In Drown v. National City Bank (In re Ingersoll), the debtor’s husband executed a general power of attorney in favor of his wife, the debtor. That same day, the debtor executed a mortgage on real property owned jointly with the right of survivorship. The debtor-wife signed the mortgage on behalf of her husband by stating that she was signing as power of attorney. The notary certificate on the mortgage stated that both husband and debtor personally appeared before the notary and signed the mortgage when, in fact, only the debtor appeared and physically signed for herself and, by virtue of a valid power of attorney, her husband. The notary certificate makes no reference to the wife’s power of attorney status. The husband passed away thereafter, and the debtor-widow filed a voluntary petition for chapter 7 relief some two and a half years later. The bankruptcy trustee sought to avoid the debtor’s mortgage by arguing that the certificate of acknowledgement was invalid because it stated that the debtor and her husband personally appeared and signed the mortgage when, in fact, only the debtor appeared and signed the mortgage for herself and, by virtue of a valid power of attorney, for her husband. The bankruptcy trustee sought to avoid the mortgage, pursuant to 11 U.S.C. § 544(a)(3), which provides that a trustee has the same rights that a bona fide purchaser for value would enjoy under state law --- seeking to avoid the mortgage, which mortgage was being held by the bank.
The bankruptcy court found that because the debtor had complete authority under Ohio law to mortgage her husband’s one-half interest in the property due to the power of attorney, her signature was the only one that needed to be acknowledged, and her acknowledgement was the only one needing to be certified. In reviewing the law on this matter, the bankruptcy court also found no requirement that the certificate of acknowledgement must disclose that an individual signing be acknowledged as having power of attorney for another. Moreover, the bankruptcy court recognized that Ohio courts have applied a doctrine of substantial compliance to find mortgages valid and enforceable when the acknowledgement certificate contains certain non-substantive errors. The Bankruptcy Appellate Panel affirmed on the basis of the bankruptcy court’s opinion. (See Drown v. National City Bank (In re Ingersoll), 420 B.R. 414 (B.A.P. 6th Cir. 2009). The Sixth Circuit Court of Appeals then affirmed after de novo review of the record.