It is not uncommon for an attorney to be confronted with a signatory to a crucial instrument that is fully competent, yet is infirm, feeble and unable to fashion any sort of signature other than an illegible scrawl. A common practice in these instances is to direct the signatory to draw an "X," (making their mark). This often leads to the question of whether there is any particular form of notary acknowledgement required for this situation, or whether the general acknowledgement will suffice to result in a valid conveyance.

Over the years we have observed a great deal of uncertainty over this issue and feel that a pragmatic response may be helpful. Practitioners are well familiar with the elements of the following discourse, but they seldom get assembled in a logical and useful sequence. We hope that this discussion may prove useful as a practical guide.

Historically, the widespread use of the seal in the execution of instruments developed in the earliest years of property conveyancing as a substitute for a signature resulting from the fact that many propertied persons were largely illiterate. As the ownership of property extended beyond the aristocracy to the masses, the cross was commonly used as a signature substitute for individuals who had no identifying heraldic device to use for a seal. This use of the cross ultimately degenerated into the, now familiar, X.

Prior to the development and appointment of official notaries public, it was the practice for someone to attest to the witnessing of the execution of an instrument. It eventually became a requirement for two persons to witness the execution of an instrument in order to attest to the identity of the signatory because it often proved difficult or impossible to locate a solitary witness in order to authenticate a questioned document. As in the case of many legal practices, this one became a substantive requirement for validity that lasted as a tradition long past its actual need.

If an instrument requires registration, NCGS 47-12 (originally codified in 1899) provides statutory authorization permitting proof of signature by the oath of one or more witnesses present at the time of execution. NCGS 47-43.2 contains the form of acknowledgement for such proof of signature. This form of proof and acknowledgement has traditionally been used in North Carolina in conjunction with the execution of a conveyance by mark.

Note that this is merely the form to be used when relying solely on a witness for proof of execution. Technically, it is more correct to use the general form of acknowledgment of the maker’s execution of the instrument.

We have long had at least one provision in the General statutes that addresses the issue of what constitutes a 'signature' in the commercial context. N.C. Gen. Stat. § 25-3-401(2) provides that a "signature may be made (i) manually or by means of a device or machine, and (ii) by the use of any name, including a trade or assumed name, or by a word, mark, or symbol executed or adopted by a person with present intention to authenticate a writing." This authorization has been expanded in recent years by other statutes authorizing electronic signatures.

The following summary of the law is quoted from Barrett v. City of Fayetteville, 248 N.C. 436, (1958).

"In 80 CJS., Signatures, section 6, page 1291, et seq., it is said: 'Generally, a signature may be made for a person by the hand of another, acting in the presence of such person, and at his direction, or request, or with his acquiescence, unless a statute provides otherwise. A signature so made becomes the signature of the person for whom it is made, and it has the same validity as though written by him.'"

"In this jurisdiction it is permissible for one to sign his name by himself 'or sign by the adoption of his name as written by another, or he may make his mark, even though he may not be able to write himself.' Lee v. Parker, 171 N.C. 144, 88 S.E. 217. But the signature, if written by another, must be made at the request or with the consent of the person whose signature it purports to be. Lee v. Parker, supra."

"Likewise, in S. v. Abernathy, 190 N.C. 768, 130 S.E. 619, Stacy, C. J., speaking for the Court, said: 'Not only may the signature be anywhere, unless otherwise provided by statute, but it is also permissible in the absence of an enactment controlling the matter, for the maker either to sign the instrument by affixing his own signature, or to adopt a signature written for him by another.' See also Devereux v. McMahon, 108 N.C. 134, 12 S.E. 902, 12 LRA 205."

A more recent case in the Court of Appeals addressing the efficacy of using a mark for a signature is; Brickhouse v. Brickhouse, 110 N.C. App. 560, (1993) Mechanical reproduction has been recognized as being effective as a signature for almost thirty years, State of North Carolina v. Watts, 289 N.C. 445, (1976).

