Court Opinion

ID: 2977808
Source: CourtListenerOpinion
Date Created: 2015-09-22 18:14:27.134241+00
Date Added: 2024-06-11T11:44:08.993088
License: Public Domain

NOT RECOMMENDED FOR FULL-TEXT PUBLICATION
                          File Name: 09a0212n.06
                           Filed: March 19, 2009

                                          No. 07-6447

                          UNITED STATES COURT OF APPEALS
                               FOR THE SIXTH CIRCUIT

IN RE: SAMUEL G. WILSON; LISA F.                        )
WILSON                                                  )       ON APPEAL FROM THE
                                                        )       BANKRUPTCY APPELLATE
              Debtors,                                  )       PANEL FOR THE SIXTH
                                                        )       CIRCUIT
                                                        )
BEVERLY BURDEN, TRUSTEE                                 )                OPINION
                                                        )
              Appellee,                                 )
                                                        )
       v.                                               )
                                                        )
CIT GROUP/CONSUMER FINANCE, INC.;                       )
SELECT PORTFOLIO SERVICING, INC.                        )
                                                        )
              Appellants.                               )

BEFORE: CLAY and COOK, Circuit Judges; and OLIVER, District Judge.*

       SOLOMON OLIVER, JR., District Judge. This appeal, which arises from the Bankruptcy

Court for the Eastern District of Kentucky’s (“Bankruptcy Court”) Memorandum Opinion and its

accompanying Judgment granting summary judgment to Beverly Burden, the Chapter 13 trustee

(“Trustee”), comes to us by way of our circuit’s Bankruptcy Appellate Panel (“BAP”), which

affirmed the Bankruptcy Court’s Memorandum Opinion. For the following reasons, we AFFIRM

the order of the Bankruptcy Court granting summary judgment to the Trustee.

       *
          The Honorable Solomon Oliver, Jr., United States District Judge for the Northern
District of Ohio, sitting by designation.
                                       I. BACKGROUND

       A.      The Mortgage

       Debtors Samuel G. Wilson and Liza Wilson granted the Creditors a mortgage in the original

principal amount of $65,741.00 (“Mortgage”) on real property owned by the Wilsons and located at

2721 Country Road, Ashland, Kentucky. (Mortgage, Joint Appendix (“JA”) at 10.) The Creditors

recorded the Mortgage in the Boyd County Clerk’s Office on May 16, 2001, and it is on record in

Mortgage Book 772, Page 509 of that office.

       Douglas Strayer was the attorney who conducted the closing and acted as notary to accept

the acknowledgment of the Wilsons. The Wilsons signed the Mortgage, and it was acknowledged

as indicated below:

       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 BOYD

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

                       My commission expires 11-30-02.       /s/ Douglas Strayer

                       Prepared by /s/ Douglas Strayer /hw/ Bourbon Country, Kentucky

(Id. at 12.) Though the instrument clearly indicates that the Wilsons signed the Mortgage, it is

important to note that the Certificate of Acknowledgment itself does not identify the Wilsons as the

                                                 2
individuals who signed the Mortgage.

        B.      The Bankruptcy Court’s Order Granting Summary Judgment to the Trustee

        The Wilsons filed for bankruptcy in the Eastern District of Kentucky on January 17, 2005.

The duly-appointed Trustee for the Wilsons filed an adversary complaint pursuant to 11 U.S.C. §§

544, 550, and 551 on May 13, 2005. Under 11 U.S.C. § 544, a trustee has the status of a bona fide

purchaser of real property, and if a hypothetical bona fide purchaser can avoid a mortgage, the trustee

can also avoid it. The Trustee in the instant case sought to avoid the Mortgage pursuant to 11 U.S.C.

§ 544 because the Certificate of Acknowledgment allegedly did not conform with the requirements

of Ky. Rev. Statute § 423.130 and therefore did not provide the Trustee, a hypothetical bona fide

purchaser, with notice under Ky. Rev. Stat. § 382.270. Burden v. The CIT Group/Consumer

Finance, Inc., Adv. No. 05-1014 (Bankr. E.D. Ky. Aug. 16, 2005) (JA at 85).

        Section 423.130 of the Ky. Rev. Statute, part of the Kentucky Uniform Recognition of

Acknowledgment Act enacted in 1970, provides as follows:

        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.

(Emphasis added.)

        Section 382.2701 of the Ky. Rev. Stat. provides as follows:

        1
         As the BAP noted, Ky. Rev. Stat. § 382.270 was amended effective July 12, 2006, and
now provides that, so long as a mortgage containing a defective acknowledgment is lodged for
record, that the mortgage “shall be deemed to be validly lodged and that all interested parties
shall be on constructive notice of the contents thereof.” The parties in the instant case do not
argue that the amended statute is retroactive. In any event, this argument would likely be
unavailing. See Select Portfolio Servs. v. Burden (In Re Trujillo), 378 B.R. 526, 533 (B.A.P. 6th

                                                  3
       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”
       included all creditors irrespective of whether or not they have acquired a lien by legal
       or equitable proceedings or by voluntary conveyance.

       The Bankruptcy Court granted the Trustee’s summary judgment motion based on the factual

similarities to Rogan v. America’s Wholesale Lender (In Re Vance), 99 F. App’x 25, 28 (6th Cir.

2004). In Vance, this court held, in an unpublished opinion, that the notary statement in a mortgage

Certificate of Acknowledgment was defective under Ky. Rev. Stat. § 423.130 since it failed to state:

(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. Id. at 28.

