HSBC Bank USA, N.A. v. Lassman (In Re Demore)
844 F.3d 292
| 1st Cir. | 2016Background
- Andrew and Maureen DeMore owned registered land in Massachusetts and granted a mortgage in April 2004 via attorney-in-fact John Molloy under powers of attorney recorded with the mortgage.
- The mortgage was recorded on the Land Court certificate of title with an attached notarial certificate of acknowledgment stating Molloy, "by their attorney-in-fact, John G. Molloy . . . under Power of Attorney recorded herewith," signed it "voluntarily and for its stated purpose."
- Chapter 183 §29 requires a certificate of acknowledgment for recording deeds; Massachusetts law requires acknowledgments to show the instrument was executed as the grantor’s "free act and deed," but no particular words are mandated.
- Bankruptcy trustee Lassman, stepping into the rights of a hypothetical bona fide purchaser under 11 U.S.C. §544(a)(3), sued to avoid the mortgage, arguing the certificate was "materially defective" because it did not clearly state the DeMores themselves acknowledged the mortgage as their free act and deed.
- The Bankruptcy Court granted summary judgment for Lassman (invalidating the mortgage); the District Court reversed, holding the certificate (read with the recorded powers of attorney) sufficiently showed Molloy acted as the DeMores’ attorney-in-fact and that his act constituted their free act and deed.
- The First Circuit affirmed the District Court, holding the acknowledgment complied with §29 and McOuatt’s free-act-and-deed requirement when read with the recorded powers of attorney; the court did not decide whether §29 applies to registered land or other bona fide purchaser/notice issues.
Issues
| Issue | Plaintiff's Argument (Lassman) | Defendant's Argument (HSBC) | Held |
|---|---|---|---|
| Whether the certificate of acknowledgment is "materially defective" for failing to show the mortgage was executed as the DeMores’ free act and deed | The certificate is ambiguous: it may show only Molloy appeared and thus only his act, not the DeMores’, was acknowledged | The certificate states Molloy acted as attorney-in-fact "under Power of Attorney recorded herewith," and those powers expressly authorize and were acknowledged by the DeMores, so the mortgage was their free act and deed | Not defective: read with recorded powers of attorney, Molloy’s acknowledgment qualified as the DeMores’ free act and deed |
| Whether the form in the certificate must mirror model/form language in chapter 183 appendix or Land Court forms | The statute’s appendix form expressly states the attorney acted "as the free act and deed" of the principal; deviation renders the certificate insufficient | The appendix and Land Court forms are permissive; other lawful forms are acceptable and the certificate here accomplishes the required substance | No strict formality required; other forms that convey the substance satisfy §29 and McOuatt |
| Whether the court should certify a question to the Massachusetts SJC about constructive notice and registration vs. recording regimes | Implied: uncertainty exists about registered land and constructive notice sufficiency | HSBC argued certification unnecessary because the acknowledgment was valid on its face and under the power of attorney | Court did not certify; disposition rests on sufficiency of the acknowledgment as interpreted by federal courts |
| Whether summary judgment invalidating the mortgage was appropriate | Certificate defective; insufficient constructive notice; mortgage avoidable under §544(a)(3) | Certificate sufficient; mortgage not subject to avoidance on that ground | Summary judgment for trustee reversed; mortgage acknowledgment upheld when read with recorded powers of attorney |
Key Cases Cited
- Bank of Am., N.A. v. Casey, 52 N.E.3d 1030 (Mass. 2016) (acknowledgment need not take a single specific form for recording)
- McOuatt v. McOuatt, 69 N.E.2d 806 (Mass. 1946) (acknowledgment must amount to admission that instrument was voluntarily and freely executed by grantor)
- In re Traverse, 753 F.3d 19 (1st Cir. 2014) (trustee’s avoiding powers under §544 and effect on estate)
- In re Sheedy, 801 F.3d 12 (1st Cir. 2015) (standards of review for bankruptcy appeals)
- Sowden & Co. v. Craig, 26 Iowa 156 (Iowa 1868) (agent’s voluntary act, within authority, treated as principal’s act and deed)