Chapter 7
trustees’ success in avoiding mortgages with defective certificates of
acknowledgement occurs with some regularity in Massachusetts. See
e.g. In re Giroux, 2009 WL 1458173 (D. Ma. Bankr. Jul. 27, 2011). But
it has not been that common in Maine. Last
month, however, a Chapter 7 trustee successfully avoided a Maine mortgage
because of a defective acknowledgment and obtained the right to sell the
property. In re Bishop, No. 15-10554 (D. Me. Bankr. Jul. 28, 2016). The Debtor’s mortgage included a certificate
of acknowledgment which failed to state the location of the notary (Aroostook
County, Maine) when he acknowledged the mortgage.
Pursuant
to the Chapter 7 trustee’s strong-arm powers, 11 U.S.C. § 544(a)(3), the
trustee argued that he could avoid the mortgage as a hypothetical bona fide
purchaser for value. As in other
defective acknowledgment cases, the trustee argued that a defective mortgage or
a mortgage which fails to meet recording requirements under applicable state
law does not provide constructive notice, at least with respect to attaching
lien creditors. The Court rejected the
bank’s argument that the acknowledgment was sufficient because it was clear the
property and notary were located in Maine.
The Court noted that it is
critical for an acknowledgement to state the location of the notary at the time
of execution. Without that statement,
one cannot determine whether the notary had the authority required by the
statute to acknowledge the mortgage.
