Daily Development for Friday, January 18, 2002

By: Patrick A. Randolph, Jr.
Elmer F. Pierson Professor of Law
UMKC School of Law
Of Counsel: Blackwell Sanders Peper Martin
Kansas City, Missouri
prandolph@cctr.umkc.edu

DEEDS; VALIDITY; FORGERY: Where cotenant forged other cotenant's signature on deed, deed was void and afforded no protection to subsequent purchasers, although other equitable circumstances may bar owner from challenging subsequent purchaser's title.

Zurstrassen v. Stonier, 786 So.2d 65 (Fla.App. 4 Dist. 2001).

Two brothers each acquired title to adjacent parcels, apparently as tenants in common. They resolved to build on the parcels and then to sell them. Construction commenced on one of the lots. While one brother, Klaus, was out of the country, the other brother, Rolf, forged Klaus' name on a deed transferring the entire interest to Rolf.

Thereafter, when Klaus returned and the brothers resolved to list the property for sale, a broker informed Klaus that his name did not appear on the title. Rolf explained this to Klaus by stating that some technical error had occurred. In fact, there were other technical errors in the title. The brothers then executed a document acknowledging that title was indeed in Rolf alone but that Klaus had an interest in the property, setting forth the plan of selling the parcels and providing for distribution of the proceeds. Klaus then left the country again.

Rolf sold the property by quitclaim and the purchaser resold it by warranty deed. Neither the first or second purchasers was aware that Rolf's title had any defect. The second purchaser, through an error, did not record the deed in the appropriate county until three months after the transfer.

In the meantime, Klaus again returned, discovered the forgery, and instituted a quiet title action and moved to rescind the two sales of the property.

The trial court entered summary judgment in favor of the purchasers, and Klaus appealed.

On appeal, held Reversed. Although there may be some equitable basis upon which the purchasers will prevail, it must be grounded in facts analyzed at trial, and the deed itself is void.

The court distinguished an earlier case that had concluded that a forged deed could be validated by equitable estoppel. It noted that the authority relied upon in that case had not involved forged deeds, and concluded that the case was better explained on grounds of equitable estoppel of the victim of forgery, rather than upon anything having to do with the deed itself.

The purchasers argued that Klaus was estopped to assert the forgery because he later became aware of the fact that his brother held sole title and entered into a document ratifying his brother's sale of the property, with him sharing in the proceeds. The court held that this document did not provide a foundation to an estoppel claim because neither of the purchasers knew of it or relied upon it. Klaus had no communication with these people at all.

The court also makes much of the fact that Klaus, at the time he signed the document, had no knowledge that Rolf had forged his signature. He believed that the fact that Rolf had sole title was due to errors in the original acquisition papers. [The editor is at a loss to see how this has anything to do with the equitable position of the third parties.]

The court held that there could be no waiver argument because Klaus didn't possess all the relevant facts - i.e. that Rolf had forged the deed, rather than that Rolf had obtained sole title to the parcels by accident.

The court also concluded that the purchasers had not shown as a matter of law that Klaus had ratified Rolf's act in forging the deed and producing title in himself alone, since he did not know the fact of the forgery at the time he signed the document agreeing that Rolf could sell the property and that Klaus would share the proceeds.

Comment 1: In a footnote, the court pointed out that the first purchaser, having taken a quitclaim deed, was in a weak position to make an equitable argument, as the quitclaim suggests that the purchaser was aware or should have been aware that there was a flaw in Rolf's title. Can the same argument be made about the second purchaser, which received a warranty deed, but had the quitclaim deed in the chain of title? Logically, the answer is yes, but of course this puts a lot of bona fide purchasers at some risk. Apparently Florida is a "race notice" jurisdiction, and the second purchaser couldn't rely upon the recording act because it wasn't recorded in time. Perhaps the first purchaser couldn't do so because of the fact that it had a quitclaim deed and therefore was disqualified as a bfp. This would be the rule in Missouri.

Comment 2: It's not clear that ultimately the purchasers won't prevail. The editor thinks that they should. Rolf and Klaus were partners, and Rolf's actions were taken in furtherance of the partnership. He had apparent authority to carry them out. 'Nuff said. But perhaps the purchaser's attorneys didn't say it.

