Bulletin: MA2012002

Date:
October 30, 2012
To:
All Massachusetts Issuing Offices
RE:
Mortgage Avoidance by Trustees in Bankruptcy Based Upon Defective Acknowledgements

Dear Associates:

Trustees in Bankruptcy continue to be successful in avoiding mortgages with defective acknowledgements, pursuant to the "strong arm" clause of 11 U.S.C. § 544(a). DeGiacomo v. Citimortgage, Inc., (In re Nistad) No. 10-17453, 2012 Bankr. LEXIS 367, 2012 WL 272750 (Bkrtcy. D. Mass. Jan. 30, 2012), Agin v. Mortg. Elec. Registration Sys., Inc. (In re Giroux), No. 08-1261, 2009 Bankr., LEXIS 3429,  2009 WL 1458173 (Bkrtcy. D. Mass. May 21, 2009) and Agin v. Mortg. Elec. Registration Sys., Inc. (In re Bower), No. 10-1092, 2010 Bank. LEXIS 3641, 2010 WL 4023396 (Bkrtcy. D. Mass. Oct. 13, 2010).  These mortgages, which were not disputed by the mortgagor(s), omitted the mortgagor’s name in the acknowledgement clause or contained the wrong name of the mortgagor(s).   

The Court has been unforgiving in its strict analysis of the law relying upon McOuatt v. McOuatt, 320 Mass. 410, (1946), M.G.L. ch. 183, §§ 4, 29, 30 and a thorough analysis of what courts in other jurisdictions have done in similar situations:

  • “No deed shall be recorded unless a certificate of its acknowledgment or of the proof of its due execution, made as hereinafter provided is endorsed upon or annexed to it, and such certificate shall be recorded at length with the deed to which it relates…” In re Giroux, at *5 citing M.G.L. ch. 183, §29.
     
  • “Massachusetts requires strict formalities in the execution of acknowledgments and a validly recorded acknowledgment is a prerequisite to recordation of a mortgage.” In re Giroux at *8, *9; In re Nistad at *5.
     
  • “It is well established law in Massachusetts that a defectively acknowledged mortgage cannot be legally recorded, and if recorded the mortgage does not, as a matter of law, provide constructive notice to future purchasers.” Graves v. Graves, 72 Mass. 391, 392-3, 6 Gray 391 (1856); In re Nistad at *4, citing In re Bower at *5. 

Agents should ensure that their office staff is made aware of this issue and as part of your pre-closing, pre-recording and post-closing document review, all parties should be careful to verify that all acknowledgement clauses are complete with proper information in order to prevent an easily avoidable yet costly claim.  Furthermore, if a Mortgage is mistakenly recorded with a defective acknowledgement, please take appropriate steps to rectify the situation immediately.

If you have any questions relating to this or other bulletins, please contact a Stewart Title Guaranty Company underwriter.

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THIS BULLETIN IS FURNISHED TO INFORM YOU OF CURRENT DEVELOPMENTS. AS A REMINDER, YOU ARE CHARGED WITH KNOWLEDGE OF THE CONTENT ON VIRTUAL UNDERWRITER  AS IT EXISTS FROM TIME TO TIME AS IT APPLIES TO YOU, AS WELL AS ANY OTHER INSTRUCTIONS. OUR UNDERWRITING AGREEMENTS DO NOT AUTHORIZE OUR ISSUING AGENTS TO ENGAGE IN SETTLEMENTS OR CLOSINGS ON BEHALF OF STEWART TITLE GUARANTY COMPANY. THIS BULLETIN IS NOT INTENDED TO DIRECT YOUR ESCROW OR SETTLEMENT PRACTICES OR TO CHANGE PROVISIONS OF APPLICABLE UNDERWRITING AGREEMENTS. CONFIDENTIAL, PROPRIETARY, OR NONPUBLIC PERSONAL INFORMATION SHOULD NEVER BE SHARED OR DISSEMINATED EXCEPT AS ALLOWED BY LAW. IF APPLICABLE STATE LAW OR REGULATION IMPOSES ADDITIONAL REQUIREMENTS, YOU SHOULD CONTINUE TO COMPLY WITH THOSE REQUIREMENTS.

References

Bulletins Replaced:
None
Related Bulletins:
None
Underwriting Manual:
None
Exceptions Manual:
None
Forms:
None