498 B.R. 392
1st Cir. BAP2013Background
- Debtors Shawn G. Kelley and Annemarie Kelley owned property in Chicopee, MA; on June 11, 2007 they granted a limited power of attorney to Obringer to facilitate a refinance with Wachovia (Wells Fargo).
- Obringer executed a $280,000 mortgage on the Property in favor of Wachovia/Wells Fargo, signing as the Debtors’ attorney in fact.
- The mortgage’s acknowledgment in MA recited that the Debtors appeared by Obringer as attorney in fact, with a blank for evidence of identification and a notary signature; the Debtors did not appear in person.
- The Debtors filed a voluntary Chapter 7 petition in 2012; the Trustee filed a two-count adversary complaint seeking to avoid the mortgage under 11 U.S.C. § 544(a)(3) and to preserve it for the estate.
- The bankruptcy court denied the Trustee’s motion for summary judgment and granted Wells Fargo’s cross-motion, ruling the acknowledgment was not defective.
- On appeal, the First Circuit BAP reversed, holding the acknowledgment was materially defective under Massachusetts law and remanding for entry of consistent orders.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the MA acknowledgment is defective for not showing the debtor’s free act and deed | Trustee: acknowledgment fails to express voluntariness of debtor's execution. | Wells Fargo: phrase 'by' through the power of attorney suffices under substantial/strict compliance. | Acknowledgment is defective; not capable of constructive notice; trustee prevails on avoidance. |
Key Cases Cited
- McOuatt v. McOuatt, 69 N.E.2d 806 (Mass. 1946) (requires grantor explicitly state execution was free act and deed)
- In re Olympic Mills Corp., 477 F.3d 1 (1st Cir. (2007)) (standard for de novo review of summary judgment in bankruptcy)
- Me. Nat’l Bank v. Morse, 30 B.R. 52 (1st Cir. BAP 1983) (avoidance power under § 544(a)(3) and constructive knowledge limits)