During Mandated Social Distancing, in Louisiana, "The pen [stroked before a Notary and Two Witnesses, still appears to be] Mightier than the Sword"

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A cursory review of the Remote Online Notarization Procedures included in Emergency Proclamation 37-JBE-2020; what they authorize, and more importantly, what they don’t.

With the latest announcements of extended Stay at Home and Social Distancing Orders, it appears that we will need to continue to adapt to life with little or no personal contact. Of course, some of life’s necessary activities such as doctors’ appointments/examinations, and certain business/legal transactions still require a minimum amount of face-to-face contact with others. In Louisiana, these include the execution of certain types of testamentary instruments and transactions involving immovable (real) property, where the operative documents are required to be in a certain form, and executed in the presence of witnesses and/or a Notary Public.

This article is not intended to comprehensively address all of the laws surrounding electronic signatures in Louisiana (as may be temporarily modified by the Governor through his various Emergency Proclamations and Executive Orders), but instead is written to serve as a practitioner’s guide, a band aid of sorts, to assist with the continued practice of law during the current pandemic.

The statutory framework authorizing electronic or “e-signatures” in Louisiana is found in the Uniform Electronic Transactions Act (UETA), codified in La. Rev. Stat. Ann. §§9:2601, et seq., which was enacted in 2001. UETA is based on the Uniform Electronic Transactions Act (1999) by the National Conference of Commissioners on Uniform State Laws, which has been adopted by forty-seven states. UETA also follows the Electronic Signatures in Global and National Commerce Act, also known as the “E-Sign Act,” which is the federal corollary passed by Congress in June, 2000 and codified at 15 U.S.C. §7001, et seq.

La. Rev. Stat. 9:2607 states:

(A) a “record or signature may not be denied legal effect or enforceability solely because it is in electronic form.”

(B) a “contract may not be denied legal effect or enforceability solely because an electronic record was used in its formation.”

(C) “[i]f a law requires a record to be in writing, an electronic record satisfies the law.”

(D)“[i]f a law requires a signature, an electronic signature satisfies the law.”

La. Rev. Stat. 9:2603 makes UETA applicable to all electronic records and electronic signatures relating to a transaction, EXCEPT:

(B)(1) A transaction to the extent it is governed by a law governing the creation and execution of wills, codicils, or testamentary trusts.

(2) A transaction to the extent it is governed by the provisions of Title 10 of the Louisiana Revised Statutes of 1950, other than R.S. 10:1-107.

(3) (Reserved).

(4)(a) A law governing adoption, divorce, or other matters of family law, with the exception of a temporary restraining order issued pursuant to Domestic Abuse Assistance, R.S. 46:2131 et seq., or Protection from Dating Violence Act, R.S. 46:2151.

(b) Any notice of any of the following:

(i) The cancellation or termination of utility services, including water, heat, and power.

(ii) Default, acceleration, repossession, foreclosure, or eviction, or the right to cure, under a credit agreement secured by, or a rental agreement [/lease] for, a primary residence of an individual.

(iii) The cancellation or termination of health insurance or benefits or life insurance benefits, excluding annuities.

(iv) Recall of a product, or material failure of a product, that risks endangering health or safety.

(c) Any document required to accompany any transportation or handling of hazardous materials, pesticides, or other toxic or dangerous materials.

(d) Publications required by law to be published in the official journals provided for in Chapter 2, 4, or 5 of Title 43 of the Louisiana Revised Statutes of 1950.

(C)       This Chapter applies to an electronic record or electronic signature otherwise excluded from the application of this Chapter under Subsection B of this Section to the extent it is governed by a law other than those specified by Subsection B of this Section.

(D)       A transaction subject to this Chapter is also subject to other applicable substantive law.

La. Rev. Stat. 9:2611 reiterates one of the major exceptions set forth in §2603(B), by restating that:

“[i]f a law requires a signature or record to be notarized, acknowledged, verified, or made under oath, the requirement is satisfied if the electronic signature of the person authorized to perform those acts, together with all other information required to be included by other applicable law, is attached to or logically associated with the signature or record.”

