No. 8 7 - 8 0
IN THE SUPREME COURT OF THE STATE OF MONTANA
1987
JOAN McWILLIAMS,
Plaintiff and Respondent,
-vs-
JEAN CLEM, CLEM'S WORD PROCESSING
CENTER, CLEM'S PLACEMENT SERVICE,
DEE ANN LANGEL and STAN TENMEY,
Defendants and Appellants,
-vs-
GEORGE McWILLIAMS,
Third Party Defendant.
APPEAL FROM: District Court of the Eighteenth Judicial District,
In and for the County of Gallatin,
The Honorable Thomas A. Olson, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
Wellcome, Frost & Bartlett; Albert Frost, Bozeman,
Montana
Corette, Smith, Pohlman & Allen; Lisa Swan, Butte,
Montana
Eula Compton, Bozeman, Montana
For Respondent :
Heberling Law Firm; Allan McGarvey, Kalispell,
Montana
Karl Knuchel, Livingston, Montana
Submitted on Briefs: June 4, 1 9 8 7
Decided: September 10, 1987
Filed:SEP I 0 1987
Clerk
Mr. Justice John C. Sheehy delivered the Opinion of the
Court.
We have here a case where a notary public, at the behest
of a husband, took the acknowledgment of a deed transferring
real property without the notary knowing or having
satisfactory evidence that the wife, whose name appeared on
the deed as a signator-grantor, was the individual described
in and who executed the deed. The wife was not present
before the notary public at the time of the acknowledgment,
nor was contact made with the wife by the notary public.
Nevertheless, the notary public signed the certificate of
acknowledgment contained in the deed instrument as if the
wife had personally appeared before the notary public and
made the acknowledgment. We determine principally that the
notary public was negligent in the performance of official
duty, and is liable for such damages as are proximately
caused by such negligence.
This appeal comes to us from the District Court,
Eighteenth Judicial District, Gallatin County, Montana.
Judgment was entered by the court, sitting without a jury, in
favor of the wife, Joan McWilliams, holding that the deed was
void as to Joan; that Joan should recover $19,950 from the
notary public for loss of use, and $17,000 in attorney fees;
and that Dee Ann Langel, the grantee in the deed, was jointly
and severally liable with the notary public for Joan's loss
of use in the sum of $19,950. Jean Clem, Clem's Word
Processing Center, Clem's Placement Service, Dee Ann Langel
and Stan Tenney, all appeal from the judgment, some from
different facets of the judgment, which will be explained as
we go along.
In the issues presented on appeal, no attack is made by
the appellants on the findings of fact of the District Court.
We utilize those findings therefore as background for this
case.
George and Joan McWilliams were married in 1955. Eight
children were born to their marriage. They constructed a
residence in 1975 large enough to accommodate their family on
the real property here involved. The residence was subject
to a trust indenture in the principal amount of $70,000, for
a loan in 1976 by Home Federal Savings and Loan Association.
During the course of their marriage, George McWilliams
handled all of the business transactions of the family, and
Joan relied on him for all business decisions. Joan is not
knowledgeable in the ways of business or law. She denied
ever knowingly signing blank documents and claimed that she
tried to understand what she was signing. She admitted
sometimes that her husband pressured her to sign documents
without explanation. She never knew the extent of her
husband's business or personal dealings.
In 1980, the McWilliams' subdivided their real property
into building lots called Tracts A and B with the residence
located on Tract A.
Joan McWilliams left the residence in June, 1980. At
the time, the property was in good condition and had a rental
value of $700 to $800 per month and a fair market value of
$165,000. Tract B was valued at $30,000. Joan McWilliams
knew the property had been listed for sale, and from her
husband's statements, she believed that the property was
rented.
In 1981, Joan McWilliams moved to Ft. Collins, Colorado.
The parties separated in June, 1981, and thereafter, the
contacts were very limited because there had been a violent
encounter a.t the time of the separation. At times, George
would return without his wife's consent to her apartment and
stay overnight. Their feelings after the date of separation
were not amicable, and there were no business dealings after
the separation date.
