In this case, a U.S. Bankruptcy Court ruled that Calumet National Bank’s recorded mortgage was invalid simply because the notary’s acknowledgement did not recite who appeared before the notary and acknowledged execution of the mortgage.

Here, debtors borrowed more than $148,000 from Calumet National Bank and signed a mortgage on their real estate securing the debt. Subsequently, the bank recorded the mortgage with the appropriate office to place others on notice of the bank’s lien on the property.

Debtors then filed for bankruptcy and sought to avoid the bank’s secured mortgage. The only defect in the recorded mortgage was that the notary failed to type or print in the notary’s acknowledgement the names of the debtors who appeared to sign the document.

The bank otherwise complied with all other requirements including obtaining the debtors’ signatures and properly completing the remaining portions of the mortgage. In fact, the county even received and recorded the mortgage.

The court held, however, that the mere technicality of the notary failing to specify who appeared when the document was signed voided the entire secured debt.

The bank now holds an unsecured debt which may cause substantial loss to the bank, or an entire loss. Baldin v. Calumet National Bank, 135 B.R. 586.

Author: Charles R. Harroun, Attorney at Law