An Appeals Court recently ