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Mortgage Notary Acknowledgments Continue to Present Problems for Creditors in Bankruptcy Proceedings

Mortgage notary acknowledgments are still causing issues in bankruptcy, as seen in two recent cases.  In both, the US Bankruptcy Court for the District of Massachusetts addressed the sufficiency of two allegedly defective notary acknowledgments which were challenged by the bankruptcy trustees.

In Agin v. Green Tree Servicing, LLC (In re Shubert) (Bankr. D. Mass. Aug. 19, 2015), the Trustee claimed that the debtor’s mortgage was unrecordable under Massachusetts law, and therefore could not provide constructive notice to the Trustee, because the acknowledgment failed to indicate that the debtor signed the mortgage as her free act and deed.  The notary clause stated as follows:

On this 29th day of November 2004, before me, the undersigned notary public, personally appeared Lisa J. Shubert, proved to me through satisfactory evidence of identification, which were, MA Driv LIC to be the person whose name is signed on the preceding or attached document in my presence.

In Greater Love Tabernacle Church v. VFC Partners 18 LLC (In re Greater Love Tabernacle Church) (Bankr. D. Mass. Aug. 21, 2015), the debtor-in-possession acting as Trustee claimed that the notary’s certificate of acknowledgment, executed by an officer of the debtor, was fatally defective under Massachusetts law because the certificate does not reflect the representative capacity of the corporate officer who executed the mortgage on behalf of the corporation or that the execution of the mortgage was the free act and deed of the debtor.  The notary clause stated as follows:

Then personally appeared before me the above-named William E. Dickerson, Jr., and acknowledged the foregoing instrument to be his free act and deed and that of any entity named.

The two decisions, both by the Hon. Joan Feeney, reach somewhat disparate results.  In Agin, the Court determined that the notary clause was defective such that the mortgage did not provide constructive notice to the Trustee, and was therefore avoidable in bankruptcy.  But in Greater Love Tabernacle Church, the Court determined that, looking at the entirety of the mortgage document, it was clear that the signatory (Pastor Dickerson) signed in his capacity as representative of the debtor, and that it was the free act and deed of the debtor, reasoning that:

A plain reading of the Certificate and the four corners of the page on which it is printed leaves no doubt that the notary, in executing the Certificate, recognized that Pastor Dickerson appeared before her and signed the Mortgage as the free act and deed of GLTC. The signature block on the Mortgage identifies the Mortgagor as GLTC and reflects that Pastor Dickerson signed the Mortgage as President of GLTC.  Immediately below his signature as President of GLTC on the Mortgage, the Certificate appears and reflects that Pastor Dickerson personally appeared before the notary and executed the Mortgage as “his free act and deed and that of any entity named.” The phrase “his free act and deed and that of any entity named” in the Certificate, when logically read with the signature block of the Mortgage itself, leads to but one conclusion, namely that the language “and that of any entity named” refers to the entity named immediately above, GLTC.

The willingness to read the language of the notary clause in context in Greater Love Tabernacle Church departs from the line of relatively recent Bankruptcy Court decisions wherein context is disregarded, despite the repeated arguments of various creditors.  Greater Love Tabernacle Church is a rare case; the bankruptcy trustee was deemed unable to avoid the mortgage.

Despite obliquely recognizing the District Court’s decision in Bank of Am., N.A. v. Casey, 517 B.R. 1, 4 (D. Mass. 2014) (stating that “Massachusetts has not been strict in the actual form of the acknowledgement”) (disclosure: this firm represents Bank of America in said matter), and the argument made before the First Circuit in the same case that a mortgage does not require a notary clause for recording purposes, the Bankruptcy Court gives no indication that there is a split in authority within the United States District Court for the District of Massachusetts, continuing to cite to the same line of decisions cited in nearly every relevant Bankruptcy and District Court decisions considering this issue.  Additionally, it is noteworthy that, despite the long list of federal decisions cited in support of the Bankruptcy Court’s interpretation of Massachusetts law regarding mortgage notary clauses, there is a dearth of Massachusetts decisions which support the Bankruptcy Court’s opinion.

For those that are interested in following this topic, the First Circuit has certified two questions of law in Bank of Am., N.A. v. Casey to the Supreme Judicial Court, the outcome of which should provide some guidance on these issues.