From June, 1980, to June, 1981, the residence was
vacated and had fallen into disrepair. Thomas and Dee Ann
Langel moved to the property on June 14, 1981, as a rental
and later purported to purchase the residence. After they
moved in, they did considerable work on the residence in the
form of repair and replacement. By warranty deed dated
August 26, 1981, George McWilliams and Joan McWilliams
purported to sell their interest in both Tracts A and B to
Dee Ann Langel. The court found, however, that the evidence
established that Joan C. McWilliams did not sign the deed,
although her signature on the deed is legitimate. The court
stated, "George McWilliams somehow obtained her signature
prior to that time, and, thereafter, filled in the
information to convey Tracts A and B to Dee Ann Langel. The
deed was then presented to Jean Clem for completion of the
acknowledgment, and notarization of the deed."
The court found that Jean Clem, as a notary public, did
not make the necessary verification that Joan C. McWilliams
had signed the deed, nor did she require that Joan C.
McWilliams appear before her and make the acknowledgment.
When Home Federal Savings and Loan Association found out
about the deed, it declared the unpaid balance on the trust
indenture of $66,012.31 accelerated and demanded payment. On
January 28, 1982, an agreement was made with Home Federal
Savings and Loan Association whereby Thomas and Dee Ann
Langel agreed to assume the loan at an increased interest.
The modification agreement contained a forgery of Joan C.
McWilliamsl signature.
At the time of the acknowledgment, Joan McWilliams was
living in Colorado. In September, 1982, she heard from an
acquaintenance that the house had been sold. She expressed
surprise and shock at this information and investigated the
matter in December, 1982, in Bozeman, Montana. She obtained
a copy of the Langel deed at the courthouse and confronted
Jean Clem about the improper acknowledgment. Jean Clem
admitted that she assumed Joan McWilliams' signature was
legitimate and stated she had similarly completed
acknowledgements of existing signatures for George McWilliams
at other times. Joan McWilliams also confronted Thomas
Langel and was then shown documents of sale.
The District Court outlined other questionable
transactions that had occurred at and following the time of
the purported transfer of the real property from the
McWilliams' to Dee Ann Langel. George McWilliams obtained a
$30,000 loan from Western Federal on August 26, 1981, forging
his wife's signature on the loan documents. Of this borrowed
amount, $25,000 was said to be credited to Thomas Langel as a
downpayment on the residence, with McWilliams also receiving
a lot in a subdivision known as Hyalite Foothills. Langel
was a business associate at times with McWilliams. The court
found that Thomas Langel was "also prone to questionable
business transactions." As an example, on August 27, 1981,
one day after the purported purchase of the residence, he
caused a contract for deed to be prepared for Tract B. A
friend, Stan Tenney, a Bozeman police officer, was said to be
the purchaser, and the purchase price was listed at $37,500,
although no consideration was ever paid. Langel caused the
contract to be sold to Gallatin Dairy pension plan and agreed
privately with Tenney to make the Tenney payments to the
pension plan. This fictitious transaction apparently was for
the purpose of raising money for Langel.
No title insurance was obtained concerning the purported
transfer from the McWilliams to Dee Ann Langel in August,
1981. In September, 1982, Joan McWilliams found unsigned
deeds dated November, 1981, with the McWilliams as grantors
and Thomas and Dee Ann Langel as grantees of Tract A and B
respectively.
In the meantime, Joan McWilliams had been pursuing
dissolution of marriage proceedings in Colorado, and had
hired a Colorado attorney. The divorce action was commenced
in January, 1983, in Colorado and a decree was obtained in
April, 1985. The Colorado attorney attempted to locate
property hidden by George McWilliams but was unable to
satisfactorily accomplish this task. In June, 1984, the
Colorado attorney arranged for Joan McWilliams to be
represented by her present Montana attorneys who filed a
complaint on August 27, 1984, seeking to nullify the
purported McWilliams/Langel transfer of Tracts A and B.
The court found that Joan McWilliams, having received
$3,500 in support from George McWilliams ended up on welfare
and she and her family sold all of her possessions including
their clothes to survive.
Dee Ann Langel, the purported transferee under the deed,
lost the house at a foreclosure sale in February, 1986. Joan
McWilliams lacked funds to redeem the property in the amount
of $7,000, and did not have the ability to pay the balance of
the loan. Later, Dee Ann Langel made arrangements with the
bank to repurchase the house.
