Joan N. Feeney, United States Bankruptcy Judge.
This adversary proceeding presents a question of whether a certificate of acknowledgment of a mortgage granted by Lisa J. Shubert (the "Debtor") complied with the requirements of Massachusetts law and, thus, provides constructive notice of the mortgage. If the certificate of acknowledgment does not comply with Massachusetts law, it may be avoided by the Debtor's bankruptcy trustee pursuant to 11 U.S.C. § 544. The question presented arises in the context of the "Plaintiff's Motion for Summary Judgment and Default Judgment" pursuant to which the Chapter 7 Trustee of the Debtor's bankruptcy estate seeks summary judgment against the defendants, Green Tree Servicing, LLC ("Green Tree"), Eastern Bank, CitiMortgage, Inc. ("Citimortgage"), and Federal National Mortgage Association ("FNMA") (collectively, the "Mortgage Defendants") with respect to Counts I-III of his Complaint and against the Debtor on Count III only.
The Trustee filed a Complaint against the Mortgage Defendants and the Debtor on November 19, 2014. In his Complaint, he set forth four counts as follows: Count I (Lien Avoidance, § 544), Count II (Recovery, §§ 550(a), 551), Count III (Declaratory Relief), and Count IV (Award of Costs). CitiMortgage, Green Tree and FNMA moved to dismiss the Trustee's Complaint. The Debtor failed to answer the Complaint and the Court entered a default against her on March 18, 2015. The Court heard the Cross-Motions for
The specific issue presented is whether the Trustee may avoid the mortgage executed by the Debtor pursuant to his avoiding powers under 11 U.S.C. § 544(a)(3) due to the absence of a proper certificate of acknowledgment in accordance with Mass. Gen. Laws ch. 183, § 29. The material facts necessary to resolve the Cross-Motions are not in dispute, and the matter is ripe for summary judgment. This Court has jurisdiction and authority to resolve the dispute as the matter arises under title 11, see 28 U.S.C. § 1334(b) and is a core proceeding under 28 U.S.C. § 157(b)(1) and (b)(2)(K). See Henderson v. Bank of Am., N.A. (In re Simmons), 510 B.R. 76, 88 (Bankr.S.D.Miss.2014). Moreover, no party has objected to the Court's entry of a final order, and thus they have consented to entry of a final order. See Wellness Internat'l Network, Ltd. v. Sharif, ___ U.S. ___, 135 S.Ct. 1932, 191 L.Ed.2d 911 (2015).
The following material facts are undisputed. On October 7, 2014, the Debtor filed a voluntary petition seeking relief under Chapter 7 of the Bankruptcy Code. On Schedule A-Real Property, the Debtor listed real property located at 2 Marisa Drive, West Bridgewater, Massachusetts (the "Real Property") with a fair market value of $295,000.00. On Schedule C-Property Claimed as Exempt, the Debtor claimed the Real Property as exempt in the sum of $13,033.00.
The Debtor acquired the Real Property on November 29, 2004 by deed from Barbara A. Carr, Deborah A. Carr, Nancy I. Berquist and Kenneth A. Carr. The deed was recorded with the Plymouth County Registry of Deeds on November 29, 2004, at Book 29557, Page 120. On November 29, 2004, the Debtor granted Plymouth Savings Bank a mortgage on the Real Property which was recorded with the Plymouth County Registry of Deeds on November 29, 2004, at Book 29557, Page 124 (the "Mortgage"). The Mortgage secured a note of the same date in the original principal amount of $310,400.00, which as of October 7, 2014, secured a debt in the amount of $281,592.13.
The notarization at the end of the Mortgage provides the following:
The United States Court of Appeals for the First Circuit has articulated the well-established standard for summary judgment in Desmond v. Varrasso (In re Varrasso), 37 F.3d 760, 763 (1st Cir.1994). It stated:
Id. at 763 (1st Cir.1994) (citations omitted, footnote omitted).
Mass. Gen. Laws ch. 183, § 29. Other provisions of Chapter 183 and case law relating to acknowledgments also inform the Court's resolution of this dispute.
