The Statewide Title Newsletter and Legal Memorandum

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Issue  12  Article  21
Published:  7/1/1996

Corporate Conveyances Execution and Acknowledgement
Chris Burti, Vice President and Legal Counsel

Corporate conveyances in the chain of title of a parcel of land can present complex issues for the title examiner. The purpose of this article is to discuss the requirements for proper execution and acknowledgment of corporate conveyances. The case decisions on this subject impose stricter requirements than in the usual case of principal and agent.

A corporate seal must be affixed to the instrument in order for the entity to effectively convey any interest in real estate. N.C.G.S. 47-71.1 validates any corporate conveyance made prior to January 1, 1991 which is defective because of the omission of the seal but is otherwise valid. N.C.G.S. 47-18.3(b) creates a rebuttable presumption that any recorded corporate conveyance bearing a seal purporting to be a corporate seal setting forth the corporate name " engraved, lithographed, printed, stamped, impressed upon, or otherwise affixed " to the instrument has been executed under lawful authority of the Board of Directors by the proper officers or agents of the corporation. This provision has been strictly construed and an instrument bearing a hand lettered seal has been held not to be entitled to the presumption, Catawba County Horsemen’s Ass’n., Inc. v. Deal, 107 N. C. App. 213, 419 S. E. 2d 185 (1992). It should be noted that this case doesn’t invalidate a hand lettered seal but merely removes the benefit of the statutory presumption. In situations where a small corporation desires to execute a conveyance, the directors and officers are available, the seal is not and time is of the essence a corporate resolution adopting a hand lettered seal as the common seal of the corporation, certifying the corporate officers and authorizing the transaction could be annexed to the instrument and recorded with it.

Additional statutory help for the title examiner is provided by N.C.G.S. 47-18.3(a) effective July 1, 1990, which provides as follows:

Notwithstanding anything to the contrary in the bylaws or articles of incorporation, when it appears on the face of an instrument registered in the office of the register of deeds that the instrument was signed in the ordinary course of business on behalf of a domestic or foreign corporation by its chairman, president, or chief financial officer, and attested or countersigned by another person who is its secretary or an assistant secretary, (or, in the case of a bank, its secretary, assistant secretary, cashier, or assistant cashier ), such an instrument shall be as valid with respect to the rights of innocent third parties as if executed pursuant to authorization from the board of directors, unless the instrument reveals on its face a potential breach of fiduciary obligation. The subsection shall not apply to parties who had actual knowledge of a lack of authority or of a breach of fiduciary obligation.

If the instrument does not appear on its face to breach fiduciary obligation, lack authority or be out of the ordinary course of business of the corporation and the relying party ( i.e. the typical title examiner ) does not have actual knowledge to the contrary, if it contains a seal as defined in N.C.G.S. 47-18-3(b) and is executed by the officers designated in N.C.G.S. 47-18-3(a) and further is acknowledged as provided in N.C.G.S 47-41.01(b), it has the most protection afforded by the statutes and a title examiner should be entitled to rely on the validity of the instrument. It should be noted that N.C.G.S. 55-12-02 is a provision of the N.C. Business Corporation Act that requires proposal of certain transactions by the corporations board of directors with approval of the shareholders. It is unclear whether G.S. 47-18-3(a) covers a transaction governed by G.S. 55-12-02. In addition Catawba County Horsemen’s Assn., Inc., cited above, restates the general law that a deed to a corporate officer raises a presumption against the validity of the deed.

If the statutory form of acknowledgment provided in Sec. 47-41.01(b) is used on a corporate conveyance it contains a certification by a State official, duly authorized to take oaths, (notary public) that the parties executing the instrument have, under oath, declared that they are the proper parties and have been properly authorized to so execute the conveyance. While this is in effect a self serving affidavit a title examiner ought to be able to rely on it none the less.

G.S. 47-41.01 contains a proviso that in essence permits any other form of acknowledgment that includes all of the essential elements necessary to warrant the recording official to accept the instrument for recording. We have not directly discussed the issues of authority and corporate standing due to space limitations but we intend to treat these issues more fully in a future article. However, these issues aside, a corporate conveyance in the chain of title which has been executed in substantial compliance with the requirements discussed above can be relied upon by the title examiner unless there is other actual or record notice of a problem. Instruments in the current transaction should be scrutinized carefully for compliance and proof of authority should be obtained.

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