      The Vance court concluded that the failure to comply with Ky. Rev. Stat. § 423.130 becomes

significant in light of the requirements of Ky. Rev. Stat. § 382.270 because:

       Under 11 U.S.C. § 544(a)(3), if a bona fide purchaser hypothetically can avoid a
       mortgage, then the trustee may avoid the mortgage. Simon v. Chase Manhattan Bank,
       250 F.3d 1020, 1024 (6th Cir. 2001). Kentucky has historically held that a
       defectively acknowledged security interest that is recorded does not provide
       protection from a subsequent party who lacks notice of the interest. See Smith v.
       Jackson, 232 Ky. 76, 22 S.W.2d 420 (Ky. 1929) (citing identical notice language as
       KRS § 382.270); Starr Piano Co. v. Petrey, 168 Ky. 530, 182 S.W. 624, 625 (Ky.
       1916); see also State Street Bank and Trust Co. v. Heck's, Inc., 963 S.W.2d 626, 630,
       45 3 Ky. L. Summary 25 (Ky. 1998) (a defectively recorded mortgage provides no
       protection unless a creditor can be charged with knowledge of the mortgage). These
       cases demonstrate that, in Kentucky, a defective acknowledgment of a mortgage that
       is recorded cannot provide constructive notice of a mortgage. Therefore, it also
       cannot provide protection from a bankruptcy trustee's status as a hypothetical bona
       fide purchaser lacking actual knowledge, which is conferred upon the trustee by
       federal bankruptcy law.

Cir. 2007) (holding that amended Ky. Rev. Stat. § 382.270 may not be applied retroactively
against a bankruptcy trustee when a debtor's petition was filed prior to the effective date of the
amendment to the statute because such an application would be in conflict with the federal
bankruptcy statute).

                                                  4
Id.

       The Bankruptcy Court found that the Wilsons’ Mortgage “is not any different in substance

than the mortgage in Vance.” (In Re Wilson, JA at 87.) The Bankruptcy Court stated that the notary

statement in the Certificate of Acknowledgment in the instant case was defective under Ky. Rev.

Stat. § 423.130 because “it did not state the identity and/or names of the individuals who

acknowledged the execution of the mortgage.” (Id.) Consequently, the Mortgage “was defectively

acknowledged and insufficient to put the trustee, as a hypothetical bona fide purchaser, on notice.”

(Id. 87-88, citing Vance, 99 F. App’x at 28.) The court therefore held that “the [Trustee] is entitled

to judgment as a matter of law, that she may avoid the [Creditors’] lien pursuant to 11 U.S.C. §

544(a)(1) and (a)(3), and that it should be preserved for the benefit of the estate pursuant to 11 U.S.C.

§ 551.” (JA at 88.)

        C. The BAP’s Opinion

        The Creditors appealed the Bankruptcy Court’s order granting summary judgment to the

Trustee to the BAP for the Sixth Circuit on August 24, 2005. The BAP affirmed the Bankruptcy

Court’s decision, premising its holding on Vance, as well as Gregory v. Ocwen Fed. Bank (In Re

Biggs), 377 F.3d 515 (6th Cir. 2004). See Burden v. CIT Group/Consumer Finance Inc. (In re

Wilson), No. 08-8065, 2007 Bankr. LEXIS 3800 (B.A.P. 6th Cir. Nov. 14, 2007).

        In Biggs, 371 F.3d at 519, the Sixth Circuit addressed Tennessee law, which the BAP found

is indistinguishable from Kentucky law on this point, and held 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. In Re Wilson, 2007 Bankr. LEXIS 3800, at *13. The BAP found that the

Sixth Circuit’s discussion in Biggs, set forth below, regarding the importance of naming the signor

                                                   5
in a Certificate of Acknowledgment was “particularly helpful”:

       [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 *13-14, citing Biggs, 377 F.3d at 519.) Accordingly, the BAP stated that it was constrained

by the Sixth Circuit’s decisions in Biggs and Vance and that the Bankrtupcy 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.” In Re Wilson, 2007 Bankr. LEXIS 3800, at *14.

                              II. STANDARD OF REVIEW

       This court independently reviews a decision of a bankruptcy court that has been appealed to

the BAP. Curreys of Neb., Inc. v. United Producers, Inc. (In re United Producers), 526 F.3d 942,

946 (6th Cir. 2008) (citing Curry v. Curry (In re Curry), 509 F.3d 735, 735 (6th Cir. 2007)). A

bankruptcy court's findings of fact are reviewed for clear error, while its conclusions of law are

reviewed de novo. In Re United Producers, 526 F.3d at 946 (citing Behlke v. Eisen (In re Behlke),

358 F.3d 429, 433 (6th Cir. 2004)).

                               III. LAW AND ANALYSIS

       The Creditors argue that the Bankruptcy Court erred when it granted summary judgment to

the Trustee based on its determination that, in light of Vance, 99 F. App’x at 28, the Mortgage did

                                                 6
not provide constructive notice to subsequent purchasers or creditors because it was not properly

acknowledged under Kentucky law and was consequently subject to avoidance by the Trustee

pursuant to 11 U.S.C. § 544. The Creditors make the following arguments to support their

contention that Vance was incorrectly decided, and that the Bankruptcy Court and BAP therefore

erred in holding that the Trustee in the instant case could avoid the Mortgage: (1) acknowledgment

is the act of the mortgagor, not the notary, and any alleged defects in the notary statement in the

Certificate of Acknowledgment is therefore irrelevant; (2) the notary statement that failed to name

the individuals signing the Mortgage in the Certificate of Acknowledgment does comply with Ky.

Rev. Stat § 423.130 when read together with Ky. Rev. Stat. §§ 423.140 and 423.150;2 (3) Ky. Rev.

Stat. § 60.060 precludes the Trustee from challenging the notary statement in the allegedly facially

invalid Certificate of Acknowledgment; (4) pursuant to Ky. Rev. Stat. §§ 423.170, a Certificate of

Acknowledgment does not need to comply with Ky. Rev. Stat. § 423.130 so long as it complies with

Ky. Rev. Stat. §§ 382.160(1) and 382.130, as demonstrated by Louisville Joint Stock Land Bank v.