The Trustee argues that the Mortgage was not recordable and does not provide constructive notice because it was materially defective owing to the absence of language of voluntariness on the part of the mortgagor, reflecting that execution of the mortgage was his "free act and deed," or similar language in the notary clause. He maintains that in Massachusetts a mortgage must be acknowledged by the signatory and must include a certificate of acknowledgment to be recorded. According to the Trustee, a clause that merely certifies that the person appeared before the notary, produced identification, and signed the document is insufficient to certify that the person acknowledged the document. Thus, he maintains, an unrecordable mortgage is treated as an unrecorded mortgage for purposes of 11 U.S.C. § 544(a), and may be avoided by a Chapter 7 trustee.
The Trustee distinguishes between a certificate of acknowledgment of a deed and a certificate of "proof of its `due execution'" as set forth in Mass. Gen. Laws ch. 183, § 29, arguing that they have different requirements. He points to the Commonwealth of Massachusetts's Governor's "Standards of Conduct for Notaries Public," which became effective on May 15, 2004.
Rev. Exec. Order No. 455 (04-04), § 2. Additionally, the Trustee points to differences in the Executive Order, contrasting Section 5(d) of the Executive Order, which pertains to a notary's certificate of acknowledgment, with a notary's jurat certificate for a signature or mark on an affidavit or other written declaration as set forth in Section 5(e), as well as the different language pertaining to witnessing a signature as set forth in Section 5(f). A comparison of Section 5(d) and (f) is helpful as the notarization of the Mortgage executed
In addition to emphasizing the provisions of the Executive Order, the Trustee highlights the language employed in Mass. Gen. Laws ch. 183 App., Form (13) "Acknowledgment of Individual acting in his Own Right"
The Trustee, relying on Massachusetts Deed Indexing Standard 4-2 (January 1, 2008) (available online at https://www.sec. state.ma.us/rod/rodpdf/IndexStnds08.pdf) argues:
The Trustee also argues that the notary clause used in the Mortgage lacks "Proof of its due execution." That alternative ground for recording under Mass. Gen. Laws ch. 183, § 29 is foreclosed, in the Trustee's view, because the statute requires providing testimony before a court of record, not merely a certificate from a notary stating that a person appeared and signed a document. He references the "made as hereinafter provided" language of § 29, contending that that language points to successive provisions of chapter 183 for the proper procedures for providing either a certificate of acknowledgment or a certificate of proof of due execution. Thus, the Trustee asserts that §§ 30-33 of chapter 183 reference acknowledgments, while §§ 34-41 deal with proof of due execution. The latter provisions, he asserts, require a certificate from a court of record, that, after testimony, establishes that the instrument was duly executed under different scenarios.
In addition to the foregoing statutory arguments, the Trustee references two decisions
In re Marron, 2011 WL 3800040, at *4.
The Trustee argues that the notary clause attached to the Mortgage is neither a certificate of acknowledgment nor a proper certificate of proof of the Mortgage's due execution under the applicable statutory provisions. In his view, there is simply no way to tell whether the Debtor acknowledged the Mortgage as her free act and deed, adding that none of the Mortgage Defendants proved before a court of record that the Debtor duly executed the instrument, and recorded a certification of proof of due execution. In sum, the Trustee argues the Mortgage was not recordable, and he may avoid the Mortgage under 11 U.S.C. § 544. He concludes:
Green Tree and FNMA argue that the Mortgage contains "proof of its due execution" and, therefore, the Trustee's claims fail as a matter of law. They contend that "by selecting the disjunctive—"or"—the Legislature manifested its intent to allow two separate and independent methods to record a mortgage in the registry of deeds; either by `annex[ing]' a `certificate of . . . acknowledgment
Green Tree and FNMA further contend that the Mortgage is "a fully completed government-issued certificate authorized by the statute and is intended to verify proof of due execution," adding that by confirming the identity of the grantor, the certification performs its statutory purpose. Green Tree and FNMA counter the Trustee's contention that a determination of "due execution" under Mass. Gen. Laws ch. 183, § 29 cannot be provided by a notary but must be based upon "testimony before a court of record," by arguing that, contrary to the Trustee's claim, the language selected by the Legislature does not reference or refer to any other sections of ch. 183 for the proper procedure for the preparation of the certificate of due execution, stating that "the Legislature intentionally omitted any specific references to any other sections of Chapter 183 in § 29." They diminish the provisions set forth in Mass. Gen. Laws ch. 183, §§ 34-41 as "judicial procedures for establishing `proof of execution' in circumstances where an acknowledgment is otherwise unavailable because a grantor refuses or is unable to acknowledge a deed. They also distinguish § 40 of ch. 183 because it refers to a "certificate of proof of execution" (not "due execution" as required by § 29) and requires that the certificate be "endorsed upon or annexed" to the deed "by the clerk or register of the court" (recognizing that only after judicial determination of proof can the certificate be annexed or endorsed), adding that § 29 has no such limitation.