Comment 3: One reason the editor noted this case is because another recent case, remarkably similar, took a different tack and suggested that a forged deed in fact is rendered voidable, and not void, when it is "ratified" by conduct following the forgery. In Treglia v. Zanesky, 67 Conn. App. 447, 2001 Conn. App. LEXIS 635 (12/25/01), although the original victim of the forgery on a land sale contract didn't know of it at the time, he later learned of it and consented that his father (the forger) could continue to sign his name on further documents carrying out the sale, including the deed. The court commented that "the plaintiff conducted himself with respect to the property in a way intended or calculated to induce [the purchasers] to believe they were receiving or had received good title to the property." Another distinction between the two cases is that Treglia was an appeal from a jury verdict in favor of the purchasers. But the court's analysis of the "void/voidable" distinction is one that the editor finds questionable. Better, in the editor's view, to treat all forged deeds as nullities and to acknowledge that other circumstances may nevertheless give rise to an equitable estoppel to challenge the later title in third parties.

Readers are urged to respond, comment, and argue with the daily development or the editor's comments about it.

Items in the Daily Development section generally are extracted from the Quarterly Report on Developments in Real Estate Law, published by the ABA Section on Real Property, Probate & Trust Law. Subscriptions to the Quarterly Report are available to Section members only. The cost is nominal. For the last six years, these Reports have been collated, updated, indexed and bound into an Annual Survey of Developments in Real Estate Law, volumes 1‑6, published by the ABA Press. The Annual Survey volumes are available for sale to the public. For the Report or the Survey, contact Maria Tabor at the ABA. (312) 988 5590 or mtabor@staff.abanet.org

Items reported here and in the ABA publications are for general information purposes only and should not be relied upon in the course of representation or in the forming of decisions in legal matters. The same is true of all commentary provided by contributors to the DIRT list. Accuracy of data and opinions expressed are the sole responsibility of the DIRT editor and are in no sense the publication of the ABA.

Parties posting messages to DIRT are posting to a source that is readily accessible by members of the general public, and should take that fact into account in evaluating confidentiality issues.

ABOUT DIRT:

DIRT is an Internet discussion group for serious real estate professionals. Message volume varies, but commonly runs 5 ‑ 10 messages per workday.

Daily Developments are posted every workday.

To subscribe to Dirt, send an e-mail to:

To:	ListServ@listserv.umkc.edu
Subject:	[Does not matter]
Text in body of message	Subscribe Dirt [your name]

To cancel your subscription to Dirt, send an e-mail to:

To:	ListServ@listserv.umkc.edu
Subject:	[Does not matter]
Text in body of message	Signoff Dirt

For information on other commands, send the message Help to the listserv address.

DIRT has an alternate, more extensive coverage that includes not only commercial and general real estate matters but also focuses specifically upon residential real estate matters. Because real estate brokers generally find this service more valuable, it is named "Brokerdirt." But residential specialist attorneys, title insurers, lenders and others interested in the residential market will want to subscribe to this alternative list. If you subscribe to Brokerdirt, it is not necessary also to subscribe to DIRT, as Brokerdirt carries all DIRT traffic in addition to the residential discussions.

To subscribe to Brokerdirt, send an e-mail to:

To:	ListServ@listserv.umkc.edu
Subject:	[Does not matter]
Text in body of message	Subscribe Brokerdirt [your name]

To cancel your subscription to Brokerdirt, send an e-mail to:

To:	ListServ@listserv.umkc.edu
Subject:	[Does not matter]
Text in body of message	Signoff Brokerdirt

DIRT is a service of the American Bar Association Section on Real Property, Probate & Trust Law and the University of Missouri, Kansas City, School of Law. Daily Developments are copyrighted by Patrick A. Randolph, Jr., Professor of Law, UMKC School of Law, but Professor Randolph grants permission for copying or distribution of Daily Developments for educational purposes, including professional continuing education, provided that no charge is imposed for such distribution and that appropriate credit is given to Professor Randolph, DIRT, and its sponsors.

DIRT has a WebPage at: http://www.umkc.edu/dirt/