In re Messinger

• Decision Date: 08 May 2002
• Docket Number: Adversary No. 5-01-00257A.,Adversary No. 5-01-00265A.,Bankruptcy No. 5-01-02895.,Adversary No. 5-01-00171A.,Bankruptcy No. 5-01-03215.
• Citation: 281 B.R. 568
• Parties: In re Dean A. MESSINGER and Cynthia Messinger, Debtors. William G. Schwab, Esquire, Chapter 7 Trustee, Plaintiff, v. Home Loan and Investment Bank, FSB, Defendant. In re Maurice Santos and Jean Santos, Debtors. William G. Schwab, Esquire Chapter 7 Trustee, Plaintiff, v. Dauphin Deposit Bank and Trust Company, and Allfirst, Bank, Defendants. In re George J. Durinko, Debtor. William G. Schwab, Esquire, Chapter 7 Trustee, Plaintiff, v. Beneficial Consumer Discount Co. d/b/a Beneficial Mortgage Co. of Pennsylvania, Defendant.
• Court: U.S. Bankruptcy Court — Middle District of Pennsylvania

281 B.R. 568

In re Dean A. MESSINGER and Cynthia Messinger, Debtors.

William G. Schwab, Esquire, Chapter 7 Trustee, Plaintiff, v. Home Loan and Investment Bank, FSB, Defendant.

In re Maurice Santos and Jean Santos, Debtors.

William G. Schwab, Esquire Chapter 7 Trustee, Plaintiff, v. Dauphin Deposit Bank and Trust Company, and Allfirst, Bank, Defendants.

In re George J. Durinko, Debtor.

William G. Schwab, Esquire, Chapter 7 Trustee, Plaintiff, v. Beneficial Consumer Discount Co. d/b/a Beneficial Mortgage Co. of Pennsylvania, Defendant.

Bankruptcy No. 5-01-02895.

Bankruptcy No. 5-01-03215.

Bankruptcy No. 5-01-02895.

Adversary No. 5-01-00171A.

Adversary No. 5-01-00265A.

Adversary No. 5-01-00257A.

United States Bankruptcy Court, M.D. Pennsylvania, Wilkes-Barre Division.

May 8, 2002.

COPYRIGHT MATERIAL OMITTED

William G. Schwab, Lehighton, PA, trustee in bankruptcy.

William J. Levant, Kaplin, Stewart, Meloff, Reiter & Stein, P.C., Blue Bell, PA, for defendant Home Loan and Investment Bank, FSB.

Michael D. Muffley, Jim Thorpe, PA, for debtors Dean A. Messinger and Cynthia Messinger.

Scott A. Dietterick, James, Smith, Durkin & Connelly, LLP, Hershey, PA, for defendant Dauphin Deposit Bank and Trust Co.

James R. Kilker, Pottsville, PA, for debtors Maurice Santos and Jean Santos.

Joseph F. Riga, Whittlesey, McDowell & Riga, Maple Shade, NJ, for defendant Beneficial Consumer Discount Co.

David S. Gellert, Reading, PA, for debtor George J. Durinko.

OPINION¹

JOHN J. THOMAS, Bankruptcy Judge.

The above-captioned cases, although unrelated, present the same legal issue: whether personal appearance before a notary is necessary for a valid acknowledgment on a mortgage.² An individual discussion of the factual background and procedural history of each case is warranted for an understanding of this decision.

IN RE: MESSINGER, Dean and Cynthia

Factual Background

The Debtors have an ownership interest in real estate located at 237 Avenue A, Palmerton, Carbon County, Pennsylvania. On May 13, 1999, they obtained a loan from Home Loan and Investment Bank (hereinafter "the Bank"), and secured that loan by a mortgage on their real estate at 237 Avenue A. The mortgage was executed by the Debtors on May 13, 1999, and recorded by the Carbon County Recorder of Deeds in Mortgage Book Number 827, Page 805, on June 4, 1999.

Procedural History

This adversary proceeding was commenced by the Trustee's Complaint to Avoid the [Defendant's] Mortgage Pursuant to 11 U.S.C. § 544(a). The Trustee seeks to avoid the mortgage, alleging substantive deficiencies in the acknowledgment (1) because the recorded copy of the mortgage does not reflect the presence of the notary's embosser on the original document, and (2) the Debtors failed to appear before the Notary for the acknowledgment. Both the Trustee and the Bank filed Motions For Summary Judgment, both parties have filed briefs, and the Motions are ready for determination.

IN RE: SANTOS, Maurice and Jean

Factual Background

The Debtors have an ownership interest in real estate located at 1713 Running Deer Drive, Auburn, Schuylkill County, Pennsylvania. On July 27, 1998, they obtained a loan from Dauphin Deposit Bank and Trust Company and secured that loan by a mortgage on their real estate at 1713 Running Deer Drive. The mortgage was executed by the Debtors on July 27, 1998, and recorded by the Schuylkill County Recorder of Deeds in Mortgage Book Number 385, Page 229, on August 3, 1998. Subsequently, the Mortgage was assigned to Allfirst Bank.