It is well-settled that interpretation of the meaning of a statute starts with an examination of its language in the context of the whole statute. In In re Reswick, 446 B.R. 362 (9th Cir. BAP 2011), the United States Bankruptcy Appellate Panel for the Ninth Circuit succinctly set forth applicable statutory interpretation principles in interpreting 11 U.S.C. § 362(c)(3)(A) and the split of authority surrounding its interpretation. It stated:
In re Reswick, 446 B.R. at 367. In this case the Court shall examine all of the provisions of Chapter 183 in order to interpret the requirements for acknowledging and proving execution of deeds, including mortgages.
The language of Mass. Gen. Laws ch. 183, § 29 is susceptible of different interpretations. Mindful of the entirety of the statutory provisions of Chapter 183, and, considering the purpose and context of the statute, and existing precedent and authorities, see Dolan, 546 U.S. at 486, 126 S.Ct. 1252, especially the decision of the Supreme Judicial Court in McOuatt v. McOuatt, 320 Mass. 410, 69 N.E.2d 806 (1946), the Court concludes that the Trustee's interpretation of the statute is more persuasive than that advanced by Green Tree and FNMA, particularly where Massachusetts follows a policy of strict formalities in the execution of acknowledgments. In re Giroux, 2009 WL 3834002, at *2. The notary had the option of employing a number of forms in observing the Debtor's signature on the Mortgage. These include the forms set forth in the following table for ease of comparison.
Executive Order/Section 5(d) Executive Order/Section 5(f) Mass. Gen. Laws ch. 183 App., Form (13) "Acknowledgment of Individual acting in his Own Right" (d) A notary shall take the (f) A notary shall witness a On this ________ day of ________ acknowledgment of the signature signature in substantially the 19__, before me personally or mark of persons following form in notarizing a appeared A B (or A B and C D), acknowledging for themselves or signature or mark to confirm that it to me known to be the person (or in any representative capacity by was affixed in the notary's presence persons) described in and who using substantially the without executed the foregoing following form: administration of an oath or instrument, and acknowledged affirmation: that he (or they) executed the On this ____ day of ___________, same as his (or their) free act and 20__, before me, the undersigned On this ____ day of ___________, deed. notary 20__, before me, the undersigned (Signature and title of officer public, personally appeared notary taking acknowledgment. Seal, if ________________________ (name public, personally appeared required.) of document _____________ (name signer), proved to me through of document satisfactory evidence of signer), proved to me through identification, which were satisfactory evidence of _______________________, to be identification, which were the person whose name is signed _______________________, to be the on the person whose name is signed on the preceding or attached document, preceding or attached document in and acknowledged to me that (he) my presence. (she) signed it _________________ (official voluntarily for its stated purpose. signature and seal of notary) (as partner for ____________, a partnership) (as ____________ for ______________, a corporation) (as attorney in fact for ________________, the principal) (as ___________ for _______________, (a) (the) _________________) _________________ (official signature and seal of notary)
In this case, the notary utilized the form set forth at Section 5(f) of the Executive Order which omits any reference to the execution and acknowledgment of the Mortgage as the free act and deed of the Debtor. The decision in McOuatt highlights the reasons for the required language of voluntariness in the acknowledgment and fatally undercuts the position of Green Tree and FNMA. In McOuatt, the Supreme Judicial Court determined that a deed was not properly acknowledged because there was no evidence that McOuatt, who was on his deathbed, acknowledged the instrument to be his "free act and deed." Id. at 411-12, 69 N.E.2d 806, 810. McOuatt signed a deed containing a notary clause asserting that he had indeed signed and acknowledged the deed. At trial, however, the evidence established that he had not spoken to the notary who filled out the acknowledgment, and thus did not indicate to that person that he "acknowledged the instrument as his free act and deed." Id. at 415, 69 N.E.2d 806, 810. The Supreme Judicial Court stated:
McOuatt, 320 Mass. at 415, 69 N.E.2d 806.
