9th-circuit-invalidates-mortgage-for-failure-to-properly-acknowledge-and-notary-misconduct
9th-circuit-invalidates-mortgage-for-failure-to-properly-acknowledge-and-notary-misconduct
In considering the actions of the Federal District Court Judge and Trustee below, the 9th Circuit Federal Court of appeals made short shrift of the shell game of the players in the securitization game. In a word, they declared the mortgage invalid. While the facts are different than the home mortgage foreclosure the legal theory is the same. Some excerpts:
Aerocolor, Inc., was in bankruptcy in the United States District Court for the Southern District of California. The appellee herein, Crocker-Citizens National Bank, applied to the referee in bankruptcy for leave to exercise the bank’s power of sale under a chattel mortgage which the bank claimed to have received from Aerocolor before Aerocolor became bankrupt. The referee in bankruptcy denied the bank’s application, stating several reasons for the denial. We shall discuss only one of those reasons, the failure of the officers of Aerocolor to acknowledge, in the presence of the notary public who attached his certificate to the document, their signatures to the chattel mortgage.
Our problem, then, is to determine whether, under California law, the bank’s chattel mortgage was valid as against Aerocolor’s creditors. California Civil Code 2957 provides:
6
A mortgage of personal property or crops is void as against
creditors of the mortgagor and subsequent purchasers and encumbrancers
of the property in good faith and for value, unless:
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1. It is acknowledged, or proved and certified, in like manner as grants of real property;
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4. The mortgage * * * is recorded in the office of the recorder * * *.
9
California Civil Code 1185 provides that the acknowledgment of an
instrument must not be taken unless the officer taking it knows, or is
furnished evidence, that the person making the acknowledgment is the
person described in the instrument. Sections 1188 and 1190 provide a
form of words which the officer must indorse on or attach to the
instrument acknowledged. That form states that the person making the
acknowledgment personally appeared before the officer who took the
acknowledgment. California Government Code 6203 provides:
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Every officer authorized by law to make or give any certificate or
other writing is guilty of a misdemeanor if he makes and delivers as
true any certificate or writing containing statements which he knows to
be false * * *.
11
California Government Code 8214 makes a notary public and his sureties
liable to any person injured by the notary’s official misconduct or
neglect.
12
In the instant case the chattel mortgage was not acknowledged.
The California statute says that such a mortgage shall be void as
against creditors of the mortgagor. At least as to existing creditors
of the mortgagor, the purpose of the legislature in requiring
acknowledgment, and recordation, to which acknowledgment is a
prerequisite, could not have been the giving of notice, since such a
creditor would have already parted with his money or his goods or his
labor, and the only benefit which would accrue to him from a
recordation which might come to his notice would be the warning that he
had better not part with any more of his money or his goods or his
labor on the assumption that because his debtor was in possession of
many chattels he would probably pay his debts. The legislators’ view
may well have been that if a person had many chattels in his
possession, and many debts, some one of his many creditors ought not to
be allowed the advantage of a secret, non-possessory lien upon the
debtor’s apparent chattel riches, which advantage the favored creditor
would disclose when the debtor’s financial structure was about to
collapse. The legislature may well have thought that if one creditor is
to be permitted to gain such an advantage over others, he should at
least take certain prescribed steps in order to accomplish that
purpose. As we have said, the notice given by recordation would have
come too late to be of use to existing creditors.
13
We think, then, that at least as to existing creditors, the requirement
of Civil Code 2957 that chattel mortgages be acknowledged in order to
be valid prescribes a necessary step in the creation of the lien of the
chattel mortgage itself, and not a method of giving constructive notice
of an otherwise valid lien.
14
In the instant case, although the chattel mortgage was not
acknowledged, the notary public certified that it had been
acknowledged. On its face, then, when it was presented by the bank to
the recorder there was no reason why the recorder should not record it,
and he did record it. In such a situation, there are obvious
possibilities of great inequities. If someone had bought Aerocolor’s
note from the bank and had sought to enforce the chattel mortgage
against Aerocolor, which for the purpose of the illustration we will
assume was still in business, it would be difficult to see any equity
in a defense by Aerocolor that its officers had not acknowledged the
chattel mortgage.