So what does this mean? What is an example of “other applicable substantive law?” What exactly constitutes the universe of “all other information required to be included by the other applicable law” that is required to be “attached to or logically associated with the signature or record?” More problematic, although technically not part of the law, is the somewhat gratuitous official comment following §9:2611 which states “[t]his Section does not provide any guidance for how electronic notarization can be achieved.” Okay, so if we can’t look to this provision in UETA, where should we look?

For those attorneys whose practice does not include the regular transfer of immovable (real) property, you may recall from your initial Civil Code Course during your first semester of law school that “[a]n authentic act is a writing executed before a notary public and two witnesses, and signed by each part who executed it, by each witness, and by each notary public before whom it was executed.” See Louisiana Civil Code art. 1833. The “authentic act” is the preferred form of conveyance for real estate practitioners.

When reading La. R.S. 9:2611 in conjunction with La. Civil Code art. 1833, at a minimum, I believe it’s safe to say that the signatures of two (2) qualified witnesses and a duly commissioned Notary Public who personally witnessed the appearer sign the document are examples of “other information required to be included by the other applicable law (here, La. Civil Code art. 1833) would have to be “attached to or logically associated with the signature or record.”

This conclusion appears to have been confirmed by the Louisiana First Circuit in Eschete v. Eschete, 2010-2059 (La. App. 1 Cir. 2/27/14) 142 So.2d 985 (2014), where that appeals court affirmed the trial court’s invalidation of an inter vivos donation of an immovable property[1] interest when the donor, did not actually sign the act of donation in the physical presence of both witnesses, although one of the witnesses was merely twelve (12’) feet away in the copy room making copies and came back into the signing room immediately after the donor had signed.

Accordingly, under normal conditions, under the facts in Eschete, the UETA, by itself, would not grant any relief to this failed authentic act even under these times of mandated physical separation.

Notwithstanding the noted exceptions in Subsection (B) of §2603 of UETA excluding certain transactions or writings from its applicability, and the substantive law regarding authentic acts that the Eschete court acknowledged, recognizing that the state and local mandated home isolation orders would present significant barriers to the continuation of commerce, like many other governors around the country, and with the intent of keeping businesses running as best of possible under the present conditions, Governor John Bel Edwards signed Emergency Proclamation No. 37-JBE-2020, which, in addition to addressing other measures in response to the threats posed by COVID-19, declared in part:

“SECTION 6:     

A)    During this emergency, a regularly commissioned notary public who holds a valid notarial commission in the state of Louisiana, including a person who is licensed to practice law and commissioned by the Secretary of State, may perform notarization for an individual not in the physical presence of the notary public if:

1) the individual, any witnesses and the notary public can communicate simultaneously by sight and sound through an electronic device or process at the time of the notarization;

2) the notary public—

a) has reasonably identified the individual; and

b) either directly or through an agent:

i)  creates an audio and visual recording of the performance of the notarization, and          

ii) retains such recording as a notarial record for at least 10 years from the date of execution unless a law of the State requires a different period of retention, and if any laws of the State govern the content, retention, security, use, effect, and disclosure of such recording and any information contained therein such recording shall be subject thereto.

c) The person appearing, all witnesses and the Notary Public can affix their digital signatures to the act in a manner that renders any subsequent change or modification of the remote online notarial act to be evident.

B) If a State law requires an individual to appear personally before or be in the physical presence of a notary public at the time of a notarization that requirement shall be satisfied if the individual and the notary public are not in the physical presence of each other but can communicate simultaneously by sight and sound through an electronic device or process at the time of the notarization; except for the laws pertaining to testaments, trust instruments, donations inter vivos, matrimonial agreements, acts modifying, waiving or extinguishing an obligation of final spousal support and authentic acts.

C) During this emergency, the recorder (as used in La. C.C. Art 3344) shall not refuse to record a tangible copy of an electronic record on the ground that it does not bear the original signature of a person if anotary public or other officer before whom it was executed certifies that the tangible copy is an accurate copy of the electronic record.”

Section 8 of Emergency Proclamation No. 37-JBE-2020 further states “these provisions are effective retroactively to the beginning of this emergency on Wednesday, March 11, 2020 to Monday, April 13, 2020, or extended by any subsequent Proclamation, unless terminated sooner,” although this April 13 expiration date will almost certainly be extended to April 30, 2020.

