Copy
iNotary White Paper - Notary Employer Liability
View this email in your browser

Notary Employer Liability

Share
Forward
Share
INTRODUCTION
The conventional notion regarding notary employer liability is that the employer does not incur liability when there is not an intentional act.  The reasoning goes that because the notary public is a public official, the employer is insulated from bad acts by the notary public.  This white paper will explore agency principles, specifically respondent superior, and other concepts that allow for the argument that a notary employer can and should be held liable for actions of a notary while performing within the scope of his or her duties, but also that the public interest is served by this outcome.
 
Agency Principles
The law of agency deals with fiduciary relationships that involve a person, called the agent, who is authorized to act on behalf of another, called the principal, to create legal relations with a third party. [1]  Specifically, agency law refers to the relationship between a principal and agent whereby the principal, expressly or implicitly, authorizes the agent to work under his or her control and on his or her behalf.[2] The agent is, thus, required to negotiate or perform a duty on behalf of the principal, usually with a third party, for the principal's benefit.

The relationship that exists between principal, agent and third party is particularly important with regard to the harm that may be incurred by a third party caused by the intentional or negligent act of the agent during the course of his or her employment for the principal, and ultimately who is to be held liable for such harm. 

In agency law, the employer’s liability for a third party’s harm arises even though the employer may not be negligent. The law provides that “liability is normally based upon the fact that the tort is brought about in the course of any undertaking for the benefit, and subject to the right, of the principal to control his servant.”[3]  This paper is concerned with this type of liability, also referred to as vicarious liability or respondent superior, as it relates to notary publics and changes in the way courts have interpreted the law in the past, present and how courts could rule on it in the future.
 
The addition of an employee being a notary employee has complicated the legal analysis that courts have used in determining the extent, if any, to which an employer may be held liable. [4] Additionally, while it may appear that courts favor a result where the employer is not found liable, the history of cases and the ruling in the landmark case of Vancura v. Katris make clear that there is still an avenue available to injured third parties.  This is especially important because jurisdictions that reject the application of agency law in suits regarding notary tort liability leave the third party injured with inadequate recovery and disregard the principle that notary employers are escaping liability while still gaining a benefit from having notary services available to their customers.
 
The significant amount of statutory protection afforded to employers codifies the negative common law trends to the ultimate detriment of the public.  Although competing interests unquestionably exist, the balance should be in favor of imposing the theory of respondent superior on notary employers through the application of agency principles, and the court in Vancura v. Katris certainly left this door open.[5]  What can employers do if this becomes a reality? They can rely on workplace education and insure themselves against notary misconduct. 
 
CASE LAW
Many early cases were split on the issue of vicarious liability, revealing an early struggle with the status of notaries as public officers.
 
In Davey v. Jones, the New Jersey Supreme Court determined that a bank could be liable for the negligence of its notary agent where the notary misread the name of a note’s endorser and failed to send notice of insufficient funds to the note holder.[6] The court held that the collecting bank had a duty to do all that was needed to protect the note holder’s rights.[7] The bank knew the holder and had a duty to inform the notary, who was “its agent,” of the correct name.[8] Because the notary was the bank’s agent, he was charged with the bank’s knowledge as to the identity of the holder, and the notary’s failure to properly notify the holder “must be treated as negligence of the bank.”[9] The court held that “a bank which assumes the duty of a collecting agent is absolutely liable for any negligence or default of a notary… in relation to it.”[10]
           
While the court in Davey v. Jones held that the bank was liable for its notary’s negligence, this is not exactly a respondent superior case because the bank’s actions—failing to share its knowledge regarding the holder’s identity with the notary—were also found to be negligent.[11] 
           
More in accordance with vicarious liability or respondent superior theories, the court in Ayrault v. Pacific Bank determined that notaries employed by banks fulfill duties the banks otherwise would have to carry out themselves, and as such, banks could be liable for the negligence of their notaries under agency theory.[12]  In that case, a bank regularly delivered notes to a notary public for protest. The notary negligently completed a protest and the damaged party filed a lawsuit.  The bank insisted the notary was not its agent and therefore it should not be held liable.  The plaintiff argued the bank did “not fulfill its duty (merely) by putting the paper into the hands of the notary, but the bank is answerable for the conduct of its agents in the premises.”[13]  The court agreed and held that if a bank employs a notary to present notes for payment, and if there is no contract limiting the bank’s liability, the notary will be deemed to be an agent of the bank and therefore the bank will be held liable for the notary’s negligence.[14]
           