McNeely, 102 S.W.3d 389 (Ky. 1937). The court addresses each argument in turn.

A.

       The Creditors argue that “acknowledgment” refers to an act of the mortgagor, the executing

party, not the notary, and that any perceived defects in the notary’s Certificate of Acknowledgment

is therefore irrelevant to whether the Mortgage was “acknowledged” by the Wilsons. The Creditors

cite only Matthews v. Commonwealth, 163 S.W.3d 11 (Ky. 2005), an inapposite case concerning the

       2
         The Creditors also argue that Biggs, which was relied upon by the BAP to support its
decision, is neither controlling nor instructive based upon the alleged difference between the
relevant Kentucky and Tennessee statutes. The court need not address this argument in light of
its conclusion that Vance is directly relevant precedent.

                                                 7
admissibility of out-of-state hospital records in a criminal rape case, to support this tenuous

argument. In any event, Matthews does not support the Creditors’ argument because it recognized

that “acknowledgment” is not merely the independent act of the mortgagor. Specifically, Matthews

stated that “the requirement of an acknowledgment is ‘wholly statutory.’              In other words,

‘acknowledgment’ is a term of art that describes the process used to prove the validity of the

signatures on various documents so as to make those instruments admissible to record or in

evidence.” Id. at 24.

       As discussed more fully below, the Trustee correctly contends that the controlling statute in

the instant case is Ky. Rev. Stat. § 423.130. Ky. Stat. § 423.130(1) states that a notary “shall certify

that the person acknowledging appeared before him and acknowledged he executed the instrument.”

(Emphasis added). Numerous courts, following Vance, have held in factually similar mortgage

avoidance actions brought by a trustee that Ky. Rev. Stat. § 423.130 requires that a notary identify

in the Certificate of Acknowledgment the names of the individuals who signed the mortgage. See,

e.g., MG Invs., Inc. v. Johnson (In re Cocanougher), 378 B.R. 518, 522 (B.A.P. 6th Cir. 2007)

(same); Select Portfolio Servs. v. Burden (In Re Trujillo), 378 B.R. 526, 533 (B.A.P. 6th Cir. 2007)

(same); Countrywide Home Loans, Inc. v. Gardner (In Re Henson), No. 07-8025, 2008 Bankr.

LEXIS 1953 (B.A.P. 6th Cir. July 9, 2008) (same); Baker v. CIT Group, Inc. (In Re Hastings), 353
B.R. 513, 517 (Bankr. E.D. Ky. 2006) (same); Burden v. CIT Group, Inc. (In Re Armstrong), 366
B.R. 716, 718 (Bankr. E.D. Ky. 2007); Schlarman v. SunTrust Morg., Inc. (In Re Helvey), No.

05-24181, Adv. No. 06-2061, 2006 Bankr. LEXIS 1619, at *7 (Bankr. E.D. Ky. Aug. 2, 2006)

(same); Miller v. Raisor (In Re Raisor), No. 05-30478, Adv. No. 05-3041, 2006 Bankr. LEXIS 3785,

at *4 (Bankr. E. D. Ky. March 31, 2006) (same).

                                                   8
        Moreover, as the Bankruptcy Court noted, Vance and its progeny are in line with Kentucky

case law holding that a mortgage is defectively acknowledged when a notary or attesting witness fails

to certify the identity of the party that signed the mortgage. See Smith v. Jackson, 232 Ky. 76, 22
S.W.2d 420 (Ky. 1929); Starr Piano Co. v. Petrey, 168 Ky. 530, 182 S.W. 624, 625 (Ky. 1916).

Accordingly, the court finds that the Creditors’ argument is not well-taken based upon the plain

meaning of Ky. Rev. Stat. § 423.130, as well as the recognition in Vance and its progeny, which are

in line with Kentucky law, that a notary must identify who signed the mortgage in the Certificate of

Acknowledgment.

B.

      The Creditors argue that the notary statement in the Certificate of Acknowledgment complies

with Ky. Rev. Stat. § 423.130 because that statute does not expressly require that the notary name

or identify the individual acknowledging the Mortgage. Rather, according to the Creditors, the

Kentucky acknowledgment and recording statutes require only substantial compliance with their

terms and are to be read together. The Creditors argue that the Kentucky statutes, when read together,

give the notary an option not to name the person acknowledging the instrument in the event that the

person named in the instrument and acknowledging the instrument are the same. In support of this

argument, the Creditors cite the following Kentucky statutes:

        423.140 Recognition of certificate of acknowledgment
        The form of a certificate of acknowledgment used by a person whose authority [to
        certify acknowledgments] is recognized under KRS 423.110 shall be accepted in this
        state if:
        (1) The certificate is in a form prescribed by the laws or regulations of this state;
        (2) The certificate is in a form prescribed by the laws or regulations applicable in the
        place in which the acknowledgment is taken; or
        (3) The certificate contains the words "acknowledged before me," or their substantial

                                                   9
       equivalent.

       423.150 Certificate of acknowledgment
       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; . .
       . and
       (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.

    According to the Creditors, the significance of these statutes is that Kentucky has no proscribed

form for a certificate of acknowledgment, and it is valid if it contains the language, “acknowledged

before me,” which the Certificate in the instant case contains. Further, they argue that if the

Certificate of Acknowledgment contains that language, Ky. Rev. Stat. § 423.150 provides a “safe

harbor” that excuses the notary from naming the person acknowledging the instrument when that

person is named in the instrument. Essentially, the Creditors argue that the phrase, “acknowledged

before me,” satisfies as a matter of law the requirement of Ky. Rev. Stat. § 423.130 that the notary

certify that the person acknowledging the instrument appeared before the notary, acknowledged that

he executed the document, and was known to the notary to be the person described therein and who

executed the instrument. The Creditors argue there is no need for the notary to identify the person

acknowledging if he and the person executing the instrument are one and the same.