So, for the time being, until at least April 13, 2020, and most likely the month of April, it appears that Emergency Proclamation No. 37-JBE-2020 will provide some relief to the execution of notarized documents where the substantive law requires be executed before a Notary Public (with or without witnesses), EXCEPT for those documents specifically excluded in Section 6 (B) of 37-JBE-2020 namely “testaments, trust instruments, donations inter vivos, matrimonial agreements, acts modifying, waiving or extinguishing an obligation of final spousal support and authentic acts,” including authentic acts purporting to convey immovable (real) property.

Now, at the risk of sounding like “Captain Obvious,” as a real estate attorney, I must admit that at first blush, Emergency Proclamation No. 37-JBE-2020 doesn’t appear to be the silver bullet that I hoped it would be. It clearly and unequivocally excludes “authentic acts,” which is the form I use for the majority of the real estate conveyances passed before me, meaning during these extraordinary times, I’m back to conducting real estate closings only after thoroughly sanitizing a conference room, slathering up with hand sanitizer, distributing a new ink pen right out of the box to all of the appearers and their respective witnesses, while at the same time, making sure that each person in the room maintains the recommended six-feet of separation from everyone else, and that the actual sheets of paper that have to be signed by multiple individuals are touched as little as possible. Or am I?

Louisiana Civil Code Art. 1839 - Transfer of immovable property states:

“[a] transfer of immovable property must be made by authentic act OR by act under private signature [emphasis added]. Nevertheless, an oral transfer is valid between the parties when the property has been actually delivered and the transferor recognizes the transfer when interrogated on oath.

An instrument involving immovable property shall have effect against third persons only from the time it is filed for registry in the parish where the property is located.

 Acts 1984, No. 331, §1, eff. Jan. 1, 1985.”

Louisiana Civil Code Art. 1836 - Act under private signature duly acknowledged states:

“[a]n act under private signature is regarded prima facie as the true and genuine act of a party executing it when his signature has been acknowledged, and the act shall be admitted in evidence without further proof.

An act under private signature may be acknowledged by a party to that act by recognizing the signature as his own before a court, or before a notary public, or other officer authorized to perform that function, in the presence of two witnesses. An act under private signature may be acknowledged also in any other manner authorized by law.

Nevertheless, an act under private signature, though acknowledged, cannot substitute for an authentic act when the law prescribes such an act.

Acts 1984, No. 331, §1, eff. Jan. 1, 1985.”

Ah ha!!! There it is. Because Civil Code Article 1839 allows for the transfer of immovable (real) property by “authentic act OR by an act under private signature” [emphasis added], and Section 6 (B) Emergency Proclamation No. 37-JBE-2020 only excludes “authentic acts” and is otherwise silent as to acts passed under private signature it appears that Section 6 (A) of Emergency Proclamation No. 37-JBE-2020 at least temporarily facilitates Remote Online Notarization (“ROL”), where all of the parties to the act, including the appearers, the witnesses and the Notary Public, need not be physically in the presence of one another, so long as:

1. “the appearers (individuals), any witnesses and the notary public can communicate simultaneously by sight and sound through an electronic device or process at the time of the notarization;”

2. “the notary public has reasonably identified the [parties executing the document];” and

3. the notary public either directly or through an agent a) “creates an audio and visual recording of the performance of the notarization,” and b) “retains such recording as a notarial record for at least 10 years from the date of execution unless a law of the State requires a different period of retention, and if any laws of the State govern the content, retention, security, use, effect, and disclosure of such recording and any information contained therein such recording shall be subject thereto.”        

So, with respect to the transfer of immovable (real) property, it appears that even though Civil Code Art. 1836 stipulates that “acts under private signature may be acknowledged by a party to that act by recognizing the signature as his own before a court, or before a notary public, or other officer authorized to perform that function, in the presence of two witnesses [emphasis added], Section 6 (A) of Emergency Proclamation No. 37-JBE-2020 clearly disposes of the requirement of a “physical presence” for acts under private signature, which is not later clawed-back or excluded in Section 6 (B) of the cited emergency proclamation.

Okay, problem solved. Life goes on and real estate closings and other transfers of immovable property may proceed while observing the state and locally mandated Stay at Home and Social Distancing Orders. Or does it?

