§ 544(a)(3) - Avoidance of Mortgage Lien Pursuant to Defective Acknowledgement

Geygan v. World Savings Bank, FSB (In re Nolan), 383 B.R. 391 (B.A.P. 6th Cir. 2008). One of the issues before the B.A.P. was whether the phrase “witness my hand” was substantially equivalent to the phrase “acknowledged before me” under Ohio law regarding acknowledgements.

The debtors signed a note in the amount of $327,600.00 in favor of the defendant. On the signature page of the mortgage, below the signatures of the debtors and handwritten beside the signature of the notary public, was the phrase “Witness my hand this 23rd day of May, 2000.” The notary’s name was hand-printed below her signature. Below the notary’s name was the printed phrase “ATTACH INDIVIDUAL NOTARY ACKNOWLEDGEMENT,” beside which were the hand-written words “See Attachment,” although no notary acknowledgement was attached. The following page contained the signatures of the notary and another person as witnesses and the next page contained a notary stamp for the notary.

The bankruptcy trustee commenced an adversary proceeding against the defendant alleging that the mortgage was not executed in accordance with Ohio law and, therefore, was avoidable pursuant to 11 U.S.C. § 544(a)(3).

To determine whether the bankruptcy court was correct in ruling that the certificate of acknowledgement did not comply with the requirements of Ohio law regarding acknowledgements, the B.A.P. first turned to O.R.C. § 5301.01(A), which states that a mortgage “shall” be signed by the mortgagor and that “[t]he signing shall be acknowledged by the . . . mortgagor . . . before a . . . notary public . . . who shall certify the acknowledgement and subscribe the official’s name to the certificate of the acknowledgement.” The combination of O.R.C. §§ 147.53, 147.54, and 147.55 prescribe what is required of an acknowledgment. It must be acknowledged in front of a notary public or similar person, the person taking the acknowledgement must know the person acknowledging or have satisfactory evidence that the person acknowledging was the person described in and who executed the instrument, it must be in a form prescribed by Ohio law or have the words “acknowledged before me,” or their substantial equivalent, and it must list the state of, county of, and the language that “[t]he foregoing instrument was acknowledged before me this (date) by (name of person acknowledged). (Signature of person taking acknowledgment) (Title or rank).”

The purported acknowledgment, which had only the phrase “witness my hand,” did not meet the requirements of § 147.54. It was not in the form prescribed by § 147.55, and it did not contain the words “acknowledged before me.” The words “acknowledged before me” are defined terms in the Ohio Revised Code, meaning that the person acknowledging appeared before the person taking the acknowledgement, the person acknowledges that he executed the agreement, and the person taking the acknowledgement either knew or had satisfactory evidence that the person acknowledging was the person named in the instrument or certificate. O.R.C. § 147.541. In contrast, the words “witness my hand” are not defined in the Ohio Revised Code and taking their ordinary meaning, indicate only that the witnessing individual observed the signing of the document by another individual. Additionally, the words “See Attachment” suggested that there was no intention to rely on the words “witness my hand” as an acknowledgment and that the parties intended to attach a formal acknowledgement. Furthermore, the Court found that even if the phrase “witness my hand” was determined to be the substantial equivalent of “acknowledged before me,” the acknowledgement was defective because the names of the borrowers were not recited. On that and other grounds, the B.A.P. affirmed the bankruptcy court’s decision.