Clearly, under well-established North Carolina law, anything intended to be a signature constitutes one. Most of the questions that come up in this context seem to focus on the validity of marks and scrawls. On further examination, the ultimate question is really one of authenticity. NCGS 47- 13.1 provides that the "person taking proof of an instrument pursuant to G.S. 47-12, 47-12.1 or 47-13 shall execute a certificate on or attached to the instrument being proved, certifying to the fact of proof substantially as provided in the certificate forms set out in G.S. 47-43.2, 47-43.3 and 47-43.4, and such certificate shall be prima facie evidence of the facts therein certified." With a proper acknowledgement, you have a prima facie authentication and a purchaser for value, without actual notice of a lack of authority, takes good title.

It is still a requirement for the execution of non-holographic Wills that two witnesses attest. One reason for this is to address questions of competency. In Richardson Memorial Hosp v. Townsend, 72 N.C. App. 499, (1985) the court ruled that competence was properly questioned by use of mark in lieu of signature for a literate person. For this reason, many practitioners consider the attestation by two witnesses to be prudent in the execution of conveyances as well. While prudent, this is certainly no longer a requirement for a valid conveyance. In fact an instrument may be proven solely by proof of the handwriting of the maker under NCGS 47-13.

We believe that the practical and prudent practice (when feasible) is to NOT have literate, but infirm, persons use a mark or X. Rather, they should sign as best they are able, or have someone assist and have the Notary take the acknowledgement accordingly. If they are competent, but physically unable to make any mark, they should request someone to sign for them and take the acknowledgement accordingly. If possible, it is generally considered prudent to have a witness, or witnesses attest and take the acknowledgement additionally as discussed above in order to provide evidence on the issue of competence should that come into question.

From a title insurer’s perspective, the issue of survey coverage is a double-edged sword. These days, most owners decline to pay for a survey when buying property but lenders insist on a policy that includes survey coverage. On one side of the sword is the fact that many claims are denied based on a survey exception after the owners/buyers declined to pay for a survey, and it is distressing to see so many owners without adequate protection under their policies. From that perspective, we try to encourage attorneys to encourage buyers to pay for a survey. Surveys give owners a more thorough understanding of the land they’re buying, and us a more thorough understanding of what we’re insuring. On the other side is the fact that over the years, title insurers have paid many claims because we have relied unwittingly on inaccurate surveys. In some instances, it costs a title insurer more money to defend a claim based on a faulty survey than it would cost if the survey had never existed.

In most cases, a compromise solution is offered that keeps lenders happy and provides some underwriting safety for title insurers: in the vast majority of lender policies, survey coverage is provided to automatically, regardless of whether a survey exists, on loans of up to five million dollars. (Other conditions apply; see below) Owners do not get the benefit of this compromise. There is less risk of loss on a lender’s policy than there is in an owner’s policy, so more coverage can be afforded lenders without causing an increase in claims or premiums. For the most part, title insurers pay claims on lenders policies only when lenders encounter enforceability problems at foreclosure proceedings. No matter what the title defect may be, as long as the homeowner continues to make timely mortgage payments, the lender suffers no loss. Owners, on the other hand, bear the brunt of title defects and suffer losses far more often. Consequently, the risks of giving survey coverage on a lender’s policy are not as high as they are for the owner’s policy insuring the same property.

Survey coverage, at its most basic level, means that the insurer agrees to pay for loss or damage resulting from matters as shown on the most recent survey. If a policy does not expressly except to matters of survey, the insured lender is entitled to file a claim upon suffering a loss over any matter a survey would have revealed. The standard survey exception means that the company will not be responsible for paying any claims arising from any matters that a current survey would have revealed. A survey can reveal something as crucial as whether the legal description in the contract and deed matches what the buyer thinks she is buying. Surveys can prevent accidental mistakes, as well as the more serious issue of seller fraud.