Neither Thomas nor Dee Ann Langel ever dealt with Joan
McWilliams concerning the property and she received no
consideration from the transfer.
Jean Clems, a notary public, operates a typing and
copying service and performs secretarial services for persons
in need thereof. She did not charge fees for her services in
this transaction. George McWilliams was a customer and used
her telephone answering service and other clerical services.
The Colorado petition for dissolution ended in a decree
on April 23, 1985. The proceedings included a separation
agreement dated October 15, 1984. Distributed by the terms
of the agreement were the household items in the possession
of each party, motor vehicles and certain debts incurred by
Joan McWilliams in Ft. Collins, Colorado. The agreement
provided for maintenance, child support and delinquent
support. The parties then released all rights, including
property rights and claims which each might have against each
other. The four page agreement was said to include all of
the agreements made between the parties. The complaint in
the present action, filed by the Montana attorneys was filed
on August 27, 1984. The agreement made no mention of this
action.
Although George McWilliams has served as a third-party
defendant in this action and was at one time represented by
an attorney who later withdrew, he made no appearance
personally or by counsel at the trial.
Based on those findings of fact, the District Court
concluded and accordingly entered judgment, declaring that
Joan McWilliams was entitled to an undivided one-half
interest in and to Tracts A and B; that Jean Clem had
negligently completed the certificate of acknowledgment on
the deed and had violated her duties as a notary public by
certifying that she had personally taken the acknowledgment
of Joan McFJilliams signature; that thereby Joan McWilliams
suffered a cloud upon her title and lost the use of the
property resulting in the sale of Tract A at a trustees sale;
that she was forced to bring this action to set aside the
conveyance and to clear her title and incurred attorney fees
and costs of $17,000; that her equity in property as of
August 26, 1981, was $49,494; that Stan Tenney had no
equitable or legal interest in Tract B of the property; that
Dee Ann Langel had unjustly benefited from occupancy and use
of the residence in question and should be jointly and
severally liable with Jean Clem for the sum of $19,950; that
George McWilliams was liable to the plaintiff for the full
rental loss as damages; that the Colorado decree of
dissolution was not a bar to this action; that Joan
McMiiliams was not barred by the statute of limitations, nor
was she guilty of laches; that she was not barred in
prosecuting her claim because she had dismissed as a
defendant in this cause the bond insurer which on behalf of
Jean Clem paid the sum of $1,000 to plaintiff; that Dee Ann
Langel and Stan Tenney were not bona fide purchasers for
value without notice because the August 26, 1981 deed was
void as to Joan McWilliams; and that the statute, 5
70-20-315, MCA, did not cure the defective acknowledgment in
this case.
Dee Ann Langel and Stan Tenney have appealed the
District Court ' s judgment as have Jean Clem, Clem' s Word.
Processing Center and Clem's Placement Service.
The position of appellants, Dee Ann Langel and Stan
Tenney on appeal is that the proximate cause of Joan's
damages was the concurrent and joint conduct of the joint
tortfeasors, the notary, Jean Clem, and the husband, George
McWilliams. Except for such concurrent conduct, these
appellants contend they would not have accepted a deed
otherwise ordinary on its face. They contend that the deed
should be valid as to Dee Ann Langel and to the extent that
the deed is not validated, they should be indemnified by the
guilty parties, Jean Clem and George McWilliams on the same
basis as Langel and Tenney are liable to Joan McWilliams.
The position of Jean Clem on appeal (the other
appellants named Clem are business entities utilized by Jean
Clem) is that the judgment against Clem is improper because
Joan McWilliamsl signature on the deed was genuine; Clem
recognized her signature and notarized it as she had done in
the past "at plaintiff's request and approval;" that the
mutual release and waiver clause in the settlement agreement
in the dissolution proceedings in Colorado barred any further
action on the matter; and that defendants Dee Ann Langel and
Stan Tenney did not see the August 26, 1981 deed and did not
rely on Clem's acknowledgment of plaintiff's signature in
acquiring the property. Tangentially, Clem argues that Joan
was negligent in signing the deed for her husband and that
Joan's negligence is the sole proximate cause of her own
damages and that the negligence of the notary public is not
the proximate cause of Joan's damages.
