Tuesday, May 19, 2015

Shameless Bankster Fails (But Nearly Succeeds) In Attempt To Invoke Statute Of Limitations To Establish Viability Of Its Mortgage Based On Forged Deed; BoA Nearly Gets NYS Courts To Set Aside Over A Century Of Case Law In Close Call

Legal Issues:
  • forged deeds,
  • void ab initio (meaning a legal nullity at its inception) vs. voidable,
  • effect upon real property of of encumbrances (ie. mortgages, etc.) based on a forged deed,
  • inapplicability of New York's recording statute (NY Real Property Law § 291) to a forged deed,
  • inapplicability of the statute of limitations (CPLR 213 (8) [NY Law]) to foreclose a claim against parties (ie. title holders, mortgagees, other lien holders) claiming under a forged deed,
  • prevailing approach in other jurisdictions.
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From an Opinion Summary from Justia US Law:
  • Plaintiff filed a complaint against Bank of America and related entities seeking to set aside and cancel, as null and void, the Bank’s mortgage interest in real property conveyed on the authority of an allegedly forged deed.

    The Bank moved to dismiss the complaint under N.Y. C.P.L.R. 3211(a)(5) as untimely under N.Y. C.P.L.R. 213(8). Supreme Court dismissed the complaint in its entirety as time-barred.

    The Appellate Division affirmed as to the Bank, concluding that Plaintiff’s forgery-based claim against the Bank was subject to the six-year statute of limitations for fraud claims set forth in N.Y. C.P.L.R. 213(8).

    The Court of Appeals reversed, holding that the statute of limitations in section 213(8) did not foreclose Plaintiff’s claim against Defendant because, under prior case law, a forged deed is void ab initio, and as such, any encumbrance upon real property based on a forged deed is null and void.(1)
Source: Opinion Summary - Faison v. Lewis.

See also, NY appeals court holds statute of limitations does not bar action to cancel mortgage.

For the court ruling, see Faison v. Lewis, 2015 NY Slip Op 04026 (May 12, 2015).

(1) From the court ruling:
  • The legal question raised in this appeal is whether plaintiff Dorothy Faison is time-barred under CPLR 213 (8) from seeking 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.

    Under our prior case law it is well-settled that a forged deed is void ab initio, meaning a legal nullity at its inception. As such, any encumbrance upon real property based on a forged deed is null and void.

    Therefore, the statute of limitations set forth in CPLR 213 (8) does not foreclose plaintiff's claim against defendant. As the Appellate Division affirmed the dismissal of plaintiff's claims as time-barred, we now reverse.

    ***

    [W]e will not impose statutes of limitations on forged deeds because the resulting prejudice to the "rights of the true owner of real estate" only "open[s] the door for the destruction of all titles, and makes[s] it much easier for the criminal to purloin real than personal property" (see Marden, 160 NY at 57-58).

    ***

    For over a century, since this Court's decision in Marden, a forged deed has been treated in New York as void ab initio. As the Court recognized in Riversidea statute of limitations cannot validate what is void at its inception. Therefore, a void deed is not subject to a statutory time bar. The defendant's arguments are in contravention of Marden and Riverside, and would subject a claim of deed forgery to a six-year statute of limitations under CPLR 213 (8), with the result that a forged deed may be relied upon to convey title and for purposes of encumbering real property.

    However, under well-established real property principles, because only a holder of legal title may convey an interest in real property, no property interest can be conveyed by a forged deed, and no person may be a bona fide purchaser of real estate on the force of such deed. Moreover, our recording statute does not apply to a forged deed, with the consequence that recording a forged deed cannot transfer title. We, thus, decline the defendant's invitation to unsettle this established doctrine to the detriment of our state's real property recording system.

    To adopt defendant's position is to permit a forged deed to accomplish, by the mere passage of time, what has always been forbidden — the encumbrance and transfer of title. Neither law nor public policy nor common sense dictates such outcome.

    Defendant fails to present a compelling reason to overturn or ignore our prior case law in the area of real property because as we have recognized, "parties in business transactions depend on the certainty of settled rules, `in real property more than any other area of the law, where established precedents are not lightly to be set aside'" (172 Van Duzer Realty Corp. v Globe Alumni Student Assistance Ass'n, Inc., 24 NY3d 528, 535 [2014], citing Holy Properties Ltd., L.P. v Kenneth Cole Productions, Inc., 87 NY2d 130, 134 [1995]). No less so with respect to forged deeds, because landowners, banks, mortgagees, insurers, and a myriad of others depend on the simple rule that a forged deed is a legal nullity that cannot divest ownership or serve to encumber real property.

    Accordingly, the order of the Appellate Division, insofar as appealed from, should be reversed and defendant Bank of America, N.A.'s motion to dismiss the complaint against it pursuant to CPLR 3211 (a) (5) denied.
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Editor's Note: What merits highlighting in this case is how close the bankster (ie. Bank of America) came to winning this case by getting the New York judiciary to completely disregard over a century of case law. They won in the trial court; they won a unanimous decision in a state intermediate appeals court (in a 4-0 ruling - see Faison v. Lewis, 966 N.Y.S.2d 198, 106 A.D.3d 1047 (App. Div. 2nd Dept. 2013)); and they persuaded three judges on the New York Court of Appeals (the state's highest court) to buy into their argument - falling one vote short of winning - losing in a split, 4-3 decision. In other words, Bank of America got a total of eight trial and appellate level judges to buy into its argument that would, as the 4-judge majority conclusively stated, "permit a forged deed to accomplish, by the mere passage of time, what has always been forbidden — the encumbrance and transfer of title. Neither law nor public policy nor common sense dictates such outcome."

Fans of the law on forged deeds may find the court's ruling to be interesting reading as it reviews the case law in New York on forged deeds (ie. void vs. voidable, effect on bona fide purchasers, effect of recording a forged deed (or an instrument based on a forged deed), applicability of statute of limitations in attempts to cancel void instruments, etc.) dating back over a century, beginning with the venerable Marden v Dorthy, 160 NY 39 [1899]).

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