Surveys also are extremely helpful for revealing things like a neighbor’s garage encroaching onto the property being purchased, the location and width of utility easements, whether any structures violate setbacks, etc. For this reason, it is extremely important that we give survey coverage only when we have an accurate, up-to-date survey, signed and sealed by a professional land surveyor. On occasion, a plat or map will contain sufficient information to allow us to substitute the plat for a survey and give survey coverage. In most instances, however, plats do not provide sufficient detail for us to know what risks we would be taking in giving survey coverage.

The general conditions that must be met in order for us to give survey coverage for are as follows:

1. Surveys must be no more than six months old. If a survey is more than six months old, we will give survey coverage with an additional provision that there is no survey coverage for matters subsequent to the date of the survey. If there has been recent construction, a survey prior to the commencement of construction will not be considered current even if it is less than six months old.

2. There must be no new construction on the property to be insured. In the event of a construction loan, a lender will have survey coverage if the construction has not yet begun.

3. The survey must be a full and accurate survey. If the survey presented is a foundation survey or boundary survey, survey coverage will be limited to only those matters as are shown on that type of survey. A complete survey will show the metes and bounds of the land, total area, improvements, encroachments, easements, fences, set-back lines, bodies of water, rights-of-way, areas in dispute, joint driveways, and the like.

4. For loan policies to automatically qualify for survey coverage, the deed of trust to be insured must be less than $5,000,000. Any policies insuring deeds of trust for more will contain a survey exception.

5. A lender’s policy insuring a deed of trust on a parcel that contains more than 25 acres will not automatically qualify for survey coverage, but will be reviewed on a case-by-case basis.

We at Statewide encourage you to call us any time you have questions about survey coverage, survey exceptions, or any other matter relating to surveys. Our senior underwriting staff and legal counsel will be more than happy to help you.

The Department of Housing and Urban Development (HUD) recently published an updated interim rule on real estate transactions known as "flipping." The existing rule that prohibits flipping was issued in May 2003, but questions and concerns about its stringency have prompted HUD to propose an update.

Flipping is defined by HUD as a "predatory lending practice whereby a property that was acquired is quickly resold for a considerable profit with an artificially inflated value, often abetted by a mortgagee’s collusion with the property appraiser and others involved in the mortgage loan transaction." The final rule from 2003 makes properties that have been resold in less than 90 days ineligible for FHA-financed mortgages. Properties flipped between 91 and 180 days may qualify for FHA financing but are subject to documentation requirements to validate the increase in property value. The existing rule exempts properties acquired and sold by HUD through its REO activities; properties within single-family HUD-identified revitalization zones; and properties acquired by employers or relocation agencies in connection with employee relocations.

The interim rule, which is open for public comment until February 22, 2005, also exempts from the rule any property acquired by any Federal agency in the ordinary course of its business. Agencies specified by name as qualifying agencies (but not meant to limit the qualifying agencies) are the Rural Housing Service (part of the Department of Agriculture), Veterans Affairs, and the Federal Deposit Insurance Corporation. Statewide Title has received inquiries into whether properties acquired through foreclosure proceedings by entities such as Fannie Mae would qualify for this exemption, and our reading of the rule leads us to believe that Fannie Mae would be a qualifying federal agency.

The interim rule also exempts properties acquired through inheritance, making it clear that persons who acquire property in this manner and then sell it are not "flipping" it, no matter how quickly they sell.

Finally, the interim rule discusses questions raised about bank foreclosures, as well as incentive programs in which builders buy an existing home from an individual who buys a new home from the builder. HUD considers these situations to be transactions in which there is a higher risk of artificially inflated appraisals and predatory lending, so HUD specifically excluded those situations as possible exemptions to the rule.

The text of the interim rule can be found in 24 CFR Part 203, or by visiting the ALTA website at www.alta.org and looking under "Government News," or by going to the following link: http://www.alta.org/govt/issues/04/69fr77114.pdf