RESPONSE:
You would like to know which Texas law prohibits a notary from notarizing his or her own document, or a document in which he or she has a financial interest.
A statement on the Texas Secretary of State’s website provides a quick answer to your concern: “…notarizations should not be performed by a notary public who is a party to the instrument or financially or beneficially interested in the transaction. The facts in each situation will determine whether the notary’s action was proper.”
However, as you have accurately determined, a specific Texas law does not exist to answer to your question.
This notary rule has been determined through rulings of higher Texas courts. Two cases that can be cited are Morris v. Dunn, 164 S.W.2d 562, 563 (Tex. Civ. App.–Fort Worth 1942, no writ); and Terrell v. Chambers, 630 S.W.2d 800. Both of these cases are summarized in the American Association of Notaries’ Texas Notary Public Manual, 2nd edition, 2006 (25-26).
However, the Texas Legislature has specified two situations in which there are no such disqualifications:
-An employee of a corporation may take an acknowledgment or proof of a written instrument in which the corporation has an interest, or
-An officer of a corporation who is a shareholder in the corporation may do likewise unless the corporation has 1,000 or fewer shareholders and the officer owns more than one-tenth of one percent of the issued and outstanding stock.
These are outlined in Texas Civil Practice and Remedies Code, Section121.002.
It stands to reason that if one cannot notarize a document in which he or she has a financial or personal interest in, one cannot notarize his or her own document.
Good Rules to Follow in All States:
A notary public taking an acknowledgement cannot also be:
-a party to the instrument, e.g. grantor or grantee, including named Trustee in a Deed of Trust
-a spouse of a party to the instrument
-a person having a direct financial interest/stake in the transaction producing the instrument, e.g. real estate broker
-a person acting as agent or attorney-in-fact for another party to the instrument
You may also be interested in reading an emailed newsletter article that the AAN published in May, 2011. Examining Notary-Family Conflicts of Interest explains why no state’s laws allow or encourage a notary to notarize a document in which he or she may have a personal or financial interest.
Reports of suspected mortgage fraud jumped 31 percent in the first quarter of 2011 compared to the same period last year, and many of the new cases were discovered amid increased scrutiny of loans originated during the final years of the real estate boom.
According to a mortgage fraud report released by the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN), 79 percent of the reports of fraud received in the first three months of 2011 involved loans originated three or more years ago.
Authorities investigating these hundreds of cases are reviewing Notary journal records as part of their inquiries. Considering that many fraud schemes go undetected for years, maintaining clear, complete, and chronological journal records of notarization's creates valuable evidence for authorities, and they are the best form of protection a Notary has against future liability.
In the past year, reports from other government agencies and industry research groups have noted a significant rise in identity fraud used to carry out mortgage scams. Among the trends the FinCEN report identified is a growing incidence of false claims of identity theft. The Notary’s journal entry can provide valuable evidence to nullify such claims.
http://www.nationalnotary.org/bulletin/bulletin_articles/jump_in_mortgage_fraud_affirms_importance_of_notary_journal_records.html?&WT.mc_id=2129&referID=A44828&utm_source=BULETN&utm_medium=email&utm_campaign=A44828