Full Faith And Credit: Indiana Foreclosure’s Die Was Cast By Kentucky Judgment
Replevin Damages: Deterioration and Loss of Use

Defective Notary Does Not Mean Defective Mortgage

Lesson.  Technical errors in a mortgage instrument will not necessarily invalidate it.  In particular, Indiana mortgages, which almost always are notarized, are not unenforceable simply because the notarization is flawed.

Case cite.  Borgwald v. Old National Bank, 12 N.E.3d 252 (Ind. Ct. App. 2014).

Legal issue.  Whether the lender’s mortgage was invalidated by an alleged violation of an Indiana statute prohibiting a notary from taking an acknowledgement from someone who is blind without first reading the instrument to her. 

Vital facts.  The borrower in this foreclosure case was an elderly woman who, at the time of closing, had difficulties with sight and hearing.  The borrower’s granddaughter was her caretaker, and the granddaughter took the borrower to a bank to apply for a home equity line of credit, the purpose of which, in part, was to pay the granddaughter for the care.  The borrower subsequently passed away, and the line of credit had a sizable balance that the lender pursued against the borrower’s estate.  In defense of the debt, the estate claimed, among other things, theft and undue influence on the part of the granddaughter.  As to the mortgage, the lender’s customer service representative testified that she explained the mortgage to the borrower but did not read it in its entirety to her.  But the bank’s customer service representative, who closed the loan, was not the notary for the mortgage, and the notary did not testify.

Procedural history.  Borgwald was an appeal from a bench trial in which the trial court found that the mortgage was enforceable. 

Key rules.  Indiana Code § 33-42-2-2(a)(4) states, among other things, that a notary public may not “take the acknowledgement of any person who is blind, without first reading the instrument to the blind person.”  On the other hand, in Indiana, “a mortgage need not be notarized in order to be enforceable.”  See, I.C. § 32-29-1-5

Holding.  The Indiana Court of Appeals affirmed the trial court and concluded that the lender’s mortgage was not invalidated by the defective notary. 

Policy/rationale.  The Court reasoned that the problems with the notary only invalidated the notary’s signature, not the mortgage:  “[e]ven assuming that the mortgage was not read to [the borrower] and that [the borrower] could be characterized as being blind . . . the validity of the mortgage would not be affected, only the notary’s signature.”  Very generally, the purpose of a notarization is to create a presumption that a signature on a legal document is authentic.  In Borgwald, there was no question that the borrower executed the mortgage. 

Related posts.