House Bill 1432, a lengthy piece of legislation correcting many issues raised at the adoption of Chapter 10B has been passed by the Legislature sent to the Governor for signature. This should provide welcome relief to real property practitioners. When N.C.G.S. Chapter 10B came into law in 2005, it contained numerous provisions that invalidated a notary acknowledgment that did not comply with many of the numerous and highly technical new requirements. The purpose of the original legislation was to strengthen regulation of actions of Notaries Public and to enhance enforcement of the law. However, an unintended consequence of this laudable undertaking was to call into question the validity of conveyances with acknowledgments bearing certificates that were acceptable under the old law, but were in technical violation of the new Act.

A joint effort of interested parties representing the Secretary of State’s office, the Lending industry, the Real Property practitioners, the Title industry and the Legislature culminated in this legislation. As there are 33 sections to the Bill, we must limit our discussion to the substantive provisions that will have the greatest impact upon real property practitioners. Many of the provisions deal with the qualification, commissioning and renewal of Notaries. Other provisions make editing changes, modify forms or make conforming changes necessitated by the amendments. All should be studied separately by those likely to be affected by the changes.

One of the first changes significant to real property practitioners redefines the term “acknowledgment”. The revised definition under Section 10B-3(1) is:

“A notarial act in which a notary certifies that at a single time and place all of the following occurred:

a. An individual appeared in person before the notary and presented a record.

b. The individual was personally known to the notary or identified by the notary through satisfactory evidence.

c. The individual did either of the following:

i.Indicated to the notary that the signature on the record was the individual's signature.

ii.Signed the record while in the physical presence of the notary and while being personally observed signing the record by the notary.”

The substantive changes result in an acknowledgment being defined as the notary’s certification of the listed acts rather than the acts themselves and in the elimination of the requirement that the individual acknowledge the voluntary nature of the act.

Subsection (25), which defines a signature as the act of signing one’s name in ink by hand, has been eliminated. This is much needed as the existing definition conflicts with numerous statutes and common law decisions that have broadly construed what constitutes a signature.

G.S. 10B-20(b) is rewritten to read:

"(b) A notarial act shall be attested by all of the following:

(1) The signature of the notary, exactly as shown on the notary's commission.

(2) The legible appearance of the notary's name exactly as shown on the notary's commission. The legible appearance of the name may be ascertained from the notary's typed or printed name near the notary's signature or from elsewhere in the notarial certificate or from the notary's seal if the name is legible.

(3) The clear and legible appearance of the notary's stamp or seal.

(4) A statement of the date the notary's commission expires. The statement of the date that the notary's commission expires may appear in the notary's stamp or seal or elsewhere in the notarial certificate."

This eliminates the former requirements that the notary’s signature be legible and that there be a separate printed name even when the seal is legible.

Substantive changes to G.S. 10B-20(c) are as follows:

"(c) A notary (“is disqualified from performing” language to be deleted) shall not perform a notarial act if any of the following apply:

(1) and (2) not substantively changed.

(2a) The credible witness is not personally known to the notary.

(3) Repealed (The principal or subscribing witness shows a demeanor that causes the notary to have a compelling doubt about whether the principal knows the consequences of the transaction requiring a notarial act.)

(4) Repealed (The principal or subscribing witness, in the notary's judgment, is not acting of the principal's or the subscribing witness's own free will.)

(5) The notary is a signer of, party to, or beneficiary of the record, that is to be notarized. However, a disqualification under this subdivision shall not apply to a notary who is named in a record solely as the trustee in a deed of trust, the drafter of the record, the person to whom a registered document should be mailed or sent after recording, or the attorney for a party to the record, so long as the notary is not also a party to the record individually or in some other representative or fiduciary capacity.

The repeal of subsection (3) and (4) eliminates inappropriately subjective disqualification. The remaining changes clarify the notary’s limitations and would still prohibit improper actions on the part of a notary, while removing the disqualification language would avoid potential invalidation of conveyances in cases of purely technical impropriety.

G.S. 10B-37 (b) contains a substantial modification in that will no longer limit the requirements to “only” those spelled out and instead will require that the “notary's official seal shall include all of the required elements.

Subsection (f) is a savings clause that will prevent invalidation of documents for technical violations of the signature and seal provisions and reads as follows:

(f) “The failure of a notarial seal to comply with the requirements of this section shall not affect the sufficiency, validity, or enforceability of the notarial certificate, but shall constitute a violation of the notary's duties.”

The changes to G.S. 10B-40 are some of the most extensive and substantive. We will only address some of the most significant due to space limitations. Subsections (a1) and (a2) create a statutory certification so that, whether or not stated in the certificate, a notary certifies as follows in (a1):

(1) As to an acknowledgment, all those things described in G.S. 10B-3(1).

