I’ll Be Missing You

As title insurance attorneys, we are often asked for our opinions on “somewhat” defective notary acknowledgments. One of the most common scenarios occurs when a co-borrower is listed in the grantor clause, and clearly signed the instrument, but the signature on the deed of trust was not acknowledged by a notary.  Usually, the notary acknowledged all of the other grantors, and the problem is just that the appropriate name was not filled in on the blank in the printed notary acknowledgment.

The deed of trust is clearly enforceable as between the lender and the co-borrower.  The problem is that the co-borrower has an interest in the property, or they wouldn’t have been shown as a grantor.  Our problem as title insurers comes because N.C.G.S. §47-20 (the Connor Act) says the deed of trust is NOT valid against subsequent lien creditors or purchasers for a valuable consideration until the deed of trust is registered in the Register of Deeds.  The Register of Deeds cannot record an instrument until the “execution of the instrument by one or more signers appears to have been proved or acknowledged before an officer with the apparent authority to take acknowledgements.” N.C.G.S. §47-14. 

If the signature of the co-borrower has not been properly acknowledged, is the document valid as to the co-borrower’s interest in the property?  There have been a number of cases where the N.C. Supreme Court has answered “No”.

Instruments whose acknowledgment are defective on their face will fail to impart constructive notice even if they are otherwise effectively recorded.  If the acknowledgment defect is patent, the recorded instrument will be treated as if unrecorded.”  McClure v. Crow, 196 N.C. 657, 146 S.E. 713 (1929).

Registration of an improperly acknowledged or defectively probated deed imports no constructive notice and the deed will be treated as if unregistered.  New Home Bldg. Supply Co. v. Nations, 259 N.C. 681, 131 S.E.2d 425 (1963).  An acknowledgment before an appropriate officer is a prerequisite to the valid registration of a deed or any other instrument presented for recordation. N.C.G.S. §47-17. Furthermore, in Allen v. Burch, 142 N.C. 525, 55 S.E. 354, (1906), it was held that the registration of an improperly acknowledged deed was invalid and the deed, therefore, not admissible in evidence to prove an essential link in the record chain.

There is a law review article critical of the New Home Bldg. Supply case, at 46 N.C. Law Rev. 56 (1967) but the law does not appear to have changed, and in fact New Home Bldg. Supply was cited by the Bankruptcy Court in a 2008 bankruptcy case dealing with the validity of a recorded deed of trust [In Re: Den-Mark Construction, 398 B.R 842 (Bankr. E.D. N.C. 2008)].

Typically, there is a common law doctrine, which allows us to assume that the notarial acknowledgment was properly done when the person appeared before the notary.

“As a general rule it is presumed that a public official in the performance of his official duties "acts fairly, impartially, and in good faith and in the exercise of sound judgment or discretion, for the purpose of promoting the public good and protecting the public interest. [Citation omitted.] The presumption of regularity of official acts is rebuttable by affirmative evidence of irregularity or failure to perform duty, but the burden of producing such evidence rests on him who asserts unlawful or irregular conduct. The presumption, however, prevails until it is overcome by . . . evidence to the contrary. . . . Every reasonable intendment will be made in support of the presumption. . . ." Huntley v. Potter, 255 N.C. 619, 122 S.E. 2d 681 (1961); accord, Styers v. Phillips, 277 N.C. 460, 178 S.E. 2d 583 (1971). Hence the burden is on the petitioner to overcome the presumption by competent and substantial evidence. 6 N.C. Index 2d, Public Officers, § 8 (1968).  In re Annexation Ordinance, 284 N.C. 442, 452, 202 S.E. 2d 143, 149 (1974). See also In re Annexation Ordinance, 296 N.C. 1, 10-11, 249 S.E. 2d 698, 703-704 (1978); In re Annexation Ordinance, 255 N.C. 633, 642, 122 S.E. 2d 690, 697 (1961).

A notary public, taking an acknowledgment, is a public official in the performance of his or her official duties.  We are entitled to presume that the notary was acting fairly, impartially, and in good faith and in the exercise of sound judgment or discretion, for the purpose of promoting the public good and protecting the public interest. 

Unfortunately for the lawyer in our scenario, the presumption is a rebuttable one, and the fact that there is NO acknowledgment at all of the co-borrower’s signature raises lots of questions.

By far the better practice is to have the co-borrower re-execute the deed of trust and have the signature properly acknowledged.  Fortunately for us, the Legislature provided an alternative to a re-recording when they adopted N.C.G.S. §47-36.1(c) in 2013. 

This statute allows the notary public who needs to correct an existing notary acknowledgment in an already recorded instrument to do so.  The notary public merely completes a corrective affidavit, identifying the correction and then attaches a new acknowledgment completed as of the date the original acknowledgment took place fixing the error.  In this case they just add the name of the co-borrower to the other borrower who was acknowledged.  The notary who made the error signs the notarial correction affidavit in the presence of a second notary, who acknowledges the signature of the first notary.  The completed notarial correction affidavit is then recorded in the Register of Deeds.  The statute provides that the original instrument’s priority remains the date and time the original instrument was recorded.  Click here to download a Notarial Correction Affidavit.