Nebraska Bankruptcy Court Voids Bank's Liens Because of Disqualified Notary

A somewhat surprising, yet costly ruling was recently issued by the United States Bankruptcy Court for the District of Nebraska.

On March 15, 2010 the Nebraska Bankruptcy Court voided 2 deeds of trust, collectively in the amount of $7,500,000.00.

In this case 2 separate deeds of trust, one for $7,745,000.00, later reduced by modification to $6,000,000.00 and a second for $1,000,000.00 were signed by two separate individuals as members of Borrower, a Nebraska limited liability company. Each deed of trust and the modification were notarized by an individual who was the brother-in-law of one of the members.

The Bankruptcy Court found, that as brother-in-law, the notary was disqualified from notarizing the signature of the member who was related to the notary. The Court cited Neb. Rev. State. Section 64-105.01 which provides that “a notary public is disqualified from performing a notarial act as authorized by Charter 64, articles 1 and 2, if the notary is a spouse, ancestor, descendant, or sibling of the principal, including in-law, step, or half relatives.

It is not known whether this case has been or will be appealed, but a valuable lesson was learned the hard way and a reminder that you always need to be wary of ever notarizing a relatives signature. The results, as in this case could be significant.