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Direction to See Included Document Satisfies Mortgage Description Requirement - In re Brockman

July 19, 2011

Last week, we wrote about a Kentucky debtor's failed attempt to avoid a mortgage that she signed only in part. This week, our Corona foreclosure defense lawyers found another Kentucky case involving a debtor who seeks to avoid a mortgage. In In re Brockman, a trustee for the bankruptcy of Stephen and Donna Brockman was seeking to avoid a mortgage securing a debt Donna Brockman owned on a property from her previous marriage. The trustee argued that the mortgage did not adequately describe the property under Kentucky law because in the space allotted for a description of the property, the mortgage said "SEE EXHIBIT A"; Exhibit A then described the property. A bankruptcy panel for the Sixth U.S. Circuit Court of Appeals found that this was adequate to satisfy Kentucky law.

Donna was married to David Hogston in 1988, when they purchased property in Fayette County. In 2006, the divorced couple granted a new mortgage on the property. In 2010, the Brockmans filed for Chapter 7 bankruptcy, giving rise to the trustee's action. The trustee argued that Donna could avoid the mortgage because the property was not described prior to the signature page. The mortgage company, American General Home Equity, moved for summary judgment in its favor and the bankruptcy court eventually granted it. The trustee appealed.

In a relatively short decision, the Sixth Circuit declared that "The Trustee's argument has no merit." The trustee had argued that "SEE EXHIBIT A" did not meet legal standards to be incorporated by reference, because it was unclear about where the description of the property was located. The appeals court disagreed. Incorporation by reference is allowed in Kentucky law, the court said, even when the information incorporated is in a separate document. Furthermore, the direction to "SEE EXHIBIT A" was not unclear enough to need further directions, the court said. And the practice of attaching descriptions and incorporating them by reference is common in Kentucky. For these reasons, the Sixth Circuit upheld the summary judgment ruling against the trustee.

Our Garden Grove foreclosure defense attorneys have seen numerous cases recently involving challenges to paperwork that is incomplete, falsified and more. However, it's far less common to see a challenge suggesting paperwork is unclear. This is not to say that there are never grounds to challenge unclear paperwork. For example, California law does not allow businesses to present a contract in a different language from the one used to negotiate its terms. And under common law, ambiguous contracts are generally interpreted in a way that is better for the signer, in order to avoid rewarding the drafter for being unclear. Nonetheless, clients who want to challenge mortgage paperwork are best off when they can point to a specific law that was unambiguously broken or bent. An experienced San Diego County foreclosure defense lawyer can help clients identify any such issues in their own cases.

If you believe your lender is playing legal and ethical tricks in order to drive you into foreclosure, you should call Howard Law PC to discuss how we can help. For a free consultation on your rights and your options, send us a message online or call 1-800-872-5925.

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