Commercial Division Blog

Posted: May 13, 2015 / Categories Commercial, Statute of Limitations/Laches, Real Property

No Statute of Limitations on Claim Based on Forged Deed

On May 12, 2015, the Court of Appeals issued a decision in Faison v. Lewis, 2015 NY Slip Op. 04026, holding that there is no statute of limitations limitations for a claim based on a forged deed.

In Faison, the plaintiff brought a claim to "set aside and cancel, as null and void, defendant Bank of America's mortgage interest in real property conveyed on the authority of a forged deed." The lower courts held that the claim was time-barred. The Court of Appeals, however, held that because "a forged deed is void ab initio, . . . any encumbrance upon real property based on a forged deed is null and void," and thus "the statute of limitations set forth in CPLR 213 (8) does not foreclose plaintiff's claim against defendant." The court explained:

In Marden v Dorthy, this Court held that a forged deed was void at its inception, finding it to be a spurious or fabricated paper, a forgery characterized by the fraudulent making of a writing to the prejudice of another's rights. As Marden noted, a forged deed lacks the voluntariness of conveyance. Therefore, it holds a unique position in the law; a legal nullity at its creation is never entitled to legal effect because void things are as no things.

. . .

A forged deed . . . cannot convey good title, and it is legally impossible for anyone to become a bona fide purchaser of real estate, or a purchaser at all, from one who never had any title, and that is this case. New York's rule reflects a general well-established principle of real property law.

It is similarly true that no property shall be encumbered, including by a mortgagee, in reliance on a forged deed.

. . .

Given the clarity of our law that a forged deed is void ab initio, and that it is a document without legal capacity to have any effect on ownership rights, the question remains whether a claim challenging a conveyance or encumbrance of real property based on such deed is subject to a time bar. Our case law permits only one answer: a claim against a forged deed is not subject to a statute of limitations defense.

As this Court held in Marden, a forged deed is void, not merely voidable. That legal status cannot be changed, regardless of how long it may take for the forgery to be uncovered. As this Court made clear in Riverside Syndicate, Inc v Munroe, a statute of limitations does not make an agreement that was void at its inception valid by the mere passage of time. Consequently, plaintiff may seek to vacate the deed and defendant's encumbrance upon the property. If, as plaintiff claims, the deed is a forgery, then it was never valid and Tonya lacks title to Gogins's half-interest in the property based on the "corrected" deed.

(Internal quotations and citations omitted).

Chief Judge Lippmann dissented, writing:

While a deed proven to have been a forgery cannot operate to affect ownership rights, this does not compel the result that the opportunity to challenge such conveyance is without limit. Statutes of limitation are essentially arbitrary time limitations barring the commencement of an action, and they reflect the legislative judgment that individuals should be protected from stale claims. While statutes of limitation foreclose a party's claim, they do not extinguish a party's underlying right.

In examining the policies underlying Statutes of Limitation, this Court has emphasized both a defendant's interest in repose and in defending a claim before the ability to do so has deteriorated through passage of time. We have also taken note of considerations of judicial economy and possible plaintiff fraud where excessive factual inquiries would be necessary. Balanced against these considerations is the injured person's interest in having a reasonable opportunity to assert a claim.

I would conclude that an action to invalidate a forged deed is subject to a statute of limitations defense. Forgery is closely related to and essentially a type of fraud. We have previously observed that forgery was defined by the common law to be the fraudulent making of a writing to the prejudice of another's rights, or the making malo animo of any written instrument for the purpose of fraud and deceit. It is therefore logical and reasonable to apply the statute of limitations for fraud to forgery claims. Under CPLR 213 (8), such a cause of action must be commenced within "the greater of six years from the date the cause of action accrued or two years from the time the plaintiff discovers the fraud, or could with reasonable diligence have discovered it. The application of the statute of limitations here has the benefit of imposing some limit on the time in which claims can be brought, while also leaving a discovery window for forgery claims which, like fraud, can be concealed from the plaintiff.

(Internal quotations and citations omitted).