More On Void vs. Voidable Deeds

Contained in a recent ruling of a New York trial court in Suffolk County, New York was a brief discussion on the distinction between deeds that are void ab initio and deeds that are merely voidable under New York law, and may offer some insight to those looking to undo/unwind fraudulent real estate transactions:

• It is well settled law that if a document purportedly conveying or encumbering property is void, the conveyance or encumbrance is a nullity and neither the grantee nor those subsequent in the chain of title or encumbrances, including bona fide purchasers or encumbrancers for value within the contemplation of RPL § 291 or § 266, gain anything of value from the void transaction (see Marden v Dorothy, 160 NY 39 [1899]; First Natl. Bank of Nevada v Williams, 74 AD3d 740 [2d Dept 2010]; Johnson v Melnikoff, 65 AD3d 519 [2d Dept 2009]; GMAC Mtge. Corp. v Chan, 56 AD3d 521 [2d Dept 2008]; Public Admin. of Kings County v Samerson, 298 AD2d 512 [2d Dept 2002]).

  It is equally well settled that deeds and encumbrances that are forged or executed under false pretenses are the result of fraud in the factum (a/k/a fraud in the execution) and are void ab initio (see Marden v Dorothy, 160 NY 39, supra; GMAC Mtge. Corp. v Chan, 56 AD3d 521, supra; Cruz v Cruz, 37 AD3d 754 [2d Dept 2007]). Persons claiming superior title to premises may possess viable defenses to a mortgage foreclosure action instituted against a mortgagor whose title to the mortgaged premises was derived from a forged deed or otherwise void transaction (see Wargo v Jean, 77 AD3d 919 [2d Dept 2010]; GMAC Mtge. Corp. v Chan, 56 AD3d 521, supra).

  In contrast, fraudulently induced deeds and other documents are voidable, not void (see Marden v Dorothy, 160 NY 39, supra; Dalessio v Kressler, 6 AD3d 57 [2d Dept 2004]; Yin Wu v Wu, 288 AD2d 104 [2d Dept 2001]). Claims resting on the voidability of fraudulently induced deeds are dependent upon the establishment of the elements of claims for fraud in the inducement and the specialized pleading requirements that attach thereto (see CPLR 3016; Cash v Tital Fin. Serv., Inc. 58 AD3d 785 [2d Dept 2009]; Dalessio v Kressler, 6 AD3d 57, supra; Mix v Neff, 99 AD3d 180 [3d Dept 1984]).

  As in the case of void deeds, persons claiming superior title to premises that were mortgaged by one whose title was derived from a fraudulently induced deed, may possess viable defenses to an action by the mortgagee to foreclose the mortgage (see Wargo v Jean, 77 AD3d 919, supra).

For the ruling, which also touches on the various statutes of limitations for the types of actions that can be brought to undo the 'dirty deeds,' see JPMorgan Chase Bank, Natl. Assn. v. Kalpakis, 2011 NY Slip Op 50374(U) (NY Supreme Court, Suffolk County, March 8, 2011).

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