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In re David Buchholz

224 B.R. 13 (D. N.J. 1998)

MORTGAGES; ACKNOWLEDGMENTS—A defectively notarized mortgage can not be recorded and, even if recorded, does not constitute a perfected lien with priority over properly perfected liens.

This case arose in the context of a debtor in bankruptcy’s motion to disallow a mortgagee’s claim as a secured debt and reclassify it as an unsecured debt, based upon improper notarization of the mortgage. There was no dispute as to whether the mortgage was properly executed and before reaching the issue of improper notarization, the Court dismissed all defenses to the mortgage such as the failure of the lender to make allegedly required disclosures. The borrower executed the mortgage in the presence of an officer of the lender. That officer was not personally acquainted with the borrower. Following a common practice at the lender’s offices, that officer then took the mortgage to another employee for notarization. The notary never met or spoke with the borrower and was not familiar with the borrower’s signature. Nevertheless, he took the acknowledgment. Using that acknowledgment, the lender then caused the mortgage to be recorded. New Jersey law requires that a recorded mortgage instrument be duly acknowledged or proved and certified at the time of execution. Courts interpreting the recording statutes have held that the test for determining the validity of a mortgage acknowledgment is based upon the degree of familiarity that the officer taking the acknowledgment had with the party signing the document. Before a designated officer affirms that the signature to be acknowledged is, in fact, the signature of the party named in the instrument, the officer must first be satisfied, within his or her conscience, that the party making it is the identical person named in, and who executed, the instrument. Generally, that requirement is met when the maker of an instrument personally appears before the notary to acknowledge the instrument and the notary has knowledge of the identity of the affiant. However, on occasion, when the acknowledgment is taken outside of the presence of the notary, the requirement may be met if the officer is sufficiently familiar with the signature of the party executing the instrument.

The document was disputed less than six years after its recording. Therefore, the statute that cures a defect in the acknowledgment of a recorded document after six years did not apply here.

By reason of a defective acknowledgment, the recording was invalid. An unrecorded mortgage is not considered to be perfected, and therefore would not necessarily have priority over subsequent liens. Consequently, it was disallowed as a secured claim. Although the underlying debt remained a valid obligation, it was only an unsecured claim in the bankruptcy.


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