A recent Michigan Supreme Court ruling overturning hundreds of emergency orders from Michigan Governor Gretchen Whitmer may have profound implications for closed mortgages based on the expanded remote notarization provisions established by order of emergency, including remote notarizations signed in ink. We explain it to you below.

What happened

Michigan already has a remote notarization law. See Michigan Deeds Act, MCL 55.261 et seq. But he has limits. The COVID-19 pandemic has led many states to enact emergency legislation and many state governors (including Michigan) to issue emergency orders to mitigate the impacts of the pandemic on the everyday life. Now Michigan’s highest court has taken collective havoc on emergency orders by hitting all. The impact on the enforceability of residential mortgages using certain types of remote notarization? Depending on how the ordinance is interpreted by future courts, this could be important, as remote notarization is one of the areas expanded by the emergency ordinance.

On March 10, 2020, the Michigan Department of Health and Human Services identified the first two presumptive positive cases of COVID-19 in Michigan. On the same day, Governor Whitmer published Executive Decree 2020-4, declaring a state of emergency. After a series of legal challenges, on June 18, 2020, the governor issued Executive Decree 2020-127, again noting that the COVID-19 pandemic is a disaster and emergency throughout the state of Michigan, and attempted to resolve the issues raised by the court orders. Acknowledging the ongoing litigation, the Governor also claimed to “invoke the [Michigan] Emergency Management Act as the basis for executive action to combat the spread of COVID-19 and mitigate the effects of this emergency on the people of Michigan, with the goal of preserving the rights and protections provided by the EMA. “

Under Executive Decree 2020-41, the governor issued an emergency order “Encouraging the use of electronic signatures and remote notarization, testimony and visits during the COVID-19 pandemic”, which, among other things, suspended the Uniform Law on electronic transactions “to the extent necessary to permit the use of an electronic signature for a transaction whenever a signature is required under Michigan law, unless the law specifically requires a physical signature.” The ordinance provided, for example, that “a signature shall not be denied legal effect or enforceability only because it is in electronic form and if a law requires a signature, an electronic signature satisfies the law. “. In addition, the ordinance (1) authorized “each State Department to send and accept electronic records and electronic signatures to and from other persons without the determination or approval of the Department of Technology, Management. and the budget ”; (2) suspended any requirement that “a notary[…]must be in the physical presence of a person requesting the services of the notary or of any required witness ”; and (3) encouraged “[p]persons and entities engaged in transactions… to use electronic records and electronic signatures and, where a notarized signature is mandated by law, to use a remote electronic notary in accordance with Michigan’s Notarial Acts . Critically here, the ordinance then sets out detailed conditions for valid remote legalization using real-time two-way audiovisual technology. If these conditions were met, Michigan (the governor ordered) would accept the remote signatures as valid.

While Order 2020-41 expired by its terms on May 6, 2020, it was subsequently replaced by an expanded version, Executive Decree 2020-74, and then with Executive decrees 2020-131, 2020-158, 2020-173 and 2020-187, the last of which was due to expire on October 30, 2020.

Of significance here, executive orders relaxed some of the existing requirements for a valid remote notarization under Michigan’s notarial deed law. For example, the ordinances permitted a hybrid procedure sometimes referred to as “ink signed remote notarization” (RIN), allowing notaries to take receipts remotely by witnessing an individual’s signature using an audiovisual communication and then performing the notarial deed on a tangible document. Ordinance 2020-41, along with other extensions, relaxed the requirement that only approved vendor systems could be used to perform remote notarization.

decision

On October 2, 2020, the Michigan Supreme Court gave an order in In re Midwest Institute of Health, PLLC v. Governor on a matter certified in court by a Federal District Judge in proceedings pending in the US District Court, Western District of Michigan. This ordinance, written in a series of concurring opinions, had the overall effect of overturning every emergency ordinance issued by Governor Whitmer.

Subsequently, on October 12, 2020, the same Supreme Court refused a motion which was intended to delay the execution of the order, considering the decision to have an immediate precedent effect, and similarly made his order in House of Representatives and Senate c. Governor (n ° 16197), adopting the decision of 2 October. Critically here, the court ruled that the law authorizing the governor to issue decrees “is incompatible with the Constitution of our state and, therefore, decrees made under this law are of no continuing legal effect. “

While it is true that the orders do not have continuing legal effect, it is clear that they had legal effect until the date of the decision. If so, the impact on the RIN may be minimal, and lenders can use this order to argue that the orders were legally in effect until October 12. the wide spectrum of the order makes such an expansion inadmissible.

The question resulted in a dissenting opinion of the October 12 denial, where a judge (Bernstein) wrote the following: “I agree with the defendants that a delay here could only leave the governor and time to better prepare for an appropriate transition. … Although I note the concern of Chief Justice MCCORMACK that there is no precedent effect to be suspended here, I would have preferred to delay the precedent effect of the opinion of this Court here and in House of Representatives c. Governor,… In order to avoid confusion and to ensure that the Governor and the Legislative Assembly have sufficient time to coordinate their efforts and guard against such unintended consequences.

Why is this important

Hundreds, if not thousands, of mortgages have been registered in Michigan since the onset of the pandemic, many using notarization processes approved by canceled executive orders, and were subsequently accepted for filing by county registrars. Many may have been registered using the RIN or other procedures approved by ordinance but not part of the law itself.

To preserve the use of the RIN and other extensions of the law, the Michigan legislature must act quickly to ensure the validity of mortgages registered under the expanded proceedings. While such a reading is likely to be tense, borrowers and their lawyers will no doubt argue that mortgages submitted for registration on the basis of emergency orders are somehow void, and lenders will no doubt consider various potential solutions to avoid this otherwise likely collateral line of attack. Manatt advises its clients on these issues and is available to discuss these issues with clients experiencing this concern.