Although Emergency Proclamation No. 37-JBE-2020 may provide a work-around to the strict requirements of authentic acts through the use of an act under private signature when handling the transfer of immovable property, it does not address the practical reality that in majority of transfers of immovable property, the sale of immovable property, be it vacant land, or land with a home or commercial building on it, typically also includes some type of financing where a mortgage is granted to secure the financing used for the acquisition, such as a purchase money mortgage.

Louisiana Civil Code Art. 3287 - Conventional mortgage states:

“A conventional mortgage may be established only by written contract. No special words are necessary to establish a conventional mortgage” while Civil Code Art. 3288 sets forth the requirements of a contract of mortgage, specifically, that:

“a contract of mortgage must state precisely the nature and situation of each of the immovables or other property over which it is granted; state the amount of the obligation, or the maximum amount of the obligations that may be outstanding at any time and from time to time that the mortgage secures; and be signed by the mortgagor.

These two code articles and the subsequent articles in this chapter of the Civil Code are silent as to the “form” of a mortgage and do not require that a mortgage be in the “authentic” form required of La. Civil Code Art. 1833.

However, although many lenders, especially those issuing second mortgages or home equity lines of credit (HELOC) secured by a mortgage on their borrower’s principal residence have dispensed with the practice of requiring that the mortgage granting the lander security for its loan be in the form of an authentic act in order to compete with other nontraditional lenders entering the market, lenders/mortgagees should remember that in order to avail themselves of Executory Process, the security instrument must be in authentic form.

Louisiana Code of Civil Procedure Art. 2631- Use of executory proceedings states:

“[e]xecutory proceedings are those which are used to effect the seizure and sale of property, without previous citation and judgment, to enforce a mortgage or privilege thereon evidenced by an authentic act importing a confession of judgment, and in other cases allowed by law” [emphasis added].

Personally, this does not bother me, as it has been my observation over the past twenty (20) years of representing lenders engaged in mortgage lending that courts routinely look for ways to find some fault with the security instrument that would preclude an executory proceeding, especially when dealing with the foreclosure on a single-family home used as a primary residence. But that’s just me personally, whether you agree or not, you should at least know the implications of accepting a mortgage that is not in authentic form and explain the same to the lender so that the lender can conduct the standard cost benefit analysis weighing the benefits of getting a mortgage that is not in authentic form quickly and efficiently, with the down-side risk of not being able to avail the lender with a fast-track foreclosure through the use of executory process.

In closing, I think it is important to point out to those individuals who take advantage of these relaxed signing procedures during this current state of emergency that Emergency Proclamation No. 37-JBE-2020 does place a few “elephants in the closing room.”

First and foremost, Section 6 (A) (2) (a) (ii) of Emergency Proc. No. 37-JBE-2020 requires the notary public conducting the Remote Online Notarization retain the video recordings of the remote signing “as a notarial record for at least 10 years from the date of execution unless a law of the State requires a different period of retention, and if any laws of the State govern the content, retention, security, use, effect, and disclosure of such recording and any information contained therein such recording shall be subject thereto.” No doubt this requirement has compliance officers, managing partners and firm administrators cringing, for obvious reasons.

Second, while many other states around the country have passed legislation adopting remote online notarization (“RON”) in similar form and condition to those set forth in Emergency Proc. No. 37-JBE-2020, to date, the Louisiana Legislature has been slow (and possibly reluctant) to adopt RON on a permanent basis.

Although there are currently two (2) bills addressing remote online notarization currently pending in the Louisiana Legislature (House Bill No. 122 by Representative Gregory Miller and House Bill No. 274 by Representative Raymond E. Garofolo, Jr.), I have heard from reliable sources that the Louisiana Notarial Association is up in arms against the revised notarial procedures contained in Emergency Proclamation No. 37-JBE-2020, while the Louisiana Bankers Association has likewise been critical of 37-JBE-2020 because it wanted to have the provisions of 37-JBE-2020 to be expanded to include authentic acts, which as discussed above, are excluded in Section 6 (B) of the emergency proclamation. Given that we are looking at another thirty (30) days of Stay-at-Home isolation, and perhaps longer, the debate on the merits of remote online notarization given the strong influence that both of these lobbying groups wield, should prove interesting for spectators during this when all organized sports competitions are temporarily suspended.