The first problem for us to determine is the liability,
if any, of the notary public in this case for the improper
acknowledgment contained in the deed.
In Montana, a notary public is one of several officials
authorized by law to take proof of the acknowledgment of an
instrument. Section 1-5-101, MCA. By statute, the
acknowledgment of an instrument must not be taken unless the
officer taking it knows or has satisfactory evidence that the
person making such acknowledgment is the individual described
in and who executed the instrument. Section 1-5-201, MCA.
The officer taking the acknowledgment must endorse on the
instrument or attach thereto a certificate of acknowledgment
substantially in the form prescribed by law. Sections
1-5-202, -203, MCA. The acknowledgment of a married person
to an instrument purported to be executed by such person must
be taken in the same manner as that of any other person, §
1-5-206, MCA, and the form of the certificate by a married
person must be substantially in the form prescribed for other
individuals in 5 1-5-203, MCA. Section 1-5-207, MCA.
A notary public must give an official bond in the sum of
$5,000 ($1,000 at the time of this incident, 5 1-5-405, MCA)
and, for the official misconduct or neglect of a notary
public, the notary and the sureties under the official bond
are liable to the parties injured thereby for all damages
sustained. Section 1-5-406, MCA.
Although an unrecorded instrument is valid as between
the parties and those who have notice thereof, S 70-21-102,
MCA, before a deed transferring real property can be recorded
with the county clerk and recorder in a Montana county, its
execution must be acknowledged by the person executing, and
the acknowledgment must be certified by an official
authorized to do so. Section 70-21-203, MCA.
Therefore, the statutory duty of the notary in taking an
acknowledgment of an instrument is clear: he or she must
know or have satisfactory evidence that the person making
such acknowledgment is the individual who is described in and
executed the instrument. A married person's acknowledgment
to an instrument is to be taken the same as any other person.
We agree with the Idaho Supreme Court as to the purpose of
these statutes:
We believe that the manifest intent of the
legislature in requiring a notary public to execute
a certificate of acknowledgment is to provide
protection against the recording of false
instruments. The sine qua non of this statutory
requirement is the involvement of the notary, a
public officer in a position of public trust. If
the notary faithfully carries out his statutory
duties, it makes little difference whether he
remembers whether to fill in the blanks in the
certificate. Similarly, if the notary conspires
with the forger, or fails to require the personal
appearance of the acknowledger, or is negligent in
ascertaining the identity of the acknowledger, the
statutory scheme is frustrated whether the form is
completely filled in or not.
Farm Bureau Finance Company, Inc. v. Carney (Idaho 1980), 605
P.2d 509, 514.
The District Court in this case did not find the notary
public was fraudulent in making the certificate of
acknowledgment. Rather, it found that the notary was
negligent. It makes little difference here. The statement
of the notary in the certificate that Joan McWilliams had
personally appeared before the notary to acknowledge the
instrument was false. Based on the false certificate of
acknowledgment by the notary, the deed was entitled to be
accepted for recording. The ensuing transactions relating to
the real property, including the change in the trust
indenture by the mortgagee, the transfer to Tenney, and the
subsequent transfer of a portion of the real estate interest
to the pension fund all were the direct and proximate result
of the false certificate of acknowledgment which led to the
recording. The false certificate of acknowledgment was a
proximate cause of those subsequent transactions. To hold
otherwise would be to frustrate the very purpose of the
statutes requiring such certificates.
True, Joan McWilliams may have been negligent in signing
a blank deed for her husband. At most her negligence would
be remote. It was the false certificate of acknowledgment of
the notary which led to the recording of the deed and which
gave the deed purported life for the subsequent transactions.
Two prior cases by this Court must be explained. In
Mahoney v. Dixon (1904), 31 Mont. 107, 77 P. 519, Mahoney
sued Dixon, a notary public, on the grounds that Dixon had
falsely certified to the execution of a mortgage by a person
who had not appeared before the notary and that Mahoney had
lent $1,800 on the strength of the security under the
mortgage. The District Court instructed the jury that if the
notary violated an express provision of the statute in the
performance of an official act done by him as a notary public
that he and his sureties were liable for the damage suffered
by the plaintiff. The Montana Court reversed because the
instruction did not tie the liability of the notary public to
damages proximately caused by his official misconduct.
