Galloway v. Cinello

Decision Date23 October 1992
Docket NumberNo. 21226,21226
Citation423 S.E.2d 875,188 W.Va. 266
CourtWest Virginia Supreme Court
PartiesWilliam E. GALLOWAY, Plaintiff, v. Rose Ann CINELLO, Defendant.

Syllabus by the Court

1. W.Va.Code, 29C-3-102 (1985), states that a notary with a disqualifying interest may not legally perform any notarial act in connection with the transaction. It does not address the validity of a document acknowledged before a notary with a disqualifying interest.

2. A notary's disqualifying interest can result in voiding an instrument that has been notarized by him. In deciding whether to void the instrument, a court should consider whether an improper benefit was obtained by the notary or any party to the instrument, as well as whether any harm flowed from the transaction. To the extent that Tavenner v. Barrett, 21 W.Va. 656 (1883), and related cases state or imply the contrary, they are overruled.

3. Once it is shown that a notary has a disqualifying interest in an instrument which he acknowledged, and a suggestion of actual prejudice, unfair dealing, or undue advantage is raised by an adverse party, then the burden shifts to the notary or any party seeking to support the challenged document to demonstrate that no improper benefit was obtained and no harm occurred as a result of the disqualified act.

4. W.Va.Code, 29C-6-101 (1985), states that a notary public is liable to the persons involved for all damages proximately caused by the notary's official misconduct.

5. W.Va.Code, 29C-6-201, provides that the term "official misconduct" means the wrongful exercise of a power or the wrongful performance of a duty. The term "wrongful" as used in the definition of official misconduct means unauthorized, unlawful, abusive, negligent, reckless, or injurious.

William E. Galloway, pro se.

Rose Ann Cinello, pro se.

MILLER, Justice:

This case comes before us through a certified question from the Circuit Court of Brooke County pursuant to W.Va.Code, 58-5-2 (1967), 1 and Rule 13 of the West Virginia Rules of Appellate Procedure. 2 We are asked to decide whether an attorney may be held liable to the beneficiary of a deed of trust where the attorney acted as the notary and as the trustee of the deed of trust. In the case at bar, this dual role resulted in the underlying debt losing its secured status in bankruptcy court. 3

I.

The petitioner, William Galloway, is an attorney at law. On January 3, 1990, Clarence and Heddy Rochinich, husband and wife, and the respondent, Rose Ann Cinello, hired Mr. Galloway to prepare a deed, a promissory note, and a deed of trust in order to consummate the sale of real property. Ms. Cinello wanted to sell the Rochinichs a residence in Weirton for $22,000. The Rochinichs made a downpayment of $1,500, and the balance, which was owner-financed by Ms. Cinello, was to be repaid in installments pursuant to a promissory note. The promissory note was secured by a deed of trust on the real property. The deed of trust was a first lien on the property, and Ms. Cinello was, therefore, a secured creditor.

The deed, promissory note, and deed of trust were signed on April 25, 1990. In the deed of trust, Mr. Galloway was named as the trustee and Ms. Cinello as the beneficiary. Mr. Galloway notarized both the deed and the deed of trust. On May 7, 1990, the deed and deed of trust were recorded in the office of the Clerk of the County Commission of Brooke County.

On December 3, 1990, the Rochinichs filed a Chapter Seven bankruptcy petition in the United States Bankruptcy Court for the Northern District of West Virginia. The assets listed in the Rochinichs' bankruptcy petition included the property they had purchased from Ms. Cinello. The Rochinichs also listed Ms. Cinello as a secured creditor to whom they owed approximately $19,000.

On April 15, 1991, the bankruptcy trustee filed a complaint in the bankruptcy court 4 alleging that Ms. Cinello did not have a perfected lien on the real estate because Mr. Galloway, as the trustee in the deed of trust, had also acknowledged the signatures of the Rochinichs. 5 The Rochinichs filed an answer to the complaint admitting the authenticity of the deed of trust and asserting that they wanted to reaffirm the debt.

By order entered November 14, 1991, the bankruptcy court ruled that Ms. Cinello had no security interest in the property. The principal legal authority relied upon by the bankruptcy court was Tavenner v. Barrett, 21 W.Va. 656 (1883), where we invalidated a deed of trust because its trustee had also notarized the instrument. Ms. Cinello appealed this decision to the United States District Court. Mr. Galloway then filed a petition for declaratory judgment in the Circuit Court of Brooke County. In addition, Mr. Galloway and Ms. Cinello filed a joint motion requesting the circuit court to certify the question to this Court. The circuit court granted the motion.

II.

