DIRTY DEEDS: The Important Distinction Between Deed Fraud and Deed Forgery

I frequently refer to deeds obtained through deception or deceit as “dirty.”  This nomenclature started off as a backhanded reference to AC/DC’s 1970’s rock n roll anthem “Dirty Deeds Done Dirt Cheap.”  However, within my office the notion of a “dirty” deed has evolved to represent the significant distinction between conveyance instruments procured through fraud versus those that are forged.

The distinction between deed fraud and deed forgery carries tremendous legal implications.

VOID VERSUS VOIDABLE DEEDS

Most people think that fraudulently procured deeds are simply invalid or “no good,” and can be set aside by Courts as a matter of course.  After all, shouldn’t fraudulent deeds be disregarded? Unfortunately, this isn’t necessarily so, and to believe that all deed fraud results in an automatic nullity is a dangerous simplification of a complex concept in Texas real estate law.

Texas law draws a stark distinction between FORGED deeds and FRAUDULENT deeds. These two classes of “Dirty” deeds are treated differently — and with differing criteria for setting them aside — based upon whether they are categorized as “forged” or “fraudulent.”

Under Texas law, a forged deed is void.  However, a deed procured by fraud is voidable rather than void.  The legal terms “Void” and “Voidable” sound alike, but they are vastly different.

A void instrument passes no title, and is treated as a nullity.  A forged deed is void ab initio. Lighthouse Church of Cloverleaf v. Tex. Bank, 889 S.W.2d 595, 601 (Tex.App.-Houston [14th Dist.] 1994, writ denied);  Dwairy v. Lopez, 243 S.W.3d 710, 712 (Tex. App.-San Antonio 2007, no pet.) (citing Hennessy v. Blair, 173 S.W. 871, 874 (Tex. 1915)); see also Commonwealth Land Title Ins. Co. v. Nelson, 889 S.W.2d 312, 318 (Tex. App.-Houston [14th Dist.] 1994, writ denied) (“when a document is void or void ab initio it is as if it did not exist because it has no effect from the outset”).

A fraudulent deed, however, is merely voiudable, and will stand until set aside or invalidated by the Court. Ford v. Exxon Mobil Chem. Co., 235 S.W.3d 615, 618 (Tex.2007) (citing Nobles v. Marcus, 533 S.W.2d 923, 926 (Tex.1976)).

FRAUD AND FORGERY ARE NOT SYNONYMOUS

At common law, forgery was defined as “the making or altering of a written instrument purporting to be the act of another.” Nobles, 533 S.W.2d at 925-26 (internal quotation marks omitted). Employing  this definition, the Texas Supreme Court has held that “one who signs his true name, and does not represent himself to be someone else… does not commit forgery because his act does not purport to be that of another.” Id. at 926.

“The rule is also clear that one who signs his true name, purporting to act as the agent of another, has not committed a forgery.” Id.  Under this rationale, although an agent who executes a document without authority may be culpable of fraud… the agent has not committed a forgery, and the document is not void, if he has executed the document purporting on its face to be executed by him as an agent. Id.

To simplify, real estate fraud (deed fraud) occurs when a person signing a deed “has induced confidence in an agency that does not exist.” This fraud, however, will not be considered forgery when the fraudster signs his own name.

Common examples of real estate fraud include:

• purporting to sell or convey property that the grantor does not own;
• purporting to sell or convey property for which the grantor lacks sufficient authority to transfer (such as exceeding the authority under a power of attorney /appointment as personal representative of a deceased person); and
• purporting to lease property that that belongs to another.

By contrast, forgery occurs when one executes a document in the name of another person.  Section 32.21(a) of the Texas Penal Code contains a statutory definition for criminal forgery which is useful, but perhaps not controlling in a civil suit:

“Forge” means:

(A) to alter, make, complete, execute, or authenticate any writing so that it purports:

(i) to be the act of another who did not authorize that act;

(ii) to have been executed at a time or place or in a numbered sequence other than was in fact the case; or

(iii) to be a copy of an original when no such original existed;

LIMITATIONS APPLIES TO CLAIMS FOR REAL ESTATE  FRAUD

The key implication of characterizing a deed as fraudulent rather than forged, is that limitations applies to claims for real estate fraud.  Under TEX. CIV. PRAC. & REM.CODE § 16.004(a)(4) a suit  for real estate fraud must be brought within four years of when the fraud should have been discovered by reasonable diligence. See Little v. Smith, 943 S.W.2d 414, 420-21 (Tex.1997); Sherman v. Sipper, 137 Tex. 85, 152 S.W.2d 319, 320-21 (1941).

Texas law is well settled that once limitations has expired for setting aside a deed for fraud, that bar cannot typically be evaded.  Thus, fraudulent deeds will sometimes be allowed to stand when the defrauded party does not timely assert a claim for setting-aside the conveyance.

Conversely, because forged deeds are void, limitations does not apply, and they can be set-aside at any time.

If you believe that you are a victim of deed fraud or deed forgery, you should seek the assistance of an experienced real estate attorney.