In response to a request from the U.S. Court of Appeals for the First Circuit, the Supreme Judicial Court of Massachusetts recently held that a recorded attorney’s affidavit attesting to the proper acknowledgment of a recorded mortgage with a Certificate of Acknowledgment that omits the mortgagors’ names, in certain circumstances, may cure the defect in the Acknowledgment.
The Court also held that a recorded attorney’s affidavit attesting to the proper acknowledgment of a recorded mortgage with a Certificate of Acknowledgment that omits the mortgagors’ names, in certain circumstances, may provide constructive notice of the existence of the mortgage to a bona fide purchaser in combination with the mortgage.
A copy of the opinion in Bank of America, NA v. Casey is available at: Link to Opinion.
Two borrowers obtained a refinance mortgage loan. The borrowers initialed the bottom of each page of the mortgage and signed the signature page. Their attorney also signed the signature page as a witness.
The mortgage contained a Certificate of Acknowledgement on a separate page. The borrowers initialed this page, but the space left open to enter the names of the persons appearing before the notary public was left blank. The acknowledgement was notarized and the mortgage was recorded.
The borrowers’ attorney later recorded an affidavit stating that through inadvertence, the names of the debtors who executed the mortgage were omitted from the notary clause. The attorney attested to witnessing them execute the mortgage voluntarily.
Some six months later, the borrowers filed a Chapter 7 Bankruptcy. The bankruptcy trustee filed an adversary complaint seeking to avoid the mortgage, arguing that the omission of the borrowers’ names on the Certificate of Acknowledgment was a material defect. The mortgagee moved for summary judgment arguing that the defect was cured with the attorney’s affidavit.
The Bankruptcy Court granted summary judgment in favor of the bankruptcy trustee. The trial court reversed and granted summary judgment to the mortgagee. The bankruptcy trustee then appealed to the First Circuit, which concluded that a proper resolution of the appeal turned on undecided issues of Massachusetts law, and certified the issues to the Supreme Judicial Court of Massachusetts.
As you may recall, under Massachusetts law, “title to real estate may be transferred by a deed which has not been acknowledged or which contains a certificate showing a defective acknowledgement, and the deed is good against the grantor and his heirs and those having actual notice, G. L. (Ter. Ed.) c. 183, § 4, but the grantor must acknowledge that he has executed the instrument as his free act and deed, and a certificate reciting that the grantor appeared before the officer making the certificate and made such acknowledgment must be attached to the instrument in order to entitle it to be recorded, G. L. (Ter. Ed.) c. 183, § 29, in order that notice of the conveyance shall be given to all the world. The certificate of acknowledgment furnishes formal proof of the authenticity of the execution of the instrument when presented for recording.” The Court noted that this statute — G. L. c. 183, § 4 — applies to mortgages, even though mortgages are not specifically mentioned.
In addition, Massachusetts General Laws c. 183, §29 states, “no deed shall be recorded unless a certificate of its acknowledgement 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.” The Court noted that the reason for requiring an acknowledgement is to ensure that public notice of the transfer of title of the land in the record is accurate.
The first certified issue was whether an attorney’s affidavit, executed and recorded pursuant to G. L. c. 183, § 5B and attesting to the proper acknowledgment of a recorded mortgage that, as originally executed and recorded, omitted the name of the mortgagor from the acknowledgement may correct the material defect.
The bankruptcy trustee argued three points.
First, the bankruptcy trustee argued the principle of functus officio prohibits a public official from unilaterally recording what essentially constitutes a formal re-acknowledgement of the mortgage agreement without the assent of the borrowers. The term “functus oficio” has meant that “because of identified actions taken by one or more relevant parties, a particular pleading (e.g., a writ) or document with legal significance (e.g., a note or mortgage) was of no further legal effect and could not be the basis of any subsequent legal action.” More recently, however, the Court noted that the term has been applied as meaning “that an arbitrator is without power to modify his final award except where the controlling statute or *563 the parties authorize modification.” The Court held that it doubted that the principle would be recognized outside an arbitration context. Regardless, the Court held, when the requirements of §5B are met, they effectively supersede any continuing common-law functus officio principle.
The bankruptcy trustee then argued that the omission of the borrowers’ name in the acknowledgement is a material defect that renders the recording of the mortgage invalid, because Massachusetts G. L. c. 184 §24 provides the sole means by which to cure a defect in an acknowledgement.
The Court disagreed, noting that §24 created a statute of repose to protect the chain of title to real property from attenuated challenges. However, the Court noted, nothing in the language of §24 stated or implied that it defined the exclusive permissible method of curing any and all defects that may exist in an acknowledgment.
The Supreme Judicial Court of Massachusetts then looked to the language of §5B to determine what types of errors relating to a defective acknowledgment may properly be corrected with an attorney’s affidavit. The Court noted that §5B requires that: (1) facts contained in the affidavit must be based on the personal knowledge of the affiant; and (2) the affidavit include a certification by an attorney that the facts stated are both relevant to the title of specifically identified property and “will be of benefit and assistance in clarifying the chain of title.” The Court noted that the Legislature’s choice of the word “clarifying” suggested that the attorney’s affidavit must be limited to facts that explain what actually occurred, and are not inconsistent with the substantive facts contained in the original document.
In this case, the Supreme Judicial Court of Massachusetts held that the attorney’s affidavit was sufficient to cure the defect in the acknowledgement and the recording of the mortgage. The Court noted that the defect was the omission of the borrowers’ names in the Certificate of Acknowledgment, and that the attorney’s affidavit supplied the missing information, confirming the execution of the mortgage was proper.
Lastly, the bankruptcy trustee argued that the mortgage was recorded illegally because of the defect in the acknowledgment. The Court again disagreed, holding that the defect generally would preclude the legal recording of the mortgage, but the filed and recorded attorney’s affidavit operated to cure the original defect in the acknowledgment.
The Supreme Judicial Court of Massachusetts then answered the second certified question — i.e., whether an attorney’s affidavit, attesting to the proper acknowledgment of a previously recorded mortgage accompanied by an acknowledgment that omitted the name of the mortgagor, may provide constructive notice to a bona fide purchaser of the existence of the mortgage, by itself or in combination with the mortgage.
The Court noted that, under Massachusetts law, constructive notice arises by operation of law under Massachusetts G. L. c. 183 §4, in any case where the mortgage is properly recorded, and that a mortgage recorded with a materially defective acknowledgement is not properly recorded and does not provide constructive knowledge. However, the Court held, because the attorney’s affidavit complied with §5B, “the affidavit — not by itself but in combination with that mortgage — provides legally adequate constructive notice to a bona fide purchaser or, here, a trustee in bankruptcy.”
Accordingly, the Supreme Judicial Court of Massachusetts held that:
- “An attorney’s affidavit filed pursuant to General Laws c. 183, § 5B, attesting to the proper acknowledgment of a recorded mortgage that has annexed to it an acknowledgment that omitted the mortgagors’ names, in certain circumstances may cure the defect in the acknowledgment and, in turn, effectuate a proper recording of the mortgage.”
- “[I]n a case in which the § 5B attorney’s affidavit does cure the defect in the acknowledgment, the attorney’s affidavit, considered in combination with the originally recorded mortgage, provides constructive notice of the existence of the mortgage to a bona fide purchaser; in a case where the attorney’s affidavit does not cure the material defect in the acknowledgment, the affidavit, whether alone or in combination with the mortgage, does not provide constructive notice.”