Historically, other jurisdictions can be distinguished from these holdings.  In 1891, the Supreme Court of Georgia held that a bank was not liable for negligence committed by a notary in the course of protesting a note.[15]  In May v. Jones, suit was brought against a notary and his bank employer when the notary neglected to present a note to the proper bank.[16]  Although the court held that there was clearly an action against the notary, it rejected the notion that the bank should be liable as well, stating that “the notary… is a public officer, sworn to discharge his duties properly.  He is under a higher control than that of a private principal.”[17]  The court went on to say that when a notary “acts in his official capacity, the bank no longer has control over him and cannot direct how his duties shall be done.”[18]
           
The holding in May v. Jones was in direct opposition to the holding in Ayrault.  In May, the court refused to hold the bank liable despite the bank’s employment of the notary and the notary’s negligent performance of the duty for which he was employed. [19]  In the court's view, only the state, not the bank, controlled the actions of the notary and therefore, the notary was not a servant of the bank when performing that function and thus no principal servant relationship existed.[20]  This was the holding even though the notary was performing a function for the bank that he had been hired to do, did so within the authorized time and space, and in so doing furthered a purpose of the bank. However, in Ayrault, the court made it clear that notaries could act as notaries and employees simultaneously, seemingly rejecting the idea presented in May.[21]  Agency law seems to be more in line with the Ayrault court, acknowledging that an employee can concurrently serve two employers.[22]
           
On viewing more recent cases, with the lack of widely adopted statutory guidance on this issue, courts continue to be divided. 
           
In Commercial Union Insurance Co. v. Burt Thomas-Aitken Construction Co., the Supreme Court of New Jersey rejected the application of agency principles in a case where a notary, who was an assistant cashier at a bank, negligently notarized signatures on an indemnity agreement.[23]  The Supreme Court took issue with the appellate court’s use of standard agency principles and held that the notary was “a public officer… and as such exercises an authority the bank itself could not receive and does an act the bank itself could not do.”[24] In the court’s view, notary’s powers come from the state and not from the employer bank.[25]  The court reasoned that someone who “seeks out a notary looks only to the notary and the notary’s employer so, any notary will do.”[26] 
           
In California, courts have applied agency principles to notary employees, but with little discussion.  In Iselin-Jefferson Financial Co. v. United California Bank, a notary negligently took the acknowledgment of a forged signature on a loan guarantee agreement.[27]  The plaintiff purchased accounts receivable from a company on the condition that the company furnished written guarantees from one of the company’s debtors.[28]  The guarantees were to be completed by two of the debtor company’s principals and their wives.[29]  In the wives’ absence, the principals presented the guarantee document to an officer of the defendant bank and asked for the signatures to be notarized.[30] A bank notary did so after the officer told him that one of the wives had signed the guarantee and that the officer had compared it with signatures from the bank files.[31] The wife had actually refused to sign the guarantees and her signature had been forged.[32] When the debtor company later defaulted, the plaintiff sued on the guarantees and also sued the notary, notary’s surety, and bank.[33] After the guarantors defaulted, the remaining parties stipulated the notary’s misconduct and the fact that the notary had acted for the bank in the scope of employment.[34] The trial court ruled that the plaintiff relied on the guarantee and notary certificate, and would not have agreed to the transaction without them.[35] Accordingly, the trial court imposed judgment against the notary, surety and bank.[36]
 
In Independence Leasing Corp. v. Aquino, in New York, a young man opened an account at a bank with the assistance of a branch manager and then asked the manager, who was also a notary, to notarize a car lease document.[37]  The document was signed in front of the notary by someone who was believed to be the young man’s father. The signer was not the father, and when payments were not made on the lease, the plaintiff leasing company sued the notary, bank, and father.[38]  The cause of action brought against the notary and bank was based on a state statute imposing liability on a notary for misconduct in the performance of his powers.[39]  The lower court held that if the father did not in fact sign the lease document, the branch manager and employer bank would be liable for the manager’s notarization provided the act constituted notary misconduct under state law.[40]  On appeal, the court held that misconduct includes negligence in the performance of notarial duties.[41]  The court held, however, that proof was needed as to the plaintiff’s reliance on the notary’s actions and accordingly ordered a new trial.[42]  Much like the California courts, Independence Leasing does not fully discuss the issue of vicarious liability but instead accepts its application without elaboration.  Notably, the court was willing to impose employer liability where misconduct occurred in a transaction that was not directly related to the employer’s business. 
           
