On March 8, 2013, the North Carolina Supreme Court overturned the Court of Appeals and held that a stamp alone can serve as a valid indorsement of a promissory note. In Re Foreclosure of Bass, No. 554PA11, 2013 WL 865408 (N.C. Mar. 8, 2013). The Supreme Court also held that a signature serving as an indorsement is entitled to a presumption in favor of validity. Id. at *5. Therefore, a party contesting the validity of the signature purporting to be an indorsement bears the burden of producing evidence to “support a finding that the signature [was] forged or unauthorized.” Id. at *4.

In   Bass, the Borrower executed a promissory note with Mortgage Lenders Network USA, Inc. (the “Note”). The Note was transferred several times and eventually ownership was transferred to U.S. Bank. Id. at *1.  The Borrower defaulted on her obligations under the Note and in March 2009 U.S. Bank filed a foreclosure action.  Id. at *2. Following U.S. Bank’s showing of the statutory elements necessary to prove foreclosure in North Carolina, the Clerk of Superior Court entered an order permitting foreclosure to proceed. Id.; see generally N.C. Gen. Stat. § 45.21.16(d) (2011).

The Borrower appealed, alleging that a stamp on the Note purporting to show transfer of ownership was insufficient to show intent or authority to negotiate the Note. The Superior Court sided with the Borrower, holding that the Note “was not properly [i]ndorsed and conveyed;” therefore, U.S. Bank was not the rightful holder of the Note and lacked standing to foreclose. Id. The Court of Appeals affirmed, holding that “the facial invalidity of th[e] stamp is competent evidence from which the trial could conclude the stamp is ‘unsigned’ and failed to establish negotiation.” Id. (citing In re Foreclosure of Bass, 720 S.E.2d 18, 27 (2011)). 

The Supreme Court held that under the UCC the contested stamp was a valid indorsement. Id. at *4.  The Supreme Court noted that “the UCC defines ‘signature’ broadly” as including a “symbol [that] may be printed, stamped or written” as long as “the symbol was executed or adopted by the party with the present intention to adopt or accept the writing.”  Id. at *3 (quoting N.C. Gen. Stat.  § 25-1-201 cmt. 37 (2011)). Thus, the stamp itself constituted a valid signature. Id. at *4. The Supreme Court noted that the stamp “indicates on its face an intent to transfer the debt from Mortgage Lenders to Emax.” Id.

Finally, the Supreme Court held that under the UCC, a “signature is presumed to be authentic and authorized [. . .] until some evidence is introduced which would support a finding that the signature is forged or unauthorized.” Id. at *4 (quoting N.C. Gen. Stat.  § 25-3-308 cmt. 1 (2011). The Borrower failed to overcome the presumption of authenticity of the signature, and therefore U.S. Bank was not required to prove the signature was valid.

The ruling represents a victory for financial institutions who were concerned that a ruling in favor of the Borrower would call into question the ownership of countless promissory notes.