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DEFECTIVE OR NONEXISTENT ACKNOWLEDGMENTS

Many documents that must be signed at closing require a notary seal, which is the usual method for acknowledging a document. However, many deeds, mortgages, and other title documents either fail to contain any acknowledgment, or contain a defective acknowledgment. This article identifies proper acknowledgments and explains the effect of an improper acknowledgment or a document with no acknowledgment at all.

Illinois

In Illinois, an acknowledgment is defined in the following way: "(1) that the person acknowledging appeared before the person taking the acknowledgment; (2) that he acknowledged he executed the instrument; (3) that the person acknowledging executed the instrument with proper authorization and for the purpose stated; and (4) that the person taking the acknowledgment either knew or had satisfactory evidence that the person acknowledging was the person named in the instrument or certificate." 765 ILCS 30/6.

A certificate of acknowledgment must be substantially in the following form:

State of [name of state]
ss.
County of [name of county]

I [name and official title of officer] certify that [name of grantor, and if acknowledged by the spouse, his or her name, and add "his or her spouse"] personally known to me to be the same person whose name(s) is (are) subscribed to the foregoing instrument, appeared before me this day in person, and acknowledged that he/she/they signed and delivered the instrument as his/her/their free and voluntary act, for the uses and purposes therein set forth.

Dated [insert date]
[Signature of officer]
[Seal]

765 ILCS 5/26

The statutory short forms of acknowledgment for individuals, corporations, partnerships, attorneys, public officers, trustees, and personal representatives are also sufficient. 765 ILCS 30/7.

Under Illinois law, the certificate of acknowledgment must state the fact of acknowledgment.Short v Conlee, 28 Ill 219, 229 (1862). InShort, the plaintiff claimed that the certificate of acknowledgment substantially complied with the statutory requirements. The certificate did not state that it was an acknowledgment or that the preparer witnessed the parties execute the deed. The court said that omission of the fact of acknowledgment rendered the acknowledgment invalid. See alsoDawson v Hayden, 67 Ill 52, 54 (1873). (Grantor's statement that the deed was his act was sufficient acknowledgment.)

Furthermore, the preparer of the certificate must verify the identity of the person making the acknowledgment.Livingston v Kettelle, 6 Ill 116, 118 (1844). The purpose of the acknowledgment requirement is to prevent impersonation. Thus, a certificate that states that the "above named mortgagor" appeared before the preparer is sufficient for this purpose.

In one case, the Illinois Supreme Court considered whether a bond that was recorded, but not acknowledged, constituted constructive notice tobona fidepurchasers.Reed v Kemp, 16 Ill 445, 450 (Ill 1855). The Court said that an unacknowledged and recorded instrument is constructive notice tobona fidepurchasers, but that the validity of the unacknowledged instrument must be proved under common law rules of evidence. Unacknowledged instruments serve only as notice, not as evidence of validity. See alsoBarnett v Barnett, 284 Ill 580, 587, 120 NE 532 (Ill 1918).

These principles have now been codified in the Conveyances Act, 765 ILCS 5/31, which requires that recorded, unacknowledged instruments provide constructive notice but cannot be read into evidence until the execution has been properly proven.

Indiana

In Indiana, the grantor of a conveyance or mortgage of real property must acknowledge the conveyance or mortgage before it can be recorded. IC § 32-21-2-3. The certificate of acknowledgment must be written on or attached to the deed. IC § 21-21-2-9. The certificate must be in substantially the same form as the following: "Before me, ... (judge or justice, as the case may be) this day of _______________, ... acknowledged the execution of the annexed deed (or mortgage, as the case may be)." IC § 32-21-2-7.

If the acknowledgment is defective or non-existent, the conveyance or deed is valid only between the parties and is not constructive notice to abona fidepurchaser. SeeIn re Sandy Ridge Oil Co, 510 NE2d 667, 671 (Ind 1987). Courts have considered defective acknowledgments in several contexts. The general rule is that "a proper acknowledgment must provide the identity of the acknowledgers, and state that they are the same parties that executed the underlying instrument as well."In re Baldin, 135 B R 586, 596 (Bankr ND Ind 1991). So, the omission of a mortgagor's signature on the certificate of acknowledgment renders the acknowledgment defective, but the omission of the preparer's signature does not. CompareHaverell Distributing, Inc v Haverell Mfg, Corp, 115 Ind App 501, 58 NE2d 372, 374-75 (Ind Ct App 1944) withIn re Sandy Ridge Oil Co, Inc, 510 NE2d 667, 671 (Ind 1987).