In Illinois, the landmark case of Vancura v. Katris leaves open the potential for a claim based on agency principles.  In Vancura, a real estate investor brought action against the employer of a notary public, Kinko’s, whose seal was used to notarize his forged signature on a mortgage assignment, seeking to hold the employer liable for the notary public’s misconduct under the Notary Public Act and under common law theories of negligent training and supervision.[43]  The Circuit Court in Cook County entered judgment against Kinko’s on both the statutory and common law claims.[44]  The appellate court reversed with respect to the statutory claim, but affirmed with respect to the common law claim.[45]  The Supreme Court of Illinois reversed the appellate court on the common law ruling and affirmed the statutory ruling, thus finding the employer could not be held liable under any of the given theories.[46]  However, the court did not rule on whether the employer could be held liable under vicarious liability or respondent superior.
           
For the purpose of this discussion, the “Assignment of Mortgage” and “Release Deed” in Vancura are not relevant.[47] However, once this Assignment and Deed were created, they were both meant to be signed and notarized by Vancura.  Two of the other parties involved in the suit, Boatwright and Brown, took the Assignment and Deed to Kinko’s on the morning of the closing and had them notarized.  It was undisputed that Vancura never signed the Assignment and was not present during the notarization of the Assignment that bore his forged signature.[48] 
           
At the trial, the notary, Gustvo Albear, testified that he was an employee of Kinko’s at the time of the notarization and that it was his seal that appeared on the notarizations, but that he did not recall notarizing either of the documents.[49]  Albear testified that he became a notary at the request of Kinko’s in 1995 and participated in a required notary training course taught by a Kinko’s trainer, Al Yamnitz. [50]  Albear testified that the training was a two to three-day program where he was taught to keep a logbook of his notarizations, to keep his logbook and seal in a safe place, and how to use identification to verify the signatures of those signing the documents.[51]  Albear arranged to have his logbook and seal kept in a drawer in the manager’s office; however, it was discovered that neither the office nor the drawer were consistently locked. [52]  Albear also testified that when he transferred to another store in 1996, he gave his seal and logbook to the manager because he believed they belonged to the manager and not him.[53]
           
Yamnitz, the regional manager at Kinko’s in 1995 and the person who conducted the training of Albear, testified that he was not a notary, but was asked by Kinko’s to develop and implement a training program for employees who elected to become part of the notary program at Kinko’s.[54]  To develop this program, Yamnitz reviewed The Notary Act, the Notary Public Handbook from the Secretary of State’s office and watched some videos on the topic.[55]
           
The plaintiff in this case argued that Kinko’s should be held liable under the common law theories of negligent supervision and negligent training, as well as a claim based on Section 7-102 of the Illinois Notary Public Act which provides:
“§ 7-102. Liability of Employer of Notary.  The employer of a notary public is also liable to the persons involved for all damages caused by the notary’s official misconduct, if:
  1. the notary public was acting within the scope of the notary’s employment at the time the notary engaged in the official misconduct; and
  2. the employer consented to the notary public’s official misconduct.”[56]
The court ruled that the plaintiff failed to “comply with our rules” with regard to briefs submitted on appeal and “therefore (he) forfeited review of the statutory claim.[57]  The court only looked at the two common laws put forth by the plaintiff, which were “negligent supervision” and “negligent training.” [58]  The court ultimately determined that because Illinois had the Notary Public Act, the Act’s purpose was to “simplify, clarify, and modernize the law governing notaries public” and to “promote, serve, and protect the public interest.”[59]  Thus, under the Act, “when a notary public wrongfully or negligently exercises the powers of the office, it is the notary alone who becomes liable.”[60]  Under Section 7-102, the employer is liable only if the employer “consented to the misconduct of the notary; that is, if the employer committed some malfeasance.”[61]  The court also did not find Kinko’s liable under “negligent training.”[62] 
           
Although the court mentioned respondent superior, it specifically concluded that it would not apply in this situation, where Illinois adopted the Notary Act, with regard to employer liability regardless of employer knowledge because the Act “was intended to modify common law liability for employers of notary publics.”[63] Therefore, the court went on to say that “plaintiffs who raise a common law claim against the employer of a notary public must show, at a minimum, that the employer had some knowledge of the notary public’s misconduct.”[64] 
           
Employer liability for notary employee misconduct requires the misconduct to be the proximate cause of the plaintiff’s harm.  The issue of proximate cause has been examined in cases brought against notary employers as well as sureties. 
           
