New York: Forged Deeds Conveys No rights — Statute of Limitations Does Not Apply

Oct 19, 2015

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This is not a legal opinion on any one case. Consult with an attorney before taking any action or making any decisions.

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see http://www.newyorklawjournal.com/id=1202739700342/The-Most-Significant-Title-and-Foreclosure-Cases-of-2015?cmp=share_email

In an interesting decision a New York State Court put to rest a misconception about the statute of limitations. It could have far reaching consequences. The premise put forward was that even though the deed was void, the homeowner loses his right to contest it because the statute of limitations bars the action. The Court made it very clear that this would amount to encouraging people to STEAL the property. So even if a subsequent purchaser acquired the property from someone who got a false deed from a thief, the title remains in the original homeowner. It is difficult to imagine how any court in any state could come to a different conclusion.

The question brings up the validity of the statutes that specifically DO allow title to be transferred, whether in foreclosure sales or otherwise. Those statutes, like Florida, say that after one year all you can get is money damages. I think that is vain attempt to clear up title after theft. In the New York case, you not only had a subsequent deed, you also had a mortgage loan that ends up NOT being an encumbrance on the homeowner’s property. So we have a question here: if the foreclosure sale was based upon forged instruments that were void, not voidable, under applicable law, then title should remain in the homeowner. And that has been my point since 2007 when I started the blog. It is obvious that servicers and trustees are claiming rights under nonexistent powers from a nonexistent trust and luring the courts into entering judgments against the borrowers.

There is a real question in my mind as to whether many of those foreclosure sales were void, not voidable, and therefore leaving title in the name of the original homeowner — and thus making the deeds and mortgages subsequent to the foreclosure auction in the category of “wild deeds.”

No statute of limitations bars a claim to set aside a forged deed and subsequent mortgage

The New York Court of Appeals had reaffirmed the traditional rule that forged deeds do not convey title. It has clarified that no statute of limitations bars a challenge to a forged deed even if the purported owner has subsequently transferred interests in the land to a subsequent mortgagee who had no notice of the forgery. Faison v. Lewis, 32 N.E.3d 400 (N.Y. 2015). The Court ruled that the third party purchaser is not a “bona fide” purchaser protected by the recording act because a forged deed can never be the basis of a valid transfer even if the third party did not know and could not have known about the forgery. To do otherwise would allow the forger to “steal” property and get away with it.

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