Recently, a court held that a certificate of acknowledgment that did not identify the person whose signature was to be acknowledged was defective.Stubbs v Chase Manhattan Mortgage Corp, 330 B R 717, 730 (Bankr ND Ind 2005). In that case, a bankruptcy trustee sought to avoid a mortgage under Bankruptcy Code Section 544(a)(3), which allows the trustee to avoid debts and obligations for which abona fidepurchaser of real estate would not be liable. The acknowledgment on the mortgage included the signature of the mortgagor and a witness but did not identify the mortgagor, which is a defective acknowledgement under Indiana Code Section 32-21-2-7.

Further, the court could not infer that the person who signed the acknowledgment was the mortgagor because a witness had also signed the acknowledgment. Although the mortgage was recorded, because of the defective acknowledgment, the mortgage failed to provide constructive notice under Indiana law. As a result, the court found that the mortgage met the requirements for the trustee to avoid it.

Wisconsin

In Wisconsin, the preparer of an acknowledgment must also verify the identity of the person making the acknowledgment. Wis Stat § 706.07(2)(a). The preparer "must determine, either from personal knowledge or from satisfactory evidence, that the person appearing before the officer and making the acknowledgment is the person whose true signature is on the instrument."Id.The preparer must sign and date the acknowledgment, and identify the jurisdiction in which the acknowledgment is performed and the title of the preparer. § 706.07(7)(a). The following form of acknowledgment is sufficient for an individual:

State of [name of state]
County of [name of county]

This instrument was acknowledged before me on [date] by [name(s) of person(s)].

[Signature of notarial officer]
[Seal, if any]
Title [and Rank]
My commission expires: __________

§ 706.07 (8)(a)

The following form of acknowledgment is sufficient for a person acting in a representative capacity:

State of [name of state]
County of [name of county]

This instrument was acknowledged before me on [date] by [name(s) of person(s)] as [type of authority (e.g., officer, trustee, etc.)] of [name of party on behalf of whom instrument was executed].

[Signature of notarial officer]
[Seal, if any]
Title [and Rank]
My commission expires: __________

Id. § 706.07 (8)(b)

If an acknowledgment is defective or non-existent, the deed or other instrument is not entitled to be recorded, and so, is not valid againstbona fidepurchasers.Girardin v Lampe, 58 Wis 267, 270-71, 16 NW 614 (Wis 1883). In one case, the Wisconsin Supreme Court considered the validity of a certificate of acknowledgment that bore the seal of the preparer, but did not indicate the preparer's authority to take the acknowledgment. The court stated the general rule:

[I]n order to be constructive notice to subsequent purchasers, the record of a deed, or other instrument in writing, which is entitled to be recorded by the laws of this state, affecting the title to real estate, must show upon its face that the instrument recorded was so executed and acknowledged as to be entitled to record; and if the record fails to show all the things necessary to entitle it to record, the record is of no effect as to those having no actual knowledge of its existence; and proof that the instrument was in fact so executed and acknowledged as to entitle it to record, does not change the effect to be given to the record.

Id. at 270-71

A certificate of acknowledgment entitles a deed or other instrument to be recorded so the certificate itself must be valid. The certificate must show that the deed or instrument was validly executed by the parties and that the execution was acknowledged. Thus, the court found that the seal alone was not sufficient for a valid certificate of acknowledgment.

Conclusion

In Illinois, unacknowledged conveyances must be proven in court to be entered into evidence, but can still be valid as between the parties and can still impart constructive notice if recorded. In Indiana and Wisconsin, unacknowledged conveyances do not constitute notice tobona fidepurchasers for value, even if recorded, and therefore may be unenforceable as to later creditors or owners in the chain of title. Thus, real estate practitioners must take extra care in reviewing acknowledgements to conveyances affecting Indiana and Wisconsin real estate.

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