One point that is made repeatedly in these cases is that notary misconduct need not be the sole cause of the harm in order for surety or employer liability to attach.  In Aetna Casualty & Surety Co. v. Commonwealth ex rel. Andres, suit was brought against a surety for the misconduct of a notary who also acted as a real estate agent.[65]  The surety claimed that the false notary certificate was not the proximate cause of the harm.  The court stated that the notary’s act need not be the sole cause of the harm “…if it is a concurring cause and plays a part in bringing about the injury, the liability for the loss is fixed.”[66]  Because the notary’s completion of a false notary certificate, when coupled with his acts as a real estate agent, led to the loss, proximate cause was shown.[67] It was irrelevant that the notary’s professional misconduct occurred simultaneously with his fraudulent acts as a real estate agent.[68] 
           
A more recent Florida case, Ameriseal, Inc. v. Leiffer, also addressed proximate cause.  In this case, a notary employee of a law firm was approached by a coworker’s husband, who asked her to notarize two signatures.[69]  The documents reflected that the two individuals whose signatures appeared were agents of an insurance company.[70]  The employee notarized the signatures even though neither individual was personally known to her and neither appeared before her to swear to the truth of the information in the papers.[71]  Ameriseal paid premiums totaling $70,000 to secure bonds that were represented by the falsely notarized papers.[72]  The insurance company denied having used the bonds and Ameriseal lost a state road-painting contract as a result.[73]  Ameriseal sued the husband, notary, and law firm employer.
           
The trial court entered summary judgment for the law firm and notary, accepting their argument that the notary’s act was not the proximate cause of the harm.[74]  This ruling was reversed on appeal with the court finding that there was an issue of fact as to whether Ameriseal’s harm stemmed from its reliance on the invalid notarization.[75]  The court was persuaded by Ameriseal’s affidavit, which stated that the plaintiff would not have paid the premiums without having relied on the notarized signatures.[76] 
           
The court found irrelevant the defendants’ argument that even if the two individuals personally appeared before the notary, the bonds would have been invalid because those individuals did not have actual authority.[77]  The court reasoned that the two “might have been unwilling to swear falsely… and… had they signed, they, and not the notary, would be civilly liable for any loss.”[78]  The defendants also claimed that Ameriseal had purchased other invalid bonds not involving the notary’s misconduct.[79]  However, the court reasoned that “the misconduct of others does not immunize the notary and her employer from damages resulting from her misconduct.”[80] 
           
Case law dealing with notary employer liability is not easily summarized.  The opinions are divergent and often accompanied by little in the way of rationale.  Numerous issues are touched upon, among them agency, reliance, and proximate cause.  As the next section demonstrates, statutory approaches exhibit slightly more consistency. 
 
STATUTES
Some state legislatures have enacted statutes governing the issue of employer liability for notary employee misconduct.  The majority of these statutes impose employer liability if the scope of employment test is met, but additionally require that the employer either know of or consent to notary misconduct.  Other statutes focus on instances where the employer coerces or directs misconduct. 
           
Under the Idaho and Virginia statutes, there must be proof that the notary acted within the scope of employment at the time of misconduct and that the employer had “actual knowledge of, or reasonably should have known of,” the notary’s misconduct.[81]  There is no definition of knowledge in the statute and no cases have arisen to guide the interpretation. 
           
Connecticut’s statute requires that notary misconduct must be related to the employer’s business and that the employer must direct, encourage, consent to, ratify, or approve of the misconduct either in the particular transaction or, implicitly, by previous actions in at least one similar transaction.[82]  This language reflects the language in the Model Notary Act. 
           
Florida’s statute is unique by relying on pure agency principles.  It imposes liability on employers for the harm that is proximately caused by notary employee misconduct provided the notary acts within the scope of employment at the time the misconduct occurs.[83]  
 
CONCLUSION
Common law and statutes governing employer liability for notary employee misconduct reveal a split of authority.  While the law provides for protection for employers, the door is still open and the argument can and should be made that employers who utilize notary employees for the benefit of their businesses should face liability for notary misconduct based on agency principles. 
           
Ideally, if a party can establish that notary misconduct occurred and that it was the proximate cause of the plaintiff’s harm, they should then be able to proceed against an employer if the employer controlled the notary employee in relation to notary services and if misconduct occurred within the scope of employment.
           