      First, the Trustee responds by arguing that Ky. Rev. Stat. § 423.140 explicitly references Ky.

Rev. Stat. § 423.110, which is titled, “Recognition of Notarial Acts Performed Outside This State.”

Therefore, the Trustee maintains that § 423.140 only applies to notarial acts performed outside of

Kentucky, and there is no evidence that the mortgage in question here was executed outside of

                                                10
Kentucky. (Appellee’s Br. at 15.) Moreover, the Trustee argues that § 423.140 only addresses

whether the form of the certificate of acknowledgment is acceptable from a notarial act performed

outside of the State of Kentucky and does not address the substance of what information should be

included in the certificate of acknowledgment.

     Secondly, the Trustee argues that Ky. Rev. Stat. § 423.150 does not provide a “safe harbor,”

whereby if the words “acknowledged before me” are used that the certificate of acknowledgment

complies with Ky. Rev. Stat. § 423.130. The court notes the BAP for the Sixth Circuit in In Re

Trujillo, 378 B.R. at 537, rejected this argument and found that:

        Section 423.130, referenced by Vance and its progeny, is authority for the
        requirement that a certificate of acknowledgment must name or identify the person
        acknowledging the instrument in order to provide constructive notice. Under the
        Creditors' argument, the pertinent statutes, except for § 423.130, would be read
        together and § 423.150 would supercede § 423.130. Section 423.150 was enacted in
        1970 at the same time as § 423.130 and has never been interpreted to negate the
        requirements of § 423.130. Such an interpretation of § 423.150 would make §
        423.130 superfluous and undermine the Vance court's determination that § 423.130
        was not satisfied when the names or identities of those acknowledging the instrument
        were omitted from the certificate of acknowledgment.

See also In Re Henson, 2008 Bankr. LEXIS 1953, at *15-16 (same). Because the court finds that the

Trustee’s argument in regard to Section 140 and 150 and the case authority above to be persuasive,

the court hereby rejects the Creditors’ arguments regarding those provisions.

C.

        The Creditors rely upon Ky. Rev. Stat. § 60.060 to argue that the Trustee is precluded from

attacking the notary’s statement in the Certificate of Acknowledgment because such an attack can

lie only upon a demonstration of fraud or mistake. (Appellant’s Br. at 12.) Ky. Rev. Stat. § 60.060

states as follows:

                                                 11
        No fact officially stated by an officer in respect of a matter about which he is by law
        required to make a statement in writing, either in the form of a certificate, return or
        otherwise, shall be called in question, except in a direct proceeding against the
        officer or his sureties, or upon the allegation of fraud in the party benefitted thereby
        or mistake on the part of the officer.

(Emphasis added). The Creditors do not provide any case law to support their position that the

statute is applicable to the instant case.

       The Trustee contends that the Creditors’ reliance upon this statute is misplaced because the

notary in this case did not state a fact, i.e., the identity of the person acknowledging the execution

of the mortgage. (Appellee’s Br. at 16.) The Trustee argues that it is the notary’s failure to state

such a fact that renders the mortgage avoidable, and that Ky. Rev. Stat. § 60.060 is therefore

inapplicable to the instant case. (Id.)

        Moreover, the bankruptcy court’s statement in Rogan v. Countrywide Home Loans (In re

Griffin), No. 06-50061, Adv. No. 06-5099, 2006 Bankr. LEXIS 2520, at * 3 (Bankr. E.D. Ky. Oct.

5, 2006), that the purpose of Ky. Rev. Stat. § 60.060 is to “prevent attack on a notary certificate

which appears to be proper in all respects” buttresses the Trustee’s argument that the statute is

inapplicable to the instant case. (Emphasis added). In Griffin, the plaintiff trustee sought to avoid

a mortgage containing a facially valid acknowledgment based upon an argument that the notary’s

statement in the acknowledgment that the debtor had appeared before her was false. Applying Ky.

Rev. Stat. § 60.060, the court held that the plaintiff could not challenge the facially valid

acknowledgment unless he either sued the notary for alleged fraud or mistake in his complaint, but

the court allowed the plaintiff to amend his complaint to allege such facts.

        In the instant case, the Mortgage is not facially valid pursuant to Ky. Rev. Stat. § 423.130

                                                  12
because the notary did not identify that the Wilsons appeared before him in the Certificate of

Acknowledgment, as required by the statute. Consequently, Ky. Rev. Stat. § 60.060 is inapplicable

under the reasoning set forth in Griffin. Significantly, none of the factually similar mortgage

avoidance cases cited above in Section III(A) that attack a facially invalid notary statement in a

certificate of acknowledgment suggest that the application of Ky. Rev. Stat. § 60.060 bars such an

attack. Accordingly, for the reasons stated above, the court rejects this argument.

D.

      The Creditors argue that Vance, as did the Bankruptcy Court and the BAP in the instant case,

erred in focusing exclusively on Ky. Rev. Stat. § 423.130 to determine whether the Mortgage had

been properly acknowledged. Instead, the Creditors cite several cases to assert that Ky. Rev. Stat.

