Eva M. Lemeh, Trustee v. Emc Mortgage Corporation

Citations: 81 S.W.3d 764; 2002 Tenn. LEXIS 339Docket: 2002-00223-SC-R23-CQ

Court: Tennessee Supreme Court; July 18, 2002; Tennessee; State Supreme Court

Original Court Document: View Document

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The Supreme Court of Tennessee addressed a certified question from the United States Bankruptcy Court regarding the validity of a deed of trust involving Edward James Crim Sr. and Jayne Crim. The key issues were whether the deed of trust was improperly acknowledged under Tennessee law and the implications of such a defect for judicial lien creditors and bona fide purchasers. The Court found that the deed of trust was null and void concerning the transfer of Edward Crim's interest in the property due to the improper acknowledgment, which failed to indicate that Jayne Crim was signing on his behalf and did not comply with statutory requirements. However, the acknowledgment of Jayne Crim's signature was deemed to substantially comply with statutory forms, making the deed effective for her right of survivorship and not voidable by creditors without notice. The case arose from a bankruptcy proceeding initiated by the Crims, with Eva M. Lemeh serving as the trustee and seeking to invalidate the deed against EMC Mortgage Corporation, the successor in interest. The acknowledgment inaccurately stated that both spouses had personally appeared before the notary, which contributed to the determination of the deed's validity.

Edward J. Crim, Sr. did not personally appear before the notary public to acknowledge his signature on the deed of trust, resulting in an improper acknowledgment under Tennessee law. The certification order lacks evidence regarding any communication between Jayne Crim and the notary concerning her husband's signature. The United States Bankruptcy Court for the Middle District of Tennessee posed two questions: a) whether the deed of trust was improperly acknowledged, and b) if so, whether this defect renders the deed void or voidable by a judicial lien creditor or bona fide purchaser. The court concluded that the deed of trust was not properly acknowledged, making it null and void for subsequent creditors and bona fide purchasers regarding Edward J. Crim, Sr. However, Jayne Crim's acknowledgment substantially complied with Tennessee requirements, meaning her conveyance is not voidable by creditors or purchasers without notice.

Despite this, the deed of trust only effectively conveyed Jayne Crim's right of survivorship due to their tenancy by the entirety. The acknowledgment process under Tennessee law requires either personal acknowledgment by the maker or proof from two subscribing witnesses. Since Mr. Crim’s signature was not verified by witnesses, the only alternative for authentication was acknowledgment by Jayne Crim on his behalf. The acknowledgment certificate incorrectly claimed Mr. Crim acknowledged his signature personally. 

Referencing the case In re Marsh, the court stated that missing an official notary seal is a fatal flaw, rendering the instrument null and void for creditors and purchasers. A properly registered deed of trust provides constructive notice to subsequent creditors and purchasers, making any improperly acknowledged deed without a notary seal legally invalid under Tennessee law.

The legal document identifies significant discrepancies between the certificate of acknowledgment and the signatures on the deed of trust, raising doubts about the instrument's legal validity. Specifically, the acknowledgment contains false statements regarding Mr. Crim's signature, which was executed by Mrs. Crim under a power of attorney, while the acknowledgment incorrectly states that Mr. Crim personally signed and acknowledged it before a notary. This noncompliance with Tenn. Code Ann. § 66-22-101 is evident, mirroring issues in the Marsh case. 

The document highlights that the acknowledgment's form is also deficient. Tennessee law outlines specific forms for acknowledgments depending on whether a person is signing on their own behalf or on behalf of another. The June 6, 1997, deed of trust improperly utilized a form meant for personal acknowledgments instead of the required form for representatives, leading to further inaccuracies in the acknowledgment statements. Notably, it is confirmed that Mr. Crim did not appear before the notary, reinforcing the acknowledgment's misalignment with statutory requirements.

Despite these deficiencies, EMC argues that the certificate is not defective under Tenn. Code Ann. § 66-26-113, which allows for minor omissions in certificates to not invalidate deeds if the essential elements of authentication are present. The document ultimately underscores the importance of compliance with statutory forms for acknowledgments in ensuring the legal validity of such instruments.

Tennessee courts have affirmed that an acknowledgment can still comply with statutory requirements despite minor deviations in language. However, substantial compliance does not apply when a critical aspect, such as the requirement for a seal, is missing. In this case, the acknowledgment of a deed of trust was deemed improperly executed due to significant defects, including false statements and noncompliance with statutory forms as outlined in Tenn. Code Ann. 66-22-101 and -107(c). A valid acknowledgment is crucial for legal registration of a deed of trust, which provides constructive notice to creditors and purchasers. Without proper acknowledgment, the deed is effective only between the parties involved. Consequently, the June 6, 1997, deed of trust was ruled null and void concerning subsequent creditors or bona fide purchasers without notice. However, because Jayne Crim's signature was acknowledged in compliance with the appropriate statutory form, her interest in the property remains valid and legally registered for subsequent creditors and bona fide purchasers.

Jayne Crim and Edward J. Crim, Sr. held the property as tenants by the entirety, meaning that one spouse can only transfer or encumber their survivorship interest independently. The deed of trust in question only encumbered Jayne Crim’s right of survivorship, which remains valid against judicial lien creditors or bona fide purchasers without notice. However, the acknowledgment of the deed of trust was found to be improper under Tennessee law, making it null and void concerning Edward James Crim, Sr.'s interest in the property for subsequent judicial lien creditors or bona fide purchasers. Consequently, the only interest affected by the deed of trust is Jayne Crim’s survivorship interest. Following this conclusion, the Clerk is instructed to send a copy of the opinion per Tennessee Supreme Court Rule 23(8), and costs are assessed to EMC Mortgage Corporation.