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Citation. 2010 U.S. App.
Brief Fact Summary. A party was unaware that her signature was forged in order to sell a house. She seeks to have the house returned to her, after it was bought first by a realty company with knowledge of the forgery and then by a couple with no knowledge of the forgery.
Synopsis of Rule of Law. When a deed is forged, the property will revert back to the original innocent property owner, even if that owner allows a long time to pass before instituting a suit.
Issue. When a deed is forged, is it an unreasonable delay to let twenty-three months pass between the time a forged contract for conveyance of property was discovered and the time suit was filed, if the party notified the buyer of the property as soon as she discovered the forgery?
Laches bars stale claims by a plaintiff. It has two elements: the defendant must have been prejudiced by plaintiff’s delay, and plaintiff’s delay must have been unreasonable. Here, there is some prejudice, but that can be remedied.
For the second requirement, a delay in filing is not unreasonable absent a duty to act. Appellant gave notice to Spicer of the forgery.
The reliance interest of Appellees may be protected by their cross-claim against Spicer for failure to notify them of Appellant’s claim against the title.
Holding the transfer to Appellees against Appellant, when Appellant had given notice to Spicer, would be to allow the notified beneficiaries of forgery to insulate their gains by rushing to pass title to an unknowing third party.
The risk of forged deeds falls on the purchaser, and the possibility of unfair prejudice falls on a defrauded plaintiff. This will allow encourage parties to plan intelligently and purchase title insurance.
An innocent property owner only has a duty to give notice to those claimants of whom she is aware or should be aware. Appellant gave notice to Spicer. She owed no duty to Appellees. Therefore, her delay was not unreasonable.
Discussion. Forged deeds are void and transfer no interest to a grantee. A bona fide purchaser who buys in reliance on the appearance of good title from the grantee will receive nothing.