(2) As to an affirmation, all those things described in G.S. 10B-3(2).

(3) As to an oath, all those things described in G.S. 10B-3(14).

(4) As to a verification or proof, all those things described in G.S. 10B-3(28).

(a2) provides “In addition to the certifications under subsection (a1) of this section, by making or giving a notarial certificate, whether or not stated in the certificate, a notary certifies to all of the following:

(1) At the time the notarial act was performed and the notarial certificate was signed by the notary, the notary was lawfully commissioned, the notary's commission had neither expired nor been suspended, the notarial act was performed within the geographic limits of the notary's commission, and the notarial act was performed in accordance with the provision of this Chapter.

(2) If the notarial certificate is for an acknowledgment or the administration of an oath or affirmation, the person whose signature was notarized did not appear in the judgment of the notary to be incompetent, lacking in understanding of the nature and consequences of the transaction requiring the notarial act, or acting involuntarily, under duress, or undue influence.

(3) The notary was not prohibited from acting under G.S. 10-20(c).

Paragraph (g) contains the added “Any form of acknowledgment or probate authorized under Chapter 47 of the General Statutes shall be conclusively deemed in compliance with the requirements of this section.”

G.S. 10B-41(a) shortens the statutory form of notarial certificate for an acknowledgment provided by chapter 10B and includes traditional “substantially complies with” language to provide for liberal construction normally accorded acknowledgment forms. The marked up version from the legislation is included to illustrate the changes.

______________ County, North Carolina

I certify that the following person(s) personally appeared before me this day, each acknowledging to me that he or she voluntarily signed the foregoing document for the purpose stated therein and in the capacity indicated: document: name(s) of principal(s).

Date: ____________________ Official Signature of Notary

Notary's printed or typed name, Notary Public

(Official Seal) My commission expires: _____________

Since this legislation will alleviate concerns about strict construction, the lack of a specific provision in this particular form for capacity should not be of concern. The attorney drafting the form of acknowledgment will no longer be constrained to a particular form as long as other legislation does not create special requirements such as in the cases of self-proving wills and powers of attorney. The following amendments further provide specific authorization and implicit certification to provide assurance that capacity issues may be dealt with simply.

G.S. 10B-40(a3) provides that the “inclusion of additional information in a notarial certificate, including the representative or fiduciary capacity in which a person signed or the means a notary used to identify a principal, shall not invalidate an otherwise sufficient notarial certificate.”

G.S. 10B-40(h) provides that if “an individual signs a record and purports to be acting in a representative or fiduciary capacity, that individual is also deemed to represent to the notary that he or she is signing the record with proper authority to do so and also is signing the record on behalf of the person or entity represented and identified therein or in the fiduciary capacity indicated therein. In performing a notarial act in relation to an individual described under this subsection, a notary is under no duty to verify whether the individual acted in a representative or fiduciary capacity or, if so, whether the individual was duly authorized so to do. A notarial certificate may include any of the following:

(1) A statement that an individual signed a record in a particular representative or fiduciary capacity.

(2) A statement that the individual who signed the record in a representative or fiduciary capacity had due authority so to do.

(3) A statement identifying the represented person or entity or the fiduciary capacity."

In addition, G.S. 10 B-40(b) provides that a certificate for acknowledgment of a principal who is acting in a representative or fiduciary capacity is sufficient if it is substantially in the form in G.S. 10B-41, if it is substantially in a form prescribed by other laws of this State, or if it:

(1) Identifies the state and county in which the acknowledgment occurred.

(2) Names the principal who appeared in person before the notary.

(4) Indicates that the principal appeared in person before the notary and the principal acknowledged that he or she signed the record.

(5) States the date of the acknowledgment.

(6) Contains the signature and seal or stamp of the notary who took the acknowledgment.

(7) States the notary's commission expiration date”

Section 10B-40(c) already provided for a notarial certificate for the verification or proof of the signature of a principal by a subscribing witness. Section 10B-40(c1) makes similar provision for a notarial certificate for the verification or proof of the signature of a principal or a subscribing witness by a nonsubscribing witness.

Amendments to G.S. 10B-42 revise the statutory form of certificate for a subscribing witness and new G.S. 10B-42.1 provides a certificate form for proof of the signature of a principal or a subscribing witness by a nonsubscribing witness.

Section 24 of the bill contains significant curative provisions by adding the following new provisions.

"§ 10B-67. Erroneous commission expiration date cured.

An erroneous statement of the date that the notary's commission expires shall not affect the sufficiency, validity, or enforceability of the notarial certificate or the related record if the notary is, in fact, lawfully commissioned at the time of the notarial act.”

"§ 10B-68. Technical defects cured.

(a) Technical defects, errors, or omissions in a notarial certificate shall not affect the sufficiency, validity, or enforceability of the notarial certificate or the related instrument or document.