17
We suggest, with deference, that the patent-latent dichotomy has no
application to the instant case. It is for the protection of persons
who rely upon what appears fair on the record, and as to whom it would
be inequitable to assert defects in the acknowledgment which they had
no reason to suspect. In the instant case the defect was created by the
chattel mortgagee itself, the bank. On
its premises, and under the supervision of its agents, the officers of
the mortgagor signed the mortgage, and were allowed to depart without
having acknowledged their signatures. Under the supervision of the
bank’s agents, a notary later made a false certification that the
mortgagor’s officers had acknowledged their execution of the
instrument. If such a complete disregard of the provisions of the
California statutes is to be treated as irrelevant, not for the
protection of an innocent third person but for the benefit of the party
who so disregarded the statutes, it should be the California courts,
not a court of another sovereign, which should announce that doctrine.
18
In view of our conclusion that the acknowledgment of the
chattel mortgage was invalid and the mortgage was therefore invalid as
against the trustee in bankruptcy, we have not considered the other
asserted grounds of invalidity of the chattel mortgage.
19
The judgment of the District Court is reversed, and the cause is
remanded for further proceedings not inconsistent with this opinion.
Any direction on where to find this information would really be of immediate benefit.
1. I need a quick detailed brain wash on the “strict” requirements of the foreclosure process in California.
Meaning, every single step in the process from the ordering of the foreclosure, each persons role in the process in the sequence requirement, the step-by-step process of the title company and all the personnel involved and their statutory legal actions (i.e., order warranty, record the something, notify the stakeholders… (who are the stake holders).
I don’t have the time to read all the laws and the laws don’t necessarily define every single step by each of the parties involved, every signature and it’s corresponding date requirement, and the coordination of parties, etc………..
2. Can you also point me to a quick and comprehensive reading to understand the lien priorities and how they work in a foreclosure.
Thank you so much.
Wamu sent me a assignment with a out of state notary with an in state (calif) signature. Is this wrong?
I’ve listed the multiple entities involved in my foreclosure. I was not notified of these parties.
- Wamu serviced my home loan for 10 years
- Wamu hired Quality Loan Services to handle my foreclosure.
- Wamu hired Fidelity Title for the title workup/foreclosure tasks (?).
- JPMorgan Chase sent me a letter, extending an offer to help me and a notice of the merge of Chase/Wamu.
- Fidelity Title hired First American Title to do the title work.
- The foreclosure auctioner is the owner of a Real Estate Publication of Deeds Company. (she is not an employee of First American or Fidelity or the bank)
Who signs the Trustee’s Deed?
Is each entity required to have a notorized signature on a form disclosing their responsibility?
I look urgently forward to clarity. Thank you.
Sir: what is the citation for this case?
When an attorney tells a plaintiff: “I will take your case…” he is thinking in his head: “I will take your case-full of money and keep you stuck like an addict who thinks I am his only way to …”
When an attorney tells a defendant the same he is thinking: “You can’t imagine how I can lie to a court to get you out of this trouble. I can buy the judge, fool the jury, by any witness to perjury declarations, it all depends on how much you can pay me in advance, and NON-REFUNDABLE even if you’re off the hook tomorrow for no reason at all…”
Neil
Thank You
Till this day I have not located an attorney that is well prepared to take my case. I have email many asking them if they are familiar or deal with TILA and have not received a response. I don’t know if my asking is to direct and offensive. But I would hate to walk into an Attorneys office sign a check or contract for that matter and watch them sit back. I know that attorneys are suppose to work in representing you but now a days it’s hard to know who to trust. I feel butter taking in your feedback being that you are providing my self and others a service yet you are not asking me for money upfront.
In all my questions or posting I take from your response a bit here and there. With that knowing it comes handy in trying to build a case for myself. If by Wednesday I have not received a response from any of the attorneys I have tried making contact with I may have to file quiet title lawsuit my sell and put Pro Se to the test. I know that giving me direct advice may or may not cause a direct problem as you are retired. But I have to say thank you for your work and the interpretation to the posting listed above. Although I have to search you blog in the many pages that exist I have been able to find some answers.
Thank You Again,
Bob
I have been asking the local lawyers about this issue for some time. In the 15 years I worked as a Principal Real Estate Broker, I never saw a single settlement where there was a Notary present, most documents were and I witnessed this, notarized after the fact. The seller,purchaser and agents never saw the notary witness the act of signing.
The same is happening now with all the power of attorneys being shipped all over the country and all the lost note, and note ownership affidavits. They are allegedly signed in one state and then notarized 2,000 miles away.
This details are relevant. We have case in which the secretary of th foreclosure attorneys signed as the vice president of MERS, and the document was notarized 500 miles away.
Thanks for this info.