§§ 382.160(1) and 382.130, which only refer to deeds, also govern the recording of deeds and

mortgages. (Appellant’s Br. at 11, citing, e.g., State Bank of Stearns v. Stephens, 97 S.W.2d 553

(Ky. 1936); Woods v. Davis, 154 S.W.2d 905 (Ky. 1913)).           However, the cases cited by the

Creditors in support of their argument that this court should apply §§ 382.160(1) and 382.130 were

decided years before the enactment of § 423.130, and the Creditors do not point to any recent and/or

relevant case law applying these statutes to mortgage avoidance actions based on an allegedly

defective notary statement in the Certificate of Acknowledgment. Numerous courts that have

reviewed similar attempts to avoid a mortgage based on a defective notary acknowledgment have

identified and applied § 423.130 as the controlling statute. See cases cited above in Section III(A).

Significantly, none of these cases have applied Ky. Rev. Stat. §§ 382.160(1) and 382.130, although

there is admittedly no indication in these cases that such an argument was advanced.

        The Creditors maintain that it not need comply with § 423.130 because the Mortgage was

                                                 13
properly acknowledged under §§ 382.160 and 382.130. The Creditors base this argument on Ky.

Rev. Stat. § 423.170. Ky. Rev. Stat. § 423.170 is titled, “Acknowledgments not affected by KRS

423.110 to 423.190,” and provides as follows:

        A notarial act performed prior to July 1, 1970, is not affected by KRS 423.110 to
        423.190. KRS 423.110 to 423.190 provide an additional method of proving notarial
        acts. Nothing in KRS 423.110 to 423.190 diminishes or invalidates the recognition
        accorded to notarial acts by other laws or regulations of this state.

(Emphasis added.) The Creditors argue that Ky. Rev. Stat. § 423.130 simply provides an additional

method for proving notarial acts after July 1, 1970. The dissent finds this argument to be persuasive.

While this may be the impact of § 423.170, this conclusion is not clear from the face of the statute.

The statute does provide that it functions as an “additional” method of proving a notarial act, but it

also states that it does not affect notarial acts performed before July 1, 1970. There would be no need

to say the latter if the prior methods of proving a notarial act carried forward along with those

provided by the new Act. The third sentence of § 423.170 is likewise ambiguous. The statement

that nothing in the new statute “diminishes or invalidates the recognition recorded to notarial acts

by other laws or regulations of this state,” could, in the context of the two other sentences, serve as

either an affirmation of the first sentence, i.e., that it does not invalidate prior acts, or of the second

sentence, i.e., that the methods set forth in the statute are additional ways of proving notarial acts.

      There is no Kentucky legislative history regarding this section. However, the court finds that

it is unnecessary to resort to the history of the URAA or the legislative history of other jurisdictions

that have adopted the URAA. See, e.g., Apsey v. Memorial Hospital, 730 N.W.2d 695 (Mich. 2007)

(containing a majority opinion that concludes that the Michigan version of the URAA regarding the

recognition of out-of-state notarial acts was in addition to prior methods of proving such acts, as well

                                                    14
as two concurring opinions and a dissenting opinion.) We conclude that the determination of

whether all notarial acts performed after 1970 had to comply with § 423.130 or whether they might

also be valid if they complied with previously existing methods, as provided in Chapter 382, has no

bearing on the outcome of this case. This conclusion is inescapable based upon review of the

provisions, §§ 382.130 and 382.160, relied upon by the Creditors in this case. The Creditors cannot

show that they have complied with any pertinent provision of Chapter 382.

      Section 382.130(1) reads, in pertinent part, “Deeds executed in this state may be admitted to

record: (1) On the acknowledgment, before the proper clerk, by the party making the deed.” In this

case, there is no question that the acknowledgment was not taken by or before a clerk. It was done

by or before an attorney who was a notary. Further, any argument that the words a “proper clerk”

includes one who acts as a notary is foreclosed by comparing § 382.130(1) to the predecessor statute,

Section 501, which read: “Deeds executed in this state. . . .may be admitted to record: (1) on the

acknowledgment, before the proper clerk or notary public by the party making the deed. . . .”

(Emphasis added.) See Starr Piano, 182 S.W. at 631 (setting forth the text of Section 501). It is

evident that the word “notary” was in Section 501 and was removed in Section 382.

        A review of § 382.160 is equally revealing. It reads, in pertinent part, “(1) Where the

acknowledgment of a deed is taken by an officer of this state . . . he may simply certify it was

acknowledged before him, and when it was done.” Like § 382.130(1), this provision does not refer

to a notary. It applies only when an officer of a state is performing an acknowledgment. There is

nothing in that statute or related statutes that defines a notary as an officer of the state for this

purpose. Yet, the dissent would so hold without citing any case where a court has held a notary is

an officer of the state under § 382.160. Instead, the dissent cites a number of cases that either predate

                                                   15
the enactment of § 382.160 in 1942 or involve facts in contexts that are clearly distinguishable from

those presented in this case.    See, e.g., Redden v. Kentucky, 339 S.W.2d 447, 448 (Ky. 1960)

(reversing the trial court’s judgment that a notary violated Ky. Rev. Stat. §§ 126.150 and 126.160

because “the provisions of these [election law] statutes impose no duty upon a notary public to

administer an oath or to notarize an application of this kind”); Love v. Duncan, 256 S.W.2d 498, 504

(Ky. 1953) (holding that “[i]t is the conclusion of the Court that neither the increase in salary nor the

increase in fees provided by the 1952 amendment to [Ky. Rev. Stat. §] 28.440 is available to the

defendant [court] reporters of the Jefferson Circuit Court now holding these offices, but are available

to the incumbents for the term beginning October 1, 1954.”)

     The only other provision that might arguably apply is § 382.130(5). It reads, in pertinent part,

“Deeds in this state may be admitted to record: (5) On the certificate of a county clerk of this state,

or any notary public, that the deed has been acknowledged before him by the party making the deed.

. . .” Analysis of this provision, assuming that it is applicable to this case, shows that it was not

complied with herein. Indeed, its requirements are very similar to those contained in § 423.130.