In Ellis v. Hale (1920), 58 Mont. 181, 194 P. 155, a
similar situation occurred. Ellis, a real estate loan agent,
had made a loan upon a mortgage. The acknowledgment of said
instrument had been forged by a notary public. There the
court held that an action against the sureties on the
official bond of the notary could not succeed in the absence
of evidence showing that the real estate agent loaned the
money relying on the forged acknowledgment.
In this case, Clem relies on the Ellis and Mahoney cases
as authority that recovery cannot be made against the notary
public unless one relied on the false statements in the
certificate. However, the factual bases for Ellis and
Mahoney are completely different from this case. Joan
McWilliams did not lose her property because she relied on a
false certificate; rather, she was divested of her property
by virtue of a false certificate. Ellis and Mahoney are not
applicable here.
An issue raised by Clem, Langel and Tenney is whether
the Colorado decree of dissolution is res judicata to this
action. An action is barred by res judicata when the
following criteria are met:
1) The parties or their privies are the same;
2) The subject matter of the action is the same;
3) The issues are the same, and relate to the same
subject matter; and
4) The capacities of the persons are the same in
reference to the subject matter and to the issues between
them.
Fox v. 7L Bar Ranch Co. (1982), 198 Mont. 201, 206, 645 P.2d
929, 931.
Clearly, none of these factors are met in the instant
action. The Colorado action had as parties Joan versus
George McWilliams; this action has Joan versus Clem, Langel
and Tenney. The subject matter of the Colorado action was a
dissolution of marriage; this action is to collect damages
for negligence and to set aside a void deed. The issues in
the Colorado action were a determination of child support,
maintenance and division of marital property (in which the
house was not listed); the issues in this case are the duty
and breach of duty of a notary public, and title to property
in Bozeman, Montana. Since the parties, subject matter and
issues are different in each action, the capacities of the
parties in relation to those areas cannot be similar. The
Colorado decree of dissolution is not a bar to the action in
Montana for negligence, quiet title and loss of use of real
property.
Joan's suit is not barred by the statute of limitations
or laches. The negligent action occurred August 26, 1981,
when the warranty deed was improperly notarized and
transferred to Langel. The statute of limitations in an
action for negligence is three years. Section 27-2-204 (1),
MCA. The statute of limitations begins to run when the cause
of action accrues or when the negligence is discovered.
Masse v. Dept. of Highways (1983), 204 Mont. 146, 151, 664
P.2d 890, 892. In this case Joan's complaint was filed
August 27, 1984, three years and one day after the deed was
improperly notarized. However, August 26, 1984, was a
Sunday, so the final day for the action to be filed was
Monday, August 27. Sections 1-1-216 ( 1 a , 1-1-306 and
1-1-307, MCA. Further, Joan did not discover the existence
of the void deed until August, or September, 1982, when a
friend informed her the house had been sold. We hold that
Joan filed her complaint within the time allowed for filing
an action in negligence.
Laches is an equitable defense applicable when the
complainant has delayed in the assertion of a right for such
time as would now make assertion of the right inequitable.
Hereford v. Hereford (1979), 183 Mont. 104, 108, 598 P.2d
600, 602. The record does not indicate Joan took unnecessary
delay in asserting her right to her property. She was not
aware the property was transferred until 1982, at which time
she began searching for the documents necessary to her case.
When she found the warranty deed, she immediately confronted
both Clem and Langels with the forgery. As we noted above,
her complaint in this action was filed within the applicable
time for statute of limitations. We hold the doctrine of
laches does not apply.
Appellants have also argued that S 70-20-315, MCA,
Montana's curative statute for validation of unacknowledged
deeds, validates the forged warranty deed. However, that
statute applies to deeds executed by grantors and signed in
due form, deeds which are otherwise valid except for the lack
of an acknowledgment or other witness thereto. The statute
is not intended to validate a void deed. As we have stated
in the context of tax deeds, "a curative statute cannot
breathe life and validity into ... void ... deeds."
Lowery v. Garfield County (1949), 122 Mont. 571, 583, 208
P.2d 478, 485. Section 70-20-315, MCA, does not validate the
August 26, 1981, warranty deed as to Joan since she, as one
of the necessary grantors, never made the grant.
