• First Circuit Court of Appeals Expected to Turn to Supreme Judicial Court for Help in Resolving Bankruptcy Code-Related Mortgage Enforcement Dispute
  • June 19, 2015 | Author: Jason A. Manekas
  • Law Firm: Bernkopf Goodman LLP - Boston Office
  • Bankruptcy trustees have relied on a Bankruptcy Code provision and a series of bankruptcy court decisions to successfully challenge the enforcement of mortgages in which the certificate of acknowledgement is imperfect because of vague wording or a careless omission on a pre-printed form. A recent Massachusetts federal court decision upheld the validity of a mortgage in which a flawed certificate of acknowledgement was later corrected by an affidavit recorded in the registry of deeds, and now the U.S. Court of Appeals for the First Circuit hearing an appeal of that case is likely to ask the Massachusetts Supreme Judicial Court to certify questions on this issue that could profoundly affect the Commonwealth’s land recordation requirements.

    The federal appeals court hearing the Bank of America v. Casey appeal was asked to rule on whether the trial judge correctly decided that an affidavit filed by counsel under a Massachusetts statute to clarify the chain of title and correct an omission in a mortgage certificate of acknowledgment prevented the bankruptcy trustee from avoiding the mortgage. The Casey ruling not only allows a lender to cure the purported defect, but is a direct challenge to the so-called Giroux line of decisions (named after a 2009 bankruptcy case) that have held that a mortgage with a materially defective certificate of acknowledgement is void and cannot provide constructive notice of the encumbrance to prospective purchasers.

    The First Circuit heard oral arguments in Casey last week, and later this month, is expected to certify questions to the SJC on the matter. Once the certification order is issued, the matter would be docketed, briefed, and argued in the Massachusetts High Court. While the SJC has discretion as to what questions it will ultimately answer, it is anticipated they will provide guidance to the federal courts.