Thursday, June 11, 2009

To Acknowledge or Not to Acknowledge

I received a settlement demand today from an attorney who argued that the disputed lease was unenforceable because it was not acknowledged pursuant to RCW 64.04.020. This statute provides that “[e]very deed shall be in writing, signed by the party bound thereby, and acknowledged by the party before some person authorized by this act to take acknowledgments of deeds.”

Yet, courts in Washington have generally held that an unacknowledged deed or mortgage is valid between the parties. Skagit State Bank v. Rasmussen, 109 Wn. 2d 377 (1987). It is true that a county recorder is under no duty to record an unacknowledged deed. Eggert v. Ford, 21 Wn. 3d 152, 154 (1944). However, if it is recorded, an unacknowledged deed will impart the same notice to third persons, from the date of recording, as if the instrument has been executed and acknowledged as required by law. RCW 65.080.030.

This makes sense. In conveyances of real property, legal title passes from Seller to Buyer for consideration, i.e., money. There is often a mortgage and old liens are paid off. A lot of moving parts. Suppose a parcel of real estate is sold through financing but somehow the lender's Deed of Trust was not notarized. (See note on acknowledgement). Recording the Deed of Trust gives notice to the world that the property is mortgaged and that, upon default, the proceeds from a foreclosure will be paid in the order that the liens were filed. It would be an injustice to disallow a valid claim because the Deed was not notarized. It has long been established that partial performance takes the parties out of the statute of frauds.

What does that mean? the Washington State Supreme Court has long held that an agreement to convey an estate in real property, though required by RCW 64.04.010 and 64.04.020 to be in writing with the formal requisites specified for a deed, may be proved without a writing, given sufficient part performance; and that specific performance will be granted where the acts allegedly constituting the part performance point unmistakably and exclusively to the existence of the claimed agreement. See, e.g., Mobley v. Harkins, 14 Wn.2d 276, 128 P.2d 289, 143 A.L.R. 88 (1942); Richardson v. Taylor Land & Livestock Co., 25 Wn.2d 518, 171 P.2d 703 (1946); Granquist v. McKean, 29 Wn.2d 440, 187 P.2d 623 (1947); Ormiston v. Boast, 68 Wn.2d 548, 413 P.2d 969 (1966); Ferguson v. McBride, 69 Wn.2d 35, 416 P.2d 464 (1966); Beckendorf v. Beckendorf, 76 Wn.2d 457, 457 P.2d 603 (1969). This, the doctrine of partial performance, exists as a means of removing an oral contract for the lease or sale of real property from the statute of frauds. The doctrine requires at least two of the following elements:

(1) delivery and assumption of actual and exclusive possession;

(2) payment or tender of consideration; and

(3) the making of permanent, substantial and valuable improvements, referable to the contract. Powers v. Hastings, 93 Wn.2d 709, 717, 612 P.2d 371 (1980).

The part performance doctrine also applies to written agreements failing to satisfy the statute of frauds. 2 A. Corbin, Contracts § 420, at 452-53 (1950) ("Being sufficient to enable the plaintiff to prove all the terms of an oral contract, it is necessarily sufficient to allow the use of oral testimony to supplement an existing memorandum that is deficient in some material respect."). Kruse v. Hemp, 121 Wn.2d 715, 724-25, 853 P.2d 1373 (1993).

Thus, even though a lease is technically a conveyance and the Statute of Frauds applies, that the lease was not notarized means nothing. As a common practice, business leases are never recorded. They are not recorded because they do not involve mortgages subject to foreclosures. There are rarely competing security interests. Thus, why record them? Even if they were recorded, case law is clear that a breaching party can not escape liability just because of a simple notary defect. Further, the court can look to the performance of the parties to determine whether a conveyance or a contract existed, in this case a lease.

I guess opposing counsel thought I just fell off a turnip truck. Bizarre expression.

Note on acknowledgments:

RCW 64.08.010
Who may take acknowledgments.

Acknowledgments of deeds, mortgages and other instruments in writing, required to be acknowledged may be taken in this state before a justice of the supreme court, or the clerk thereof, or the deputy of such clerk, before a judge of the court of appeals, or the clerk thereof, before a judge of the superior court, or qualified court commissioner thereof, or the clerk thereof, or the deputy of such clerk, or a county auditor, or the deputy of such auditor, or a qualified notary public, or a qualified United States commissioner appointed by any district court of the United States for this state, and all said instruments heretofore executed and acknowledged according to the provisions of this section are hereby declared legal and valid.

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