Employers can shield against this with proper workplace education, more diligent supervision, and uniform notary procedures in the business, and wronged parties could have a more meaningful avenue to correct their harm rather than through the individual notary’s assets—which are likely to be far less than those of the employer. 
 
 
FOOTNOTES
 
[1] See RESTATEMENT (SECOND) OF AGENCY § 1 (1958) (hereinafter RESTATEMENT); J.S. Covington, INTRODUCTION TO AGENCY AND PARTNERSHIP 1 (1988); ROSCO T. STEPHAN, AGENCY—PARTNERSHIP IN A NUTSHELL. 
[2] See id.
[3] Trinity Lutheran Church inc.  451 N.E. 2d 1099, In Ct. App. 1983).
[4] Commercial Union Ins. Co. v. Bert Thomas-Aitken Constr. Co. 230 A.2d 498 (NJ 1967).
[5] See generally J. Michael Gottschalk, Comment, The Negligent Notary Public-Employee: Is His Employer Liable? 48 NEB. L. REV. 503 (1969) and Vancura v. Katris, 238 Ill.2d 352 (2010).
[6] Davey v. Jones, 42 N.J.L. 28 (1880).
[7] See, id. At 31.
[8] See id.
[9] See id.
[10] See id.
[11] See id.
[12] Ayrault v. Pacific Bank, 47 N.Y. 570 (1872).
[13] See, id.
[14] See, id.
 
[15] May v. Jones, 14 S.E. 552, 553 (Ga. 1891).
[16] See, id.
[17] See, id.
[18] See, id.
[19] See, id.
[20] See, id. 
[21] Ayrault v. Pacific Bank.
[22] Agency law definition.
[23] Commercial Union Ins. Co. v. Burt Thomas-Aitken Constr. Co., 230 A.2d 498.
[24] See id.
[25] See id.
[26] See id.
[27] Iselin-Jefferson Financial Co. v. United California Bank, 549 P.2d 142 (Cal. 1976).
[28] See id.
[29] See id.
[30] See id.
[31] See id.
[32] See id.
[33] See id.
[34] See id.
[35] See id.
[36] See id.
[37] Independence Leasing Corp v. Aquino, 480 N.Y.S. 2d 1003 (Erie County Ct. 1986).
[38] See id.
[39] See id.
[40] See id.
[41] See id.
[42] See id.
[43] Richard P. Vancura v. Peter Katris et al (Kinko’s Inc.), 238 Ill. 2d 352 (2010). 
[44] Vancura v. Katris.
[45] Vancura v. Katris, 391 Ill. App. 350, 907 N.E. 2d 814.
[46] Vancura v. Katris, 238 Ill.2d 352.
[47] See id.
[48] See id.
[49] See id.
[50] See id.
[51] See id.
[52] See id.
[53] See id.
[54] See id.
[55] See id.
[56]  Illinois Notary Public Act 5 ILCS 312/7-102 (1996).
[57] Vancura v. Katris.
[58] See id.
[59] See id.
 
[60] See id.
[61] See id.
[62] See id.
[63] See id
[64] See id.
[65] Aetna Casualty & Surety Co. v. Commonwealth ex rel. Andres, 25 S.W.2d 51 (Ky. 1930).
[66] See id.
[67] See id.
[68] See id
[69] Ameriseal, Inc. v. Leiffer, 673 So.2d 68 (Fla. Dist. Ct. App. 1996).
[70] See id.
[71] See id.
[72] See id.
[73] See id.
[74] See id.
[75] See id.
[76] See id.
[77] See id.
[78] See id.
[79] See id.
[80] See id.
[81] IDAHO CODE § 51-118 (1995); VA. CODE ANN. § 47.1-27 (1995).
[82] CONN. GEN. STAT. § 3-941 (1994).
[83] FLA. STAT. ch. 117.05(7) (1995).
Share
Forward
Share
iNotary, LLC, provides this white paper as a public service. iNotary is a digital journal that helps to limit liability incurred by institutions that employ the services of notaries public. To limit liability, we customize required fields for notary journals based on the state in which the notary public resides. Even if the state does not mandate required fields, we follow the recommendations in its notary public handbook. 

Copyright © 2015, iNotary LLC, All rights reserved.

Our mailing address is:
11867 Bradburn Blvd.
Westminster, CO 80031


unsubscribe from this list    update subscription preferences