TRAPS FOR THE WARY

Over the next two issues, I will be reviewing issues that have resulted in claims against conveyancers and title insurance companies.  I hesitate to repeat the frequently used phrase “traps for the unwary” as “unwary” is defined as “not cautious; not aware of possible dangers or problems”.  I believe most conveyancers in this day and age are extremely wary of possible danger.  That danger, however, frequently is dressed differently than it was in the past and is not easily recognizable.

I hope these “encounters” help and feel to contact me with your own horror stories.

M.G.L. c. 184, §35

The form of Trustee’s Certificate (REBA Form 35 and Title Standard 68) has become a popular tool for conveyancers who do not want to record a trust agreement.  Note, however, that the Statute requires that the “Certificate must be sworn to or stated to be executed under the penalties of perjury”.  A properly executed trustee’s certificate will allow the unrecorded trust to fall outside the parameters of the Indefinite Reference Statute, M.G.L. c. 184, §25.  It is clear that if the certificate is not recorded until the deed out, the reference to the trust in the initial deed will result in an indefinite reference, meaning that any liens against the trustee, individually, will attach.  The question as to whether a trustee’s certificate lacking a jurat has the same result is unknown.  Clearly, a certificate pursuant to M.G.L. c. 184, §35 without a jurat does not meet the provisions of the Statute.  To protect your clients, be certain that the certificates you record are properly executed.

EXECUTING AN INSTRUMENT UNDER A POWER OF ATTORNEY

A recent Decision in the United States Bankruptcy Appellate Panel for the First Circuit, BAP No. MS 13-012, Steven Weiss, Chapter 7 Trustee, Plaintiff-Appellant v. Wells Fargo Bank, N.A., Defendant-Appellee has caused “notary hysteria” in some parts of the conveyancing community.  A copy of the Decision is available on the REBA website.

After a review of the Decision by members of the REBA Board, the belief is that the Court “got it right”, and the Decision should have no impact on any instrument that is not executed under Power of Attorney.  In the opinion of the REBA Board, the case continues to support the use of the Executive Order Notary Format as compliant with the statutory requirement for acknowledgments.

In this case, the Mortgagors executed a Mortgage to Wells Fargo Bank pursuant to a Power of Attorney given to a representative of the Lender, LSI.  The 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 method 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 Court cited the seminal acknowledgment case in Massachusetts, McOuatt v. McOuatt, 69 N.E.2d 806, 810 (Mass. 1946):  “[n]o particular words are necessary as long as they amount to an admission that [the grantor] has voluntarily and freely executed the instrument.”

The issue is not whether the language in the Executive Order format is sufficient to comply with the statutory requirement (which it clearly is), but whether it was clear that the mortgage was executed as the voluntary act of the mortgagors, rather than the voluntary act of their attorney in fact.

The Court states:  “We agree with the Trustee’s third argument, however, namely that the foregoing language fails 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 is, indeed, fatal.  Here, the preprinted form utilized by the notary combined with her failure to attend to the blank space and the inapplicable verbiage creates ambiguity concerning whether the execution of the Mortgage was the voluntary act of the Debtors.  Although the acknowledgment contains a recitation that the Mortgage was signed “voluntarily for its stated purpose,” we are left to speculate whether the voluntariness relates to the principals (the Debtors) or to the attorney-in-fact Obringer).

For the proper way to execute and acknowledge a deed under Power of Attorney, see Land Court Guideline (2009) 15, which is available on the REBA website.