Clem's fifth issue is whether the payment of the $1,000
bond fully satisfies Joan for her damages against Clem. On
or about October 25, 1984, Joan entered into an agreement
with Reliance Insurance Company in which she released all her
claims against the company upon its payment to her of a
$1,000 penal bond. On November 14, 1984, Joan stipulated
that all her claims against Reliance Insurance Company had
been fully compromised and settled, and the District Court
dismissed the company from the action with prejudice.
Nothing in the agreement, stipulation or order evidences the
intention to release or compromise Joan's claims against
Clem. Reliance simply performed its bond contract and it
does not appear that the release document "'is intended to
release the other tortfeasors, or the payment is full
compensation, or the release expressly so provides.'"
Kussler v. Burlington Northern, Inc. (1980), 186 Mont. 82,
88, 606 P.2d 520, 524 (quoting Adams v. Dion (Ariz. 1973),
509 P.2d 201, 203). However, the $1,000 payment should be
deducted from the total amount of damages owed by Clem to
Joan. State ex rel. Deere & Co. v. District Court (Mont.
1986), 730 P.2d 396, 405, 43 St.Rep. 2270, 2279. We remand
this issue to the District Court for an amendment to the
findings of fact, conclusions of law, and judgment deducting
$1,000 from the amount of damages for loss of use owed to
Joan.
The next issue raised by defendants Langel and Tenney is
whether the District Court erred in denying them relief under
S 70-20-404, MCA. That statute states that the rights to
real property of a purchaser in good faith and for value are
not to be impaired when a conveyance of property is made with
intent to defraud prior or subsequent purchasers or
encumbrances. This is not the situation in this case. Here,
the fraud was perpetrated by one grantor upon the other. The
deed was conveyed to Langel without the execution and
acknowledgement of one of the married grantors, and therefore
the deed is void as to her. Section 70-20-101 and -106, MCA.
The District Court was correct in finding that 5 70-20-404,
MCA, was inapplicable to the facts of the case.
Another issue raised by Langel and Tenney is whether the
District Court erred in failing to rule on their cross-claim
for indemnification from Clem. The District Court concluded
Dee Ann Langel had unjustly benefited from the occupancy and
use of the Gallatin Gateway home, and that Langel was liable
in the amount of $19,950, such liability being joint and
several with Clem. Langel argues that since Clem was found
negligent and she, Langel, was not found negligent, she
should be fully indemnified by Clem.
In Consolidated Freightways Corp. v. Osier (19791, 185
Mont. 439, 447, 605 P.2d 1076, 1081, we defined "indemnity"
as the principle which shifted "the entire loss from one
party compelled to bear it to the shoulders of another who
should bear it instead." In this instance, Joan was awarded
$19,950 in damages for her loss of use of the house and
property. Langel had the sole use of the house for over four
years without paying Joan any consideration for her interest
in it. Joan had a present interest in the house, since the
purported transfer of her interest to the Langels was not
valid. Langel and Tenney did possess the house and real
estate and thus owe Joan for Joan's loss of use. We hold
Langel and Tenney are not entitled to indemnification from
Clem.
Finally, Langel and Tenney argue that it was error for
the District Court to fail to grant them a default judgment
against and indemnification from George McWilliams. George
was not present at trial and his counsel had been given leave
to withdraw from the case. However, he had been given notice
of the trial and had informed one of the attorneys of record
that he did not plan to attend. At the opening of the trial
and at a later hearing, the attorney for Langel and Tenney
requested that a default judgment be entered against George
in their favor. The motion was never ruled on by the
District Court.
When an attorney is removed or ceases to act as such,
the party to the action for whom the attorney was acting
must, before any further proceedings are had against that
party, be required by the adverse party, upon written notice,
to appoint another attorney or appear in person. Section
37-61-405, MCA. The record does not show that George
McWilliams was served with such a notice, and therefore the
case against McWilliams is stayed by virtue of S 37-61-405,
MCA. Judgment against him cannot be granted until the proper
notice is served.
Remanded to the District court for amendment of the
judgment as herein provided. As so amended, the judgment is
affirmed.
jLjdh\- 42 %?
Justice
We Concur: //f
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