Thomas Looney and Jonathan Hixon recently obtained dismissal of a complaint filed by a Chapter 7 Trustee in the United States Bankruptcy Court for the District of Massachusetts seeking to avoid a mortgage on the grounds that the acknowledgment failed to state the method of identification.
The case arose when the borrower filed for Chapter 7 bankruptcy in Massachusetts. The mortgage encumbering the borrower’s home was signed, notarized and recorded with the registry of deeds, but the method of identification (i.e., driver’s license, personal knowledge, etc.) in the acknowledgment was left blank. As such, the Chapter 7 Trustee filed an action seeking to avoid the mortgage encumbering the borrower’s home as defective so that the Trustee could then sell the property free and clear of the mortgage.
In a number of prior decisions, bankruptcy courts have avoided mortgages for seemingly hyper-technical defects in notary clauses. However, bankruptcy courts in Massachusetts have consistently rejected arguments that mortgages which fail to state the method of identification in the acknowledgment are defective. In this case, the Trustee argued that the recent passage of G.L. c. 222 § 15, which codified an executive order setting forth guidelines for notary acknowledgments, changes the landscape. The Trustee contended that courts should revisit these cases in light of the new statute and rule that such acknowledgments render mortgages fatally defective.
The court expressly rejected the Trustee’s argument, adopting Mr. Looney and Mr. Hixon’s position that prior bankruptcy court decisions remain applicable and the failure to indicate the method of identification in the acknowledgment does not affect the validity of the mortgage. The court further determined that the statute relied upon by the Trustee does not apply retroactively to mortgages recorded before its enactment in January 2017.
Mr. Looney and Mr. Hixon’s practices encompass a wide range of business and real estate-related litigation.
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