It is readily apparent from the directives contained in the McOuatt decision and well-settled authority on the requirements of certificates of acknowledgment, that circumstances may exist where a signature can be procured that is not the voluntary or the free act and deed of the individual executing the deed or other instrument. Therefore, an alternate method for obtaining a certificate of proof of its due execution exists to permit recordation as set forth in Mass. Gen. Laws ch. 183, § 29. The language in § 29, namely "made as hereinafter provided," refers to the successive provisions set forth in §§ 30-41, not just to the language of § 29, and, when the statute is read as a whole, it is evident that §§ 30-33 pertain to acknowledgments and §§ 34-41 pertain to proof of due execution. The latter provisions require evidence, the involvement of a court of record, and subscribing witnesses. See Mass. Gen. Laws ch. 183, § 34-41. Indeed, § 40 provides that "A certificate of proof of the execution of a deed shall be endorsed upon it or annexed thereto by the clerk or register of the court or the judge before whom such proof is made, and the certificate shall state whether the grantor was present at the hearing." Mass. Gen. Laws ch. 183, § 40.
The decision relied upon by the Green Tree and FNMA in support of their argument that the notarization was adequate, Gordon v. Gordon, is inapposite. In that case, a husband and wife owned property as tenants by the entirety. Both signed a deed conveying the property to the wife. The wife took the deed to a notary before whom she acknowledged the instrument to be the free act and deed of herself and of her husband, although he was not present. The notary affixed his signature and seal below the recitation that both had personally appeared before him and acknowledged the instrument as their free act and deed. Mrs. Gordon then took the deed to an attorney with instructions to have it recorded. For some unexplained reason, the deed was not immediately recorded. 8 Mass.App.Ct. at 861-62, 398 N.E.2d 497. The court determined that "when a husband
In summary, the Court rejects the position of Green Tree and FNMA. A fair reading of § 29 provides for two alternatives for the recordation of deed. The procedures for the two alternatives ("as hereinafter provided") are set forth in subsequent provisions of the statute with §§ 30-33 addressing acknowledgments and §§ 34-41 addressing proof of due execution. Green Tree and FNMA essentially ask that "proof of due execution," without the involvement of a court of record or a subscribing witness, be conflated with an acknowledgment. Were the Court to accept their position, the decision in McOuatt, 320 Mass. at 415, 69 N.E.2d 806, with its observation that "[a]n acknowledgment is the formal statement of the grantor to the official authorized to take the acknowledgment that the execution of the instrument was his free act and deed" would be rendered meaningless, as all that would be required would be a notarization that the deed was executed in the notary's presence. In other words, the notary, as was done in this case, merely would be witnessing the signature of the grantor without attesting to the required acknowlegment.
In his Motion for Summary Judgment, the Trustee observes that under 11 U.S.C. § 544(a) "the trustee may recover for the benefit of the estate the property transferred." 11 U.S.C. § 550(a). A trustee may obtain this recovery from the initial transferee, any entity for whose benefit the transfer was made, or any immediate or mediate transferee of the initial transferee. 11 U.S.C. § 550(a)(1) and (2). Pursuant to 11 U.S.C. § 551, the interest in the Real Property represented by the Mortgage is preserved for the benefit of the bankruptcy estate, "`put[ting] the estate in the shoes of the creditor whose lien is avoided." DeGiacomo v. Traverse (In re Traverse), 753 F.3d 19, 26 (1st Cir. 2014), cert. denied, ___ U.S. ___, 135 S.Ct. 459, 190 L.Ed.2d 332 (2014) (quoting In re Carvell, 222 B.R. 178, 180 (1st Cir. BAP 1998)). According to the Trustee, he is entitled to a declaratory judgment under Count II of the Complaint against the Mortgage Defendants, in a recordable form, stating that the avoided Mortgage is recovered for the benefit of the estate pursuant to 11 U.S.C. §§ 550(a) and 551.