The notary must certify that the deed has been acknowledged before him by the very party who has

made the deed. In the case before the court, that is precisely the problem. The notary did not

indicate in his acknowledgment that the persons who appeared before him were the persons who

made the deed. One is only left to surmise about that.

     The Creditors argue that Louisville Joint Stock Land Bank v. McNeely, 102 S.W.2d 389 (Ky.

1937), supports their argument that the form of acknowledgment in the instant case complies with

Section 382. The Creditors state that the McNeely court “was faced with a notary certificate which

stated ‘and acknowledged before me by them,’” and the court found the instrument was properly

                                                   16
acknowledged. (Appellant’s Br. at 13.) The Creditors extrapolate from McNeely that “there is no

statutory requirement in KRS Chapter 382 that the notary state who acknowledged it.” (Appellant’s

Br. at 14.)

     McNeely, which was decided years before under the predecessor statute to § 382, is readily

distinguishable from the instant case. The notary certification statement at issue in McNeely provides

as follows:

        I, G. W. Lane Notary Public for the County and State aforesaid do certify that the
        foregoing mortgage from H. B. McChesney, L. L. McChesney, his wife, to E. L.
        McNeely was this day produced to me in Caldwell Co., Ky. and acknowledged
        before me by them to be their act and deed for the uses and purposes therein
        mentioned. Witness my hand, this first day of April, 1922.

McNeely, 102 S.W.2d at 392. Unlike the notary in the instant case, it is evident that the McNeely

notary stated that the McChesneys appeared before him and signed the mortgage. McNeely therefore

does nothing to advance the Creditors’ argument that Kentucky case law does not require that a

notary must state who acknowledged the mortgage. In light of the foregoing, the court finds the

Creditors’ argument that the form of the acknowledgment in this case complies with Kentucky law

is not well-taken.

                                           IV. CONCLUSION

        For the reasons stated above, the court finds that the Creditors’ arguments that Vance was

incorrectly decided, and the decisions of the Bankruptcy Court and the BAP are therefore invalid,

are not well-taken. In light of Vance and its progeny, the Bankruptcy Court and the BAP correctly

concluded that the Mortgage did not provide constructive notice to subsequent purchasers or

creditors because it was not properly acknowledged under Kentucky law and was consequently

subject to avoidance by the Trustee pursuant to 11 U.S.C. § 544. Accordingly, we AFFIRM the

                                                 17
order of the Bankruptcy Court granting summary judgment to the Trustee.

                                             18
       CLAY, Circuit Judge, dissenting. The majority erroneously concludes that the certificate

of acknowledgment accompanying the Wilsons’ mortgage fails to comply with applicable Kentucky

law and that, consequently, Plaintiff, Trustee Beverly Burden, may avoid the mortgage obligation.

Contrary to the majority’s argument, the record demonstrates that the acknowledgment complied

with § 382.160 of the Kentucky Revised Statutes, the mortgage was validly acknowledged, and

Plaintiff cannot avoid the mortgage obligation. Therefore, I respectfully dissent.

       By way of background, on May 8, 2001, Samuel and Liza Wilson financed a $65,741 loan

with Defendant CIT secured by a lien against their Kentucky home. In the presence of a notary, they

executed a mortgage to secure the loan. The signature page of the mortgage documents reads as

follows:

               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)

                                                   19
(J.A. 12.) Immediately below this signature block appears the certificate of acknowledgment, which

states:

          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)

(Id.)

          On January 17, 2005, the Wilsons filed for Chapter 13 bankruptcy, and Plaintiff was

appointed as Trustee of the Wilsons’ estate. As Trustee, Plaintiff filed the instant case in the United

States Bankruptcy Court for the Eastern District of Kentucky. Pursuant to 11 U.S.C. § 544(a)(3),

“a bankruptcy trustee is considered a bona fide purchaser of the debtor’s real estate and may therefore

avoid certain obligations placed on the property that are voidable under state law.” In re Cook, 457
F.3d 561, 566 (6th Cir. 2006). To be valid under Kentucky law, a mortgage must be “acknowledged

or proved according to law and lodged for record.” Ky. Rev. Stat. Ann. § 382.270. Thus, if the

Wilsons’ mortgage was not properly “acknowledged” under Kentucky law, the estate may avoid any

obligations created by that mortgage.

                                                  20
        Kentucky law provides two separate frameworks for creating a valid certificate of

acknowledgment. The first is set forth in Kentucky’s Uniform Recognition of Acknowledgments

Act (“URAA”). Relevant to the issue presented in this case, § 423.130 requires that, for the

certificate to be valid, “[t]he person taking an acknowledgment” must certify:

       (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.

Ky. Rev. Stat. Ann. § 423.130. In addition to the URAA, Chapter 382, governing conveyances and

encumbrances, sets forth certain requirements for certificates of acknowledgment. Specifically, §

382.160 provides that, “[w]here the acknowledgment . . . is taken by an officer of this state or an

officer residing out of state, he may simply certify that it was acknowledged before him, and when

it was done.” Ky. Rev. Stat. Ann. § 382.160(1). Therefore, if the certificate accompanying the

Wilsons’ mortgage complies with either of these statutes, the acknowledgment is valid.

        The record establishes that the acknowledgment complies with the requirements set forth in

§ 382.160. The certificate of acknowledgment accompanying the Wilsons’ mortgage states that the

“foregoing instrument” was “acknowledged before [the notary]” on the eighth day of May, thus

satisfying the statute’s requirement that “the officer . . . may simply certify that it was acknowledged

before him, and when it was done.” Ky. Rev. Stat. Ann. § 382.160. Because the acknowledgment

complies with § 382.160, the mortgage was validly acknowledged and therefore recordable.

                                                  21
Accordingly, the mortgage provided notice to the Trustee under § 382.270, and Plaintiff cannot avoid

the mortgage obligation.

