Garzolini Tire & Fue v. Edgar County Bank ( 2007 )

In the
United States Court of Appeals
For the Seventh Circuit
____________
No. 06-3238
FIFTH THIRD BANK, INDIANA,
Plaintiff,
v.
EDGAR COUNTY BANK & TRUST, et al.,
Defendants-Appellees.
Appeal of:
GARZOLINI TIRE & FUEL, INC.,
Debtor in Possession.
____________
Appeal from the United States District Court for the
Southern District of Indiana, Terre Haute Division.
No. 2:05-cv-0219-RLY/WGH—Richard L. Young, Judge.
____________
ARGUED FEBRUARY 21, 2007—DECIDED MARCH 15, 2007
____________
Before EASTERBROOK, Chief Judge, and FLAUM and
SYKES, Circuit Judges.
EASTERBROOK, Chief Judge. Garzolini Tire & Fuel
borrowed money from Edgar County Bank & Trust on the
security of a mortgage in what the parties call the Clinton
Property. During Garzolini Tire’s bankruptcy, Fifth
Third Bank filed an adversary proceeding in which it
argued that it held an interest superior to Edgar County
Bank’s. Eventually Fifth Third Bank conceded—but
2 No. 06-3238
Garzolini Tire made its own claim to the proceeds of the
Clinton Property, which has been sold. (The purchase
price is being held in escrow.) According to Garzolini Tire,
the mortgage was not properly signed and attested, so the
proceeds of the Clinton Property should be distributed
to unsecured creditors (including Edgar County Bank)
under the terms of the plan of reorganization.
Neither side’s brief complied with Circuit Rule 28(a)(3),
which requires details on how the matters appealed in a
bankruptcy case relate to any part of the litigation still
under way in the bankruptcy court or the district court.
An order issued before oral argument achieved only partial
compliance, so at oral argument we directed the parties
to try again. Their filings have revealed that (a) the
adversary proceeding has been fully resolved (Fifth Third
Bank made several claims in addition to the one about the
Clinton Property), and (b) the bankruptcy itself has
produced an approved plan of reorganization, a final
decision by any standard.
A final resolution of any adversary proceeding is
appealable, as it is equivalent to a stand-alone lawsuit. See
In re Forty-Eight Insulations, Inc., 115 F.3d 1294 (7th Cir.
1997); In re Morse Electric Co., 805 F.2d 262 (7th Cir.
1986). Counsel were mistaken to treat each separate
claim in an adversary proceeding as appealable inde-
pendently while the adversary proceeding as a whole
is ongoing. In bankruptcy litigation, as in other civil
cases, it takes a separate judgment under Fed. R. Civ. P.
54(b) to allow an immediate appeal of one claim in a
larger proceeding. See Fed. R. Bankr. P. 7054(a) (applying
Rule 54(b) to bankruptcy litigation). But the misunder-
standing turned out not to matter. Counsel could have
saved both themselves and the judges valuable time by
studying the jurisdictional rules and supplying all mate-
rial information at the outset.
No. 06-3238 3
When Garzolini Tire borrowed from Edgar County Bank
& Trust (“the Bank” for short), its president was Bruno
Garzolini, Jr., and its vice president was Robert D.
Garzolini. Both Bruno and Robert borrowed from the
Bank in the same transaction, though only Garzolini Tire
gave a security interest in real property. The signature
block on the mortgage reads (with manuscript signa-
tures in italic):
THE BORROWERS HEREBY DECLARE AND
ACKNOWLEDGE THAT THE BORROWERS HAVE
RECEIVED, WITHOUT CHARGE, A TRUE COPY
OF THIS MORTGAGE.
GARZOLINI TIRE & FUEL, Bruno Garzolini, Jr.
INC.
BRUNO GARZOLINI, Jr.
By: Bruno Garzolini, Jr.
ATTEST: Robert D. Garzolini
Robert D. Garzolini, V.P. ROBERT D. GARZOLINI
The next page contains a notary public’s declaration that
these signatures are genuine.
Garzolini Tire maintains that these signatures are
inadequate, because the Garzolinis may have been sign-
ing exclusively in their personal capacities. The notary’s
attestation does not reveal in which capacity they signed,
so the document is ineffective under Ind. Code §32-21-2-3.
Although Ind. Code §32-21-2-3 and its predecessors deal
4 No. 06-3238
with the recording of mortgages rather than with the
rights of the parties to the transaction, see Hubble v.
Wright, 23 Ind. 322 (1864), in a bankruptcy proceeding
the trustee or debtor in possession can assume the posi-
tion of a hypothetical third party that could take ahead of
a non-recorded mortgage. See 11 U.S.C. §544(a).
Garzolini Tire relies principally on Haverell Distributors,
Inc. v. Haverell Manufacturing Corp., 115 Ind. App. 501,
58 N.E.2d 372 (1944), in which the court found some
signatures too ambiguous to create a mortgage on a
corporation’s behalf. For its part, the Bank relies princi-
pally on Mishawaka Federal Savings & Loan Associa-
tion v. Brademas, 162 Ind. App. 423, 319 N.E.2d 674
(1974), which found particular signatures adequately
revealing after stating that “it is not necessary that the
acknowledgment or certificate thereof be considered in
isolation.” 319 N.E.2d at 677.
Arguments back and forth about the relative weight
and effect of Haverell and Mishawaka Federal S&L seem
to us bootless, because Ind. Code §32-21-2-3 is simple as
can be. Under this statute, a mortgage is eligible to be
recorded if it is “(1) acknowledged by the grantor or (2)
proved before a (A) judge . . . [or] (E) notary public . . . .”
The statute does not say how mortgages are to be “acknowl-
edged” or “proved”; this is apparently left to private choice.
Ind. Code §32-21-2-7 offers some samples but does not
require their use—and the sample forms are skimpier
than the one these parties devised. This particular mort-
gage was acknowledged by two corporate officers, proved
before a notary public, and later proved before a bank-
ruptcy judge. As long as the Garzolinis were acting on
behalf of Garzolini Tire, there is no problem. And whether
they were so acting is a question not of law but of
fact—and the bankruptcy judge found that they acted
in both corporate and personal capacities.
No. 06-3238 5
The bankruptcy judge’s understanding of this document
seems to us entirely sensible, if it is not inevitable. Each
Garzolini signed twice—once on the left side in a corpo-
rate capacity, and once on the right in a personal capacity.
The left side gives the corporate name, followed by “By”
and the signature of the corporation’s President. It does
not take the word “President” after Bruno’s name to
illuminate the capacity in which one signs when the
immediately preceding text is “GARZOLINI TIRE &
FUEL, INC., By:” The next line makes this clear; Robert
Garzolini, as Vice President (or “V.P.”), attests the signa-
ture, a step unnecessary and inappropriate unless Bruno
was signing for the corporation as its President. And
the notary tells us that the signatures are genuine. We
have no doubt that Indiana’s courts would treat this as
an effective mortgage.
AFFIRMED
A true Copy:
Teste:
________________________________
Clerk of the United States Court of
Appeals for the Seventh Circuit
USCA-02-C-0072—3-15-07