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HSBC Bank United States, N.A. v. Lassman

United States District Court, D. Massachusetts

January 7, 2016

HSBC BANK USA, N.A.
v.
DONALD LASSMAN, CHAPTER 7 TRUSTEE OF THE BANKRUPTCY ESTATE OF ANDREW AND MAUREEN DEMORE

          For HSBC Bank USA, N.A., Appellant: Christine E. Devine, LEAD ATTORNEY, Mirick O'Connell Demallie & Lougee, Worcester, MA; Jason A. Manekas, LEAD ATTORNEY, Bernkopf Goodman LLP, Boston, MA; Sean R. Higgins, LEAD ATTORNEY, K & L Gates LLP - MA, Boston, MA.

         For Donald Lassman, CHAPTER 7 TRUSTEE OF THE BANKRUPTCY ESTATE OF ANDREW A. DEMORE, Appellee: Keri L. Wintle, LEAD ATTORNEY, Duane Morris LLP, Boston, MA; Taruna Garg, LEAD ATTORNEY, Murtha Cullina LLP, Boston, MA.

         For ANDREW A. DEMORE, Appellee: Gary W. Cruickshank, LEAD ATTORNEY, Boston, MA.

         For MAUREEN A DEMORE, Appellee: Jason A. Manekas, LEAD ATTORNEY, Bernkopf Goodman LLP, Boston, MA.

         MEMORANDUM AND ORDER ON APPEAL FROM THE BANKRUPTCY COURT AND ON APPELLANT'S MOTION TO CERTIFY

         Richard G. Stearns, UNITED STATES DISTRICT JUDGE.

         Appellee Donald Lassman is the Trustee of the bankruptcy estates of Andrew and Maureen DeMore (the DeMores). Appellant HSBC Bank, USA, N.A. (HSBC) is the United States arm of an international bank headquartered in London, England. HSBC appeals the decision of the Bankruptcy Court granting summary judgment to Lassman in two adversary proceedings involving a mortgage note on real property located in North Attleboro, Massachusetts.

         BACKGROUND

         In February of 1994, the DeMores acquired a parcel of land in North Attleboro. The deed transferring the property was registered with the Land Court on March 19, 1994. In April of 2004, the DeMores executed Limited Powers of Attorney to John G. Molloy. One week later, Molloy, ostensibly on behalf of the DeMores, executed a promissory note in favor of HSBC Mortgage Corporation, USA, in the amount of $244,900, secured by a mortgage on the Attleboro property. HSBC Mortgage Corporation, USA subsequently assigned the mortgage to HSBC.

         The Certificate of Acknowledgment appended to the mortgage read as follows (handwritten portions italicized):

On this 27th day of April, 2004, before me, the undersigned notary public personally appeared Andrew DeMore and Maureen DeMore by their attorney-in-fact, John G. Malloy under power of attorney recorded herewith proved to me through satisfactory evidence of identification, which were drivers licenses to be the person whose name is signed on the proceeding attached document, and acknowledged to me that he/she signed it voluntarily and for its stated purpose.

         The mortgage was executed less than three weeks prior to the signing by Governor Romney of Revised Executive Order No. 455 (04-04), Standards of Conduct for Notary Publics (May 14, 2004), which mandated that notaries use a standard form Certificate of Acknowledgment that is virtually a verbatim copy of the Certificate executed at the DeMores' closing. Id. § 5(d). As with every page of the mortgage, the Certificate was inscribed at the bottom of the page with the initials " A.D. by JGM as AIF under POA recorded in Bristol Bk pg . . . MD by JGM as AIF under POA recorded in Bristol Bk pg ."

         In October of 2013, Andrew DeMore filed for bankruptcy under Chapter 7 of the United States Bankruptcy Code, 11 U.S.C. § § 101 et seq. Two months later, in December of 2013, Maureen DeMore also filed for Chapter 7 bankruptcy. On January 21, 2014, Lassman, in his capacity as Trustee, began adversary proceedings against Mr. DeMore and HSBC, and on the following day against Mrs. DeMore and HSBC.[1] Lassman sought to avoid the mortgage pursuant to the " strong-arm powers" granted to bankruptcy trustees by 11 U.S.C. § § 544(a)(3) and 551,[2] based on an alleged notarization defect: namely, that the Certificate of Acknowledgment appended to the DeMores' North Attleboro mortgage failed to " unequivocally and unambiguously identify who appeared in front of the notary." Record App'x at 33. HSBC moved to dismiss the action, or alternatively, to certify questions of state law to the Massachusetts Supreme Judicial Court (SJC).

         The Bankruptcy Court rejected HSBC's motion to certify and granted summary judgment to Lassman. The Bankruptcy Court relied on a Bankruptcy Appellate Panel decision, In re Kelley, 498 B.R. 392, 400-401 (B.A.P. 1st Cir. 2013). Echoing Kelley, the Bankruptcy Court found the mortgage to be materially defective

[b]ased upon the ambiguous language in the acknowledgment it is unclear whether the Mortgage was signed 'voluntarily and for its stated purpose' by Molloy, or by [Molloy] under his power of attorney. Indeed, the language in the acknowledgment is unclear as it is capable of two different interpretations ...

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