        Attempting to avoid this self-evident legal conclusion, the majority finds that the mortgage

is invalid under § 382.160. The majority reasons that, because § 382.160 “does not refer to a

notary,” it applies “only when an officer of a state is performing an acknowledgment.” Op. ¶ 40.

The majority then states that “nothing in that statute or related statutes . . . defines a notary as an

officer of a state.” Id. However, numerous longstanding decisions from the Kentucky courts have

recognized that a notary is a “public officer” or “officer of the state.” See Redden v. Kentucky, 339
S.W.2d 447, 448 (Ky. 1960) (finding that a notary public is a type of public officer); Love v. Duncan,

256 S.W.2d 498, 501 (Ky. 1953) (“[N]otaries public are universally regarded as officers.”); Huffaker

v. Nat’l Bank of Monticello, 75 Ky. 287 (Ky. 1876) (“The notary being an officer of this state, his

official signature is all that is required . . . .”); see also New Madrid Realty & Inv. Co. v. Kirby, 11
S.W.2d 429, 430 (Ky. 1928) (concluding that, because the acknowledgment indicated that a “notary

public” took the acknowledgment, “the title of the officer taking the acknowledgment plainly appears

on the mortgage”); Holland v. Stubblefield, 206 S.W. 459, 461 (Ky. 1918) (concluding that “a notary

who held himself out as such . . . was a de facto officer” and that the acknowledgment taken before

him was valid because “the contracting parties did not know of the officer’s disability”).

        Despite the clear understanding of Kentucky courts that a notary is an officer, the majority

attempts to argue that these cases are inapplicable. However, the grounds on which the majority

attempts to distinguish the cases are baseless. Unable to find any other way to discredit the Kentucky

Supreme Court’s clear statement that a “notary [is] an officer of this state,” Huffaker, 75 Ky. 287,

the majority contends, without explanation, that the Kentucky Supreme Court’s decision is irrelevant

                                                  22
because it was decided before the enactment of § 382.160. However, nothing in § 382.160 suggests

that the Kentucky legislature intended to overturn the general principle that a notary public is an

officer under Kentucky law.

        With respect to the cases decided after the enactment of § 382.160, the majority argues they

do not apply to this case because they “involve facts in contexts that are clearly distinguishable from

those presented in this case.” Op. ¶ 40. However, any factual distinctions are irrelevant; they in no

way undermine or limit the general principle that a notary public is an “officer of this state.” In

addition, the majority offers no support for its contention that Kentucky excludes notaries from the

more general category of state officers. Therefore, the majority’s contention that a notary is not an

“officer of this state” for purposes of § 382.160 is clearly contrary to Kentucky law.

        By reaching the erroneous conclusion that the certificate of acknowledgment fails to comply

with § 382.160, the majority attempts to avoid the issue of whether the provisions of Chapter 382

apply to this case, as well as the question of whether the URAA provides the exclusive method of

creating a valid certificate of acknowledgment. Nonetheless, the majority offers several reasons as

to why it believes that Chapter 382 should not apply to this case, all of which lack merit.

        First, the majority rejects the Creditors’ reliance on Chapter 382 because the relevant

provisions “only refer to deeds” and therefore do not “govern the recording of . . . mortgages.” Op.

¶ 36. While the term “mortgage” is not present in the text of § 382.160 or similar provisions, such

as § 382.130(1), Kentucky courts have applied earlier versions of these statutes when confronted

with the question of whether a mortgage was recordable. See, e.g., Starr Piano Co. v. Petrey, 182
S.W. 624, 625-26 (Ky. 1916) (applying section 501—the predecessor statute to 382.130(1)—to

determine whether a mortgage was properly recorded); see also State Bank of Stearns v. Stephens,

                                                  23
97 S.W.2d 553, 557 (Ky. 1936) (citing section 501 for the rule that a mortgage could not be legally

lodged for record until it was acknowledged). Therefore, to the extent the majority attempts to

dismiss Chapter 382 as relevant only to deeds, the majority is clearly at odds with well-established

Kentucky law.

       In addition, the majority reasons that Chapter 382 should not apply to this case because other

courts that “have reviewed similar attempts to avoid a mortgage based on a defective notary

acknowledgment have identified and applied § 423.130 as the controlling statute.” Op. ¶ 36. The

majority concedes, however, that “there is admittedly no indication in these cases” that the parties

advanced the argument that § 382.160 applied. Id. Without evidence that a court rejected Chapter

382 as inapplicable, the fact that these courts applied § 423.130 does not support a conclusion that

§ 382.160 cannot provide a valid method of proving notarial acts.

       The majority also addresses the Creditors’ argument that § 423.170 demonstrates that the

Kentucky legislature intended for the URAA to provide an additional method of proving notarial

acts, rather than the exclusive method. Section 423.170 provides:

       A notarial act performed prior to July 1, 1970, is not affected by KRS 423.110 to

       423.190. KRS 423.110 to 423.190 provide an additional method of proving notarial

       acts. Nothing in KRS 423.110 to 423.190 diminishes or invalidates the recognition

       accorded to notarial acts by other laws or regulations of this state.

Ky. Rev. Stat. Ann. § 423.170. In evaluating the Creditors’ argument, the majority finds § 423.170

to be ambiguous with respect to whether § 423.170 precludes the application of Chapter 382.

However, § 423.170 specifically indicates that the URAA does not replace existing methods of

                                                 24
proving notarial acts, but provides an “additional” method.