The Trustee recognizes the binding effect of In re Traverse. In that case, the United States Court of Appeals for the First Circuit stated:
In re Traverse, 753 F.3d at 27 (citations omitted, footnote omitted). In rejecting the trustee's argument that the preserved mortgage empowered him to sell Traverse's home because, with the bankruptcy estate now standing in the shoes of the secured lienholder, the sale would directly benefit the unsecured creditors, the First Circuit observed:
Just because the preserved mortgage entitles the estate to benefit from the sale of Traverse's property, however, does not mean that the trustee is by that fact empowered to sell the property so as to immediately realize that benefit. In itself, a mortgage carries neither a right of immediate ownership of Traverse's property, nor a right of immediate payment of the secured loan's outstanding value, but only a right to foreclose on Traverse's property in the event that she defaults on her loan or to receive payment in full when the home is sold through other means. And that is the extent of the rights gained by the estate through the trustee's preservation. . . .
Id. at 29 (citing Morris v. St. John Nat'l Bank (In re Haberman), 516 F.3d 1207, 1210 (10th Cir.2008)). It concluded:
Id. at 31 (footnote omitted).
Based upon his reading of Traverse, the Trustee, noting that a mortgage is treated as a transfer of legal title, subject to a right of redemption, see Bevilacqua v. Rodriguez, 460 Mass. 762, 774, 955 N.E.2d 884 (2011); Maglione v. BancBoston Mtg. Corp., 29 Mass.App.Ct. 88, 90, 557 N.E.2d 756 (1990), contends that the right of redemption should not be confused with rights under the note previously secured by the avoided mortgage, especially as the bankruptcy discharge under 11 U.S.C. § 727(a) discharges the Debtor's personal liability under the note, but not the mortgagee's title interest.
In a footnote, the Court of Appeals in Traverse, however, observed:
In re Traverse, 753 F.3d at 31 n.9.
The Trustee adds:
The Trustee concludes:
Accordingly, the Trustee seeks the entry of an order declaring that the interest in the Real Property by virtue of the Mortgage, once avoided and preserved for the benefit of the estate, is subject to redemption only on account of payments made to the Trustee, as representative of the estate, with a value as of the petition date of $281,592.13.
Moreover, the Court is unpersuaded by the Trustee's contention that he is entitled to a declaratory judgment that the avoided Mortgage is subject to redemption only on account of payments made to him with a value of $281,592.13. The debt for which the Debtor was liable prior to the entry of discharge is represented by the note, not the Mortgage. As the First Circuit stated: "[i]n itself, a mortgage carries neither a right of immediate ownership of [the Debtor's] property, nor a right of immediate payment of the secured loan's outstanding value, but only a right to foreclose on [the Debtor's] property in the event that she defaults on her loan or to receive payment in full when the home is sold through other means." Traverse, 753 F.3d at 29.
In view of the foregoing, the Court shall enter an order granting the Trustee's Motion for Summary Judgment on Count I against Green Tree and FNMA. The Court shall enter an order denying the Cross-Motion for Summary Judgment filed by Green Tree and FNMA. With reference to Counts II and III, the Trustee in his Complaint requested the value of the avoided mortgage in the sum of $281,592.13 from one or more of the Mortgage Defendants, and an order that "the Lien Interest, once avoided and recovered for the benefit of the estate, is not subject to redemption on account of any payments made to or for the benefit of the Mortgage Defendants." In his Motion for Summary Judgment, however, the Trustee stated that he was not seeking a monetary judgment and abandoned that request for relief. In addition, he sought a declaration "that the interest in the Real Estate by virtue of the Mortgage, once avoided and preserved for the benefit of the estate, is subject to redemption only on account of payments made to the Trustee, as representative of the estate, with a value as of the petition date of $281,592.13." In view of 1) the failure of Green Tree and FNMA to address the Trustee's requests for relief as to Counts II and III in either the Complaint or his Motion for Summary Judgment; 2) the decision in Traverse in which
Mass. Gen. Laws ch. 183, § 30.
(emphasis supplied). In addition, § 35 provides: "If all the subscribing witnesses to the deed are also dead or out of the commonwealth, the due execution thereof may be proved before such court by proving the handwriting of the grantor and of a subscribing witness." Sections 36 and 37 also reference "a court of record" and "a subscribing witness."
Bevilacqua, 460 Mass. at 774, 955 N.E.2d 884. The court added:
Bevilacqua, 460 Mass. at 775, 955 N.E.2d 884.
Id. at 75.
516 B.R. at 204 (footnotes omitted).