530 B.R. 519
Bankr. D. Mass.2015Background
- Debtors Andrew and Maureen DeMore owned registered land in the Land Court; a 2004 mortgage to HSBC (executed by the Debtors’ attorney‑in‑fact, John Molloy) was accepted for registration and noted on the certificate of title.
- The mortgage acknowledgment recited appearance “by their attorney‑in‑fact” and stated the instrument was signed “voluntarily,” using a preprinted Executive Order form that left ambiguity whether voluntariness referred to the principals or the attorney‑in‑fact.
- The mortgage and a later assignment were noted on the Memorandum of Encumbrances attached to the certificate of title.
- Chapter 7 Trustee sued to avoid the mortgage under 11 U.S.C. § 544(a)(3), arguing the acknowledgment was a material, patent defect that rendered the mortgage incapable of giving constructive notice.
- HSBC moved for certification to the Massachusetts SJC and for summary judgment, arguing that registration and notation on the certificate of title provide constructive notice even if the instrument’s acknowledgment is arguably ambiguous; certification was denied and summary judgment issues were addressed on the merits.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a mortgage on registered land with an arguably ambiguous acknowledgment (attorney‑in‑fact form) provides constructive notice to a trustee/bona fide purchaser under § 544(a)(3) | A materially defective, ambiguous acknowledgment cannot give constructive notice; the mortgage is avoidable under § 544(a)(3) | Registration and notation on certificate of title (and related documents noted thereon) charge subsequent purchasers with constructive/inquiry notice; registration should be dispositive | Court held the acknowledgment was materially defective (following Kelley) and, notwithstanding registration, such a mortgage does not provide constructive notice to the trustee; trustee may avoid the mortgage |
Key Cases Cited
- Weiss v. Wells Fargo Bank, N.A. (In re Kelley), 498 B.R. 392 (1st Cir. B.A.P. 2013) (acknowledgment ambiguous as to voluntariness when executed by attorney‑in‑fact is materially defective and cannot give constructive notice)
- Mbazira v. Ocwen Loan Serv., LLC (In re Mbazira), 518 B.R. 11 (Bankr. D. Mass. 2014) (registered mortgage with materially defective acknowledgment does not give constructive notice to trustee)
- In re Woodman, 497 B.R. 668 (Bankr. D. Mass. 2013) (certainty of Torrens title system; defects in chain prevent constructive notice where instrument cannot give notice of itself)
- Jackson v. Knott, 418 Mass. 704 (1994) (purchasers of registered land need only examine the registration system; notation on certificate that would prompt further inquiry can defeat bona fide purchaser status)
- U.S. Bank Nat. Ass’n v. Ibanez, 458 Mass. 637 (2011) (foreclosing party must show unbroken assignment chain; defects in the chain defeat enforceability)