Establishing Authority By Acknowledgment

Last Friday, I discussed the ramifications of affixing a secretary's certificate to a deed or instrument conveying or otherwise transferring any assets of a corporation.  Today's post covers the legal effect of obtaining a certificate of acknowledgment of an instrument of transfer.

Preliminarily, it is useful to recall a few basic concepts.  An acknowledgment generally requires someone signing an instrument to appear before a notary public or another legally authorized official.  The notary or other official must have "satisfactory evidence" that the person making the acknowledgment is the person described in, and executing, the instrument.  The California Civil Code prescribes who may take acknowledgments and what constitutes "satisfactory evidence".  Cal. Civ. Code §§ 1180 - 1183.5 & 1185.  Importantly, the notary or other official verifies only the identity of the individual who signed the document to which the certificate is attached, and not the truthfulness, accuracy, or validity of that document.  Cal. Civ. Code § 1189(a)(1).

A certificate of acknowledgment acquires greater legal significance when it is executed on behalf of an incorporated or unincorporated entity by a "duly authorized person".  If the certificate of acknowledgment is in the form specified by Civil Code Section 1189, it is prima facie evidence that the instrument is the duly authorized act of the entity named in the instrument and is conclusive evidence thereof in favor of any good faith purchaser, lessee, or encumbrancer. Cal. Civ. Code § 1190.

But isn't the statute hopelessly circular?  It seems to require that the signatory to the instrument be a "duly authorized person" in order to establish evidence that the instrument is "duly authorized".  The legislature addresses this conundrum only partially.  Section 1190 provides that a "duly authorized person" of a domestic or foreign corporation includes the president, vice president, secretary, and assistant secretary of the corporation.  The use of the word "includes", of course, leaves open the possibility that other categories of corporate agents may be "duly authorized persons".  However, without a specific designation, the problem of circularity abides.  We are also left in the dark concerning limited liability companies, limited partnerships, associations and other entities.

Both Corporations Code Section 1002, discussed last Friday, and Civil Code Section 1190 establish presumptions.  However, Section 1002 applies only to corporations, as defined in Section 162.  Section 1190 is not limited to corporations.  It applies to unincorporated entities as well.  Because Section 1002 refers to foreign corporations, it appears reasonable to conclude that it is not limited to corporations organized under, or subject to, the California General Corporation Law.