(b) As used in this section, a technical defect includes those cured under G.S. 10B-37(f) and G.S. 10B-67. Other technical defects include the absence of the legible appearance of the notary's name exactly as shown on the notary's commission as required in G.S. 10B-20(b) and defects in the commissioning or recommissioning of the notary that were approved by the Department under this Chapter.”

"§ 10B-69. Official forms cured.

(a) The notarial certificate contained in a form issued by a State agency prior to October 1, 2006 is deemed to be a valid certificate provided the certificate complied with the law at the time the form was issued.

(b) The notarization using a certificate under subsection (a) of this section shall be deemed valid if executed in compliance with the law at the time the form was issued.”

"§ 10B-99. Presumption of regularity.

(a) In the absence of evidence of fraud on the part of the notary, or evidence of a knowing and deliberate violation of this Article by the notary, the courts shall grant a presumption of regularity to notarial acts so that those acts may be upheld, provided there has been substantial compliance with the law. Nothing in this Chapter modifies or repeals the common law doctrine of substantial compliance in effect on November 30, 2005.

(b) A notarial act performed before October 1, 2006, shall be deemed valid if it complies with the law as it existed on or before December 1, 2005."

There are several changes to chapter 47 as well. These are conforming changes, curative provisions or rules of construction serving to ameliorate some of the harsh results that can otherwise result from purely technical errors in acknowledgments.

G.S. 47-14 is amended by adding a new subsection reading:

"(f) The acceptance of a record for registration by the register of deeds shall give rise to a presumption that, at the time the record was presented for registration, a clear and legible image of the notary's official seal was affixed or embossed on the record near the notary's official signature. This presumption shall apply regardless of whether the image is legible or photographically reproduced in the records maintained by the register of deeds. A register of deeds may not refuse to accept a record for registration because a notarial seal does not satisfy the requirements of G.S. 10B-37. "

Amendments to G.S. 47-38 encompass execution by someone acting in a representative or fiduciary capacity, whether or not stated in the notarial certificate. This includes those acting for unincorporated associations, corporations, general or limited partnerships, limited liability companies, trusts, as the personal representative of a decedent's estate, as an agent or attorney in fact, as the guardian of a minor or an incompetent, or as a public official. The authorization of the form in this section applies to notarial certificates made before, on, and after December 1, 2005.

North Carolina, __________County.

I (here give the name of the official and his official title), do hereby certify that (here give the name of the individual whose acknowledgment is being taken) personally appeared before me this day and acknowledged the due execution of the foregoing instrument. Witness my hand and (where an official seal is required by law) official seal this the ____________ day of______ (year).

(Official seal.)

________________________________

(Signature of officer.)

(Title)"

G.S. 47-41.01 adds a new subsection to read:

"(e) The forms of probate set forth in this section may be modified and adopted for use in the probate of deeds and other conveyances and instruments executed by entities other than corporations, including general and limited partnerships, limited liability companies, trusts, and unincorporated associations. This subsection applies to notarial certificates and forms of probate made before, on, or after December 1, 2005."

G.S. 47-41.02 adds a new subsection to read:

"(h) The forms of probate set forth in this section may be modified and adopted for use in the probate of deeds and other conveyances and instruments executed by entities other than corporations, including general and limited partnership, limited liability companies, trusts, and unincorporated associations. This subsection applies to notarial certificates and forms of probate made before, on, or after December 1, 2005."

A new section 47-41.2 “Technical defects” is added to read:

“(a) Technical defects, including technical defects under G.S. 10B-68, and errors or omissions in a form of probate or other notarial certificate, shall not affect the sufficiency, validity, or enforceability of the form of probate or the notarial certificate or the related instrument or document. A register of deeds may not refuse to accept an instrument or document for registration because of technical defects, errors, or omissions in a form of probate or other notarial certificate.” (Not applicable to G.S. 47-14(a) requirements)

It appears that these provisions should eliminate most concerns about certificates that that did not comply with the first version of 10B, thereby effecting a disqualification of the notary and potentially resulting in an invalidation of the notarization. If a defect is apparent on the face of the certificate there is a real concern that it would void the subject conveyance ab initio under common law. Title examiners should remain vigilant and extend the search for any grantors whose potentially defective conveyances have been cured during the relevant period. This is required because a void conveyance does not become operative as against purchasers for value and creditors until the effective date of the curative statute.

Finally the bill directs the General Statutes Commission to study the need for additional changes to the notaries public laws, notarization and registration of instruments notarized in other jurisdictions. The Commission must report the results of its study to either the 2007 or 2009 General Assembly. Amendments to G.S. 10B-11(b)(3) (not discussed here) become effective July 1, 2006. The remainder of the act becomes effective October 1, 2006, and except as otherwise provided, apply to notarial acts performed on or after that date.