Am I a Notary or a POLICEMAN?
Recently a Notary colleague has been asked to witness and certify the execution of a form of assignment of an American property. The owner of it (call him Mr A) has a Bank mortgage he cannot repay and in order to avoid the expense of a court application for repossession, the Assignment back to the Bank was being given for a notional 1 Dollar.
As normal the Notary inspected his identification documents to make sure that the person in his presence was the person named on the title deeds as the owner, then the Assignment was signed and witnessed.
So far so normal, and unremarkable.
The next thing to happen was that the Notary received a letter from the Receiver or Trustee in Bankruptcy of the Estate of Mr A, asking for details of all transactions in which he had assisted Mr A. The letter told the Notary, who had known nothing about it, that Mr A had been a Bankrupt person at the time of the American notarisation.
So, this meant that Mr A had had no right to deal with the Property in America. And therefore the Notarised Assignment was a void document. And therefore, the American Bank is not in fact the owner of it now after all.
Obviously Mr A has been a naughty boy. The concern of the Notary however was as to his own position. If he had made a search of the registers of Bankrupts, he would have seen that Mr A could not validly execute the Deed.
In this case I suspect there will be no issues. The Receiver will hardly have any interest in notifying the US Bank and setting aside the void Assignment. The effect of that would be make it clear that the USA Property is still owned by the Bankrupt Estate, but since it is in negative equity to the Bank there is no point in doing so. (It may be that the illegal document has actually saved a lot of fuss and expense!)
But is there a lesson to be learned? What if there had been no mortgage, and Mr A instead, knowing that he is Bankrupt, had been signing a sale deed for full value at the Notary’s office. That is, in effect, stealing perhaps hundreds of thousands of dollars from the creditors in his Bankruptcy. We have learned that a Notary could stop this theft, by making a Bankruptcy search.
Does that mean that in future when I see you to assist with the sale of your foreign Property I have to charge you extra for taking the time and expense to make certain that you are not Bankrupt?
This is an issue that the Notaries Society is going to think about:- but my own view that I should not do this. A Notary is there to document – to “place on record” – what has happened (i.e. that Mr A has signed a deed) and is not there to be a policeman.
Some may contrast this view with the fact that if a client calls to see me saying he is Company Director and that the Company is to execute a Deed by his signature then I do as a matter of course make a search of Companies House to check this. My opinion is that there is no contradiction and the Companies House Search is a necessary identity check. As I have said before – Other opinions are available!