        The Kentucky legislature evidenced its intent through § 423.170 to maintain existing statutes,

such as those set forth in Chapter 382, as permissible methods of proving the acknowledgment of

deeds, mortgages, and other instruments. While Kentucky courts have not addressed the impact of

§ 423.170 on seemingly conflicting statutes, courts in other states that have adopted the URAA “have

consistently come to the conclusion that the uniform act creates an alternative means of

authentication.” Apsey v. Mem’l Hosp., 730 N.W.2d 695, 702 n.9 (Mich. 2007) (discussing Rumph

v. Lester Land Co., 172 S.W.2d 916 (1943), which concluded that a pre-existing statute “was merely

a system of acknowledgement [sic] that was an alternative to” the URAA and that, as a result, “[t]wo

ways are open: (1) the old way; or (2) the way under [the uniform act]. Either way reaches the same

goal: i.e., the right to be recorded”). Accordingly, there is no basis for the majority’s contention that

§ 423.170 is ambiguous.

        In addition to arguing that the certificate of acknowledgment failed to comply with §

382.160, the majority asserts that the acknowledgment is invalid under § 423.130. Because

Kentucky law amply demonstrates that the mortgage was validly acknowledged pursuant to §

382.160, it is unnecessary to address whether the certificate of acknowledgment complied with §

423.130.1 However, it should be noted that the majority’s interpretation of § 423.130 represents an

        1
         As a result, it also is unnecessary to address the majority’s reliance on this Court’s
unpublished decision in Rogan v. America’s Wholesale Lender (In Re Vance), 99 F. App’x 25
(6th Cir. 2004), for its conclusions regarding the proper interpretation of § 423.130.
        In addition, to the extent that the majority relies on bankruptcy court cases to support its
interpretation of Kentucky law, such reliance is misplaced. Although a panel of this Court must
follow a prior panel’s interpretation of state law under the principles of stare decisis, see Koch v.
Koch Indus., Inc., 203 F.3d 1202, 1231 (10th Cir. 2000), this Court is not obligated to follow a
bankruptcy court’s interpretation of state law, Brockett v. Spokane Arcades, Inc., 472 U.S. 491,
500 (1985) (noting that federal courts “surely have the authority to differ with the lower federal

                                                   25
inappropriately technical and misleading reading of that statute, particularly in light of the Kentucky

Supreme Court’s recent discussion of the purpose of a certificate of acknowledgment:

       The certificate of acknowledgment is evidence of the acknowledgment itself, which

       in its technical legal sense is a formal declaration before a proper officer that an

       instrument is the act or deed of the person executing it, or, to put it more expressly,

       a formal declaration of the genuineness of an instrument in writing made by a person

       executing it . . . before a competent court or officer[] in order to establish the validity

       of such instrument or entitle it to be admitted in evidence or be recorded. . . . As such,

       an acknowledgment is nothing more than a verification that a document was

       executed.

Matthews v. Commonwealth, 163 S.W.3d 11, 24 (Ky. 2005) (internal quotation marks omitted)

(footnotes omitted). Thus, the purpose of requiring a certificate of acknowledgment is to ensure the

validity of an instrument. While reciting the name of the person acknowledging execution of the

instrument is an important requirement to guarantee the integrity of the instrument, there is no

dispute in this case that the Wilsons are the ones who acknowledged execution of the mortgage; the

certificate of acknowledgment appears directly below their signatures. Further, the acknowledgment

references the “foregoing instrument,” which could only refer to the mortgage document the Wilsons

signed directly above the certificate of acknowledgment.

        Therefore, this case does not present a situation where a subsequent purchaser would be “left

to wonder who appeared before the notary . . . to acknowledge their signatures.” In re Biggs, 377
F.3d 515, 519 (6th Cir. 2004). Under the circumstances, “no intelligent person could have been

courts as to the meaning of a state statute”).

                                                   26
misled by the . . . certificate,” as “[a]ny person of common understanding would at once know and

understand that the named [instrument]” referred to the mortgage. Louisville Joint Stock Land Bank

v. McNeely, 102 S.W.2d 389, 392 (Ky. 1937).2 Accordingly, a finding that the Wilsons’ mortgage

was not properly recorded solely because the certificate of acknowledgment fails to restate the names

of the persons whose signatures are being acknowledged constitutes an overly technical and arcane

reading of Kentucky law. The majority attempts to justify its conclusion by relying on case law that

addresses the validity of instruments and acknowledgments distinct in presentation from those in this

case, which involves a signature to an instrument followed immediately by a statement that the

instrument was acknowledged. Allowing a trustee to avoid the mortgage obligation under these

circumstances does nothing to fulfill the purposes of the acknowledgment requirement—protecting

the validity of the title system and preventing fraud.

        Instead of protecting the integrity of this and similar transactions, the majority has exalted

form over substance and actually has made it more difficult for parties to such transactions to receive

the legal protections that Kentucky law has sought to insure over many years. Thankfully, inasmuch

as this Court is not the final arbiter or interpreter of Kentucky law, neither the Kentucky legislature

nor the Kentucky courts are bound by the majority’s ill-advised and legally erroneous conclusions.

See Ohio ex rel. Skaggs v. Brunner, 549 F.3d 468, 472 (6th Cir. 2008) (“No federal court has the

final say on what [Kentucky] law means.”).

        2
         In rejecting the Creditors’ reliance on McNeely, Op. ¶ 43, the majority fails to recognize
McNeely’s rejection of overly technical interpretations of the requirements for creating a valid
certificate of acknowledgment. The court in McNeely emphasized that, despite the existence of a
“more precise” or “better form” alternative, where “no intelligent person could have been
misled” by the imperfect certificate, a court should not invalidate the certificate. See 102 S.W.2d
at 392.

                                                  27
       Because the majority erroneously concludes that the certificate of acknowledgment

accompanying the Wilsons’ mortgage failed to comply with Kentucky law, I respectfully dissent

from the majority’s conclusion that Plaintiff may avoid the mortgage obligation.

                                               28