A recent decision in the United States Bankruptcy Appellate Panel for the First Circuit, (Massachusetts), in simplest terms, allowed a mortgagor to avoid his mortgage because of how the Notary Public acknowledged the document. In light of that, as a Title Insurance provider throughout much of the United States, we thought this would be a good time to once again remind you of the importance of the proper completion of all information in the signature and acknowledgment sections of any document to be recorded, particularly one being signed by an Attorney-in-Fact.
In that case, the Mortgagors executed a Mortgage to Wells Fargo Bank pursuant to a Power of Attorney given to a representative of the Lender. In a subsequent Bankruptcy proceeding by the Mortgagors, in its attempt to avoid the Mortgage, the Bankruptcy Trustee maintained that the acknowledgment suffered from “three fatal flaws”: (1) the use of the phrase “personally appeared,” when, in fact, it is undisputed the Debtors did not appear; (2) the failure to specify in the appropriate blank space the form of identification by which the notary identified the signer (or signers) of the Mortgage; and (3) the failure to indicate whose free act and deed the notary was verifying.
The Bankruptcy Court agreed with the Trustee’s third argument, namely that the foregoing language failed to unequivocally express that the execution of the Mortgage was the free act and deed of the principals, i.e., the Debtors, and that this flaw was, indeed, fatal. Here, the preprinted form utilized by the notary combined with her failure to attend to the blank space and the inapplicable or inappropriate wording thereon created ambiguity concerning whether the execution of the Mortgage was the voluntary act of the Debtors. Although the acknowledgment contained a recitation that the Mortgage was signed “voluntarily for its stated purpose,” , the Court responded that it was left to speculate whether the voluntariness related to the principals (the Debtors) or to the attorney-in-fact (Obringer). Id at 14.
While the Title Insurance Company typically prepares the Deed and the lender the loan documents, it is critical that anyone signing such documents or acknowledging those signatures do so in the proper manner. An Attorney-in-Fact is not acting in their own capacity, but as an agent for someone else. Specific guidelines as to how they should sign and how the notary should acknowledge ensure that the document is legally valid in all manner and situation. No buyer or lender would want to have to defend their rights to a property due to such a preventable error. If you’re uncertain, then our experienced and knowledgeable Title Insurance staff can assist you.