin ga ft e r t

he date the mor

tg a g e e fi le d a d oc ume nt i n the pu bli c re c or ds makin gc le ar that the dis c ha rg e wa s e rr on e ou sly fi le d. Th e re fo re , w e AF F I RM the bankr uptcy court’s grant of summar

y judgme nt to Ci timortga g e and a g ainst the Trustee

.