Procedural History

On October 18, 2001, the case Trustee filed a Complaint to Avoid the [Defendant's] Mortgage Pursuant to 11 U.S.C. § 544(a). The Trustee seeks to avoid the mortgage, alleging substantive deficiencies in the acknowledgment (1) because the recorded copy of the mortgage does not reflect the presence of a notary's embosser on the original document, and (2) the Debtors failed to appear before the Notary for the acknowledgment. Both the Trustee and Allfirst Bank filed Motions for Summary Judgment, both parties have filed briefs, and the Motions are ready for determination.

IN RE: DURINKO, George

Factual Background

The Debtor has an ownership interest in real estate located at 105 North Second Street, Girardville, Schuylkill County, Pennsylvania. On October 25, 1996, he obtained a loan from Beneficial Consumer Discount Company d/b/a Beneficial Mortgage Co. of Pennsylvania (hereinafter "Beneficial"), and secured that loan by a mortgage on his real estate at 105 North Second Street. The mortgage was executed by the Debtor on October 25, 1996, and recorded by the Schuylkill County Recorder of Deeds in Mortgage Book Number 60E, Page 221, on October 29, 1996.

Procedural History

This adversary proceeding was commenced by the Trustee's Complaint to Avoid the [Defendant's] Mortgage Pursuant to 11 U.S.C. § 544(a). The Trustee seeks to avoid the mortgage, alleging a substantive deficiency in that document because the Debtors failed to appear before the Notary for the acknowledgment. Both the Trustee and Beneficial filed Motions For Summary Judgment, both parties have filed briefs, and the Motions are ready for determination.

Opinion

Under Federal Rule of Civil Procedure 56(c), applicable to these proceedings through Bankruptcy Rule 7056, summary judgment may be entered only "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). The party moving for summary judgment has the burden of proving that there is no genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 322-23, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). Additionally, on summary judgment the inferences to be drawn from the underlying facts must be viewed in the light most favorable to the party opposing the motion. Mraz v. County of Lehigh, 862 F.Supp. 1344 (E.D.Pa.1994). With regard to "materiality, the substantive law will identify which facts are material. Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment. Factual disputes that are irrelevant or unnecessary will not be counted." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986). Furthermore, there must be a "genuine" issue of the material fact, "that is, if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Id. at 248, 106 S.Ct. at 2510. "If the evidence is merely colorable, or is not significantly probative, summary judgment may be granted." Id. at 249-250, 106 S.Ct. at 2511 (citations omitted).

In these cases, all of the Debtors have purchased real estate. When the Debtors purchased their real estate, each of them borrowed money for the purchase and secured those loans with mortgages. Each of the mortgages appears to have been executed by the respective Debtors, each has an acknowledgment which appears to be complete and regular on its face, each acknowledgment has been certified in Pennsylvania by a notary public, and each mortgage has been recorded in the recorder of deeds office in the counties in which the properties lie. The Trustee contends that the certificate of acknowledgment on the mortgages falsely states that the Debtors personally appeared before the notary to acknowledge their signatures. If personal appearance of the parties is required for proper acknowledgment, the Trustee argues that the mortgages were never properly recorded, and they may be avoided by the Trustee as a hypothetical lien creditor under § 544 of the Bankruptcy Code (11 U.S.C. § 544)³.

"[T]he Supreme Court has held that the property interests of mortgagor and mortgagee are created and defined by state law. Butner v. United States, 440 U.S. 48, 55, 99 S.Ct. 914, 918, 59 L.Ed.2d 136, 140 (1979)." Commerce Bank v. Mountain View Village, Inc., 5 F.3d 34, 36 (3d Cir.1993). Bankruptcy courts must take the necessary steps to "ensure that the mortgagee is afforded in federal bankruptcy court the same protection he would have under state law if no bankruptcy ensued." Id. at 37.

To perfect a security interest under Pennsylvania law, the mortgagee must record the mortgage with the Recorder of Deeds in the county in which the real estate is located. 21 P.S. § 621. The purpose of recording the mortgage is to provide notice to the whole world of the person or entity who encumbers the title. Ladner, § 18.02, citing Salter v. Reed, 15 Pa. 260, 263 (1850). An acknowledgment is an essential prerequisite for recording a mortgage, but is not necessary for the validity of the instrument.⁴ Abraham v. Mihalich, 330 Pa.Super. 378, 381, 479 A.2d 601, 604 (1984); 21 P.S. § 42. An acknowledgment is a formal declaration or admission before an authorized public officer, by a person who has executed an instrument, that such instrument is his or her act and deed. Abraham v. Mihalich, 330 Pa.Super. at 381, 479 A.2d at 604.

Pennsylvania acknowledgments are governed by the Uniform Acknowledgment Act, 21 P.S. § 291.1, et seq., adopted in the Commonwealth in 1941. Under the Act, acknowledgment is made before an authorized officer, who must certify the acknowledgment; a certificate of acknowledgment is completed with the signature and title of the officer; and notaries must state the dates their commissions expire. 21 P.S. § 291.8.⁵ A Pennsylvania notary is also required to keep an official seal, which shall be used to authenticate all acts of the notary. 57 P.S. § 158.⁶ In Pennsylvania, acknowledgment of any instrument may be made before a notary public. 21 P.S. § 291.2. By notarizing an affidavit, the notary is not representing that the facts contained within the affidavits are true; the notary is simply representing that the affiant appeared and swore that the...