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Lender Entitled to Rely on “Facially Valid” Notarization

Private lender, in a series of loans, loaned an entity-borrower more than $6 million. The entity was comprised of a father, Michael Miller, and his son, Brandon Miller. While Michael borrowed the money, Michael had his secretary forge Brandon’s signature, which she then notarized. Michael died before the loans were repaid. Upon default, the lender sued the entity and Brandon.

Brandon argued, among other things, that he never signed the loan documents and his signatures were forged. Michael, claimed Brandon, was the responsible party. The court rejected that argument and held that the lender “had no obligation to perform due diligence so as to protect Brandon from the possibility that his father, Michael, and his assistant, Ms. Frangipane, were forging his name to certain loan documents and notarizing his signature and could rely on the facially valid documents, which were notarized and confirmed as validly executed by opinions of Defendants’ counsel.”

While the decision is intuitively logical, imagine the impact on business transactions had the court agreed with Brandon and required a lender to undertake due diligence for a notarized signature. The impact would be severe—every transaction would require insurance. Part of a court’s job is to create consistent and reliable outcomes among a discrete set of recurring circumstances so that businesses can rely on traditional practices.

Donald Jaffe v. REEC 137 Franklin St., LLC

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