HSBC Bank USA, N.A. v. Lassman (In re Demore)

Case Type:
Case Status:
No. 16-1150 (1st Circuit, Dec 13,2016) Published

The Court of Appeals for the First Circuit AFFIRMS the order of the district court below finding that a certificate of acknowledgement for a mortgage was not materially defective under Massachusetts law where it was executed on behalf of the debtors by "attorney-in-fact" for the debtors "under [a] Power of Attorney."

Procedural context:

The chapter 7 trustee, Donald Lassman (the "Trustee") appealed from the district court's order reversing the order of the bankruptcy court for the District of Massachusetts.  The bankruptcy court granted summary judgment to the Trustee on the ground that the certificate of acknowledgement for the mortgage was "materially defective" because the certificate failed to make clear that the debtors, as grantors of the mortgage, executed the mortgage as their free act and deed.  The bank, HSBC, appealed that ruling to the district court which reversed on the ground that the certificate of acknowledgment was not materially defective because it did make clear that the debtors had executed the mortgage as their free act and deed. 


In 2004, the debtors each executed a power of attorney to John G. Molloy.  The powers of attorney authorized Molloy to grant a mortgage on the debtors' property to HSBC Mortgage.  Molloy later granted a promissory note and mortgage to HSBC Mortgage on behalf of the debtors.  The certificate of acknowledgement of the mortgage stated that the debtors "personally appeared" "by their attorney-in-fact, John G. Molloy[,] under Power of Attorney recorded herewith" but did not indicate that the execution of the instrument was the debtors' "free act and deed." 

The Trustee filed adversary actions against HSBC (which had received an assignment of the mortgage from HSBC Mortgage) to avoid the mortgage. The Trustee argued: (1) that a valid certificate of acknowledgment must be recorded along with the mortgage; and (2) that the mortgage was voidable under state law by a bona fide purchaser--and thus the Trustee--because the certificate of acknowledgment was materially defective under Massachusetts law as it did not clearly state that the execution of the mortgage was the free act and deed of the debtors. 

Torruella, Lipez and Barron

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