An acknowledgment is a formal declaration before an authorized public official, i.e., a notary public, by a person who has executed an instrument that the instrument is his free act or deed. 6 See generally 1A C.J.S. Acknowledgments § 2 (1985); 1 Am.Jur.2d Acknowledgments § 1 (1962 & Supp.1992). An acknowledgment has three functions: to authenticate the instrument; to permit the instrument to be introduced into evidence without proof of execution; and to entitle the instrument to be recorded. See generally 1 Am.Jur.2d Acknowledgments at § 4. An acknowledgment is a prerequisite to recording an instrument in this State. See W.Va.Code, 39-1-2 (1933). 7

As earlier noted, the bankruptcy court relied on Tavenner v. Barrett, supra, where we held that the acknowledgment of the deed of trust by the trustee made the deed of trust invalid. In Tavenner, we followed the rationale advanced by other courts that an acknowledgment is a quasi-judicial act, and, as a consequence, " '[t]he objection to the trustee taking such acknowledgment is analogous to the one forbidding a judge to pass upon his own case. Though this act may not be strictly judicial, it is of a judicial nature and requires disinterested fidelity.' " 21 W.Va. at 688, quoting Stevens v. Hampton, 46 Mo. 404, 407 (1870). 8

Several cases follow Tavenner, but provide no analysis of its rule. For example, in Central Trust Co. v. Cook, 111 W.Va. 637, 163 S.E. 60 (1932), which involved another acknowledgment of a deed of trust by the trustee-notary, we merely cited Tavenner and concluded in Syllabus Point 2: "An acknowledgment of a trust deed by the grantors before the trustee as a notary public is invalid."

Similarly, in Dixon v. Hesper Coal & Coke Co., 100 W.Va. 422, 130 S.E. 663 (1925), a mortgage company had its deed of trust declared invalid because the trustee acknowledged the instrument. Again, there was only a brief reference to Tavenner.

In some jurisdictions, courts have focused on the notary's interest and have held that if the notary has a financial or beneficial interest in the transaction other than receipt of the ordinary notarial fee, the instrument is invalid. See Loucks v. Carl Foster & Wards Used Cars, 334 F.2d 86 (6th Cir.1964); Southern Iron & Equip. Co. v. Voyles, 138 Ga. 258, 75 S.E. 248 (1912); Logue v. Von Almen, 379 Ill. 208, 40 N.E.2d 73 (1941); Bartlett v. Bolte, 193 Iowa 1063, 188 N.W. 814 (1922); Pearl v. Interstate Secs. Co., 357 Mo. 160, 206 S.W.2d 975 (1947); Musselshell Valley Farming & Livestock Co. v. Cooley, 86 Mont. 276, 283 P. 213 (1929); Loyal's Auto Exch., Inc. v. Munch, 153 Neb. 628, 45 N.W.2d 913 (1951); Armstrong v. Jonas, 204 N.C. 153, 167 S.E. 562 (1933); Phillips v. Brazosport Sav. & Loan Ass'n, 366 S.W.2d 929 (Tex.1963), appeal dismissed, 375 U.S. 438, 84 S.Ct. 506, 11 L.Ed.2d 471 (1964); First Nat'l Bank v. Citizens' State Bank, 11 Wyo. 32, 70 P. 726 (1902). See generally 1 Am.Jur.2d Acknowledgments § 16; 1A C.J.S. Acknowledgments § 40.

The analysis in these cases is somewhat different than in Tavenner, but the same result is generally achieved, i.e., voiding the instrument. Typical of the reasoning of this approach is the principle articulated in Loucks v. Carl Foster & Wards Used Cars, 334 F.2d at 88, where the court quoted from 1 Am.Jur.2d Acknowledgments § 16 at 458:

" '[A]n officer or a person otherwise legally authorized to take acknowledgments is not qualified to act where he has a financial or beneficial interest in the proceedings or will acquire such an interest under the instrument to be acknowledged.

"Frequently it is said that this rule rests upon grounds of public policy, the purpose being to close the door to temptation to fraud.' " (Emphasis added in Loucks ).

The rule regarding the disqualifying interest of a notary is presently contained in our Uniform Notary Act, which the legislature adopted in 1984. 9 See generally W.Va.Code, 29C-1-101, et seq. The particular language regarding disqualification is contained in W.Va.Code, 29C-3-102 (1985):

"(a) A notary public who has a disqualifying interest, as hereinafter defined, in a transaction may not legally perform any notarial act in connection with the transaction.

"(b) For the purposes of this chapter, a notary public has a disqualifying interest in a transaction in connection with which notarial services are requested if he:

"(1) May receive directly, and as a proximate result of the notarization, any advantage, right, title, interest, cash or property, exceeding in value the sum of any fee properly received in accordance with section three hundred one [§ 29C-4-301], article four of this chapter, or exceeding his regular compensation and benefits as an employee whose duties include performing notarial acts for and in behalf of his employer; or

"(2) Is named, individually, as a party to the transaction."

While this section states that a notary with a disqualifying interest "may not legally perform any notarial act in connection with the transaction," it does not address the validity of...

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  • Aikens v. Debow
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    • November 6, 2000
    ...mother of the testamentary consequences of a planned remarriage, reducing beneficiary's share of estate). 14. See Galloway v. Cinello, 188 W.Va. 266, 423 S.E.2d 875 (1992) (based upon West Virginia Code § 29C-6-101(1999), a notary public is liable to persons involved for all damages proxima......
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    • October 6, 2011
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    • March 6, 2008
    ...that twelve cases were pending involving improperly acknowledged deeds of trust. Id. 35. Id. at 928 (quoting Galloway v. Cinello, 188 W.Va. 266, 423 S.E.2d 875, 876 (1992)). 36. Id. 37. Id. 38. Since we cannot determine where the power of attorney was recorded, if at all, we decline to addr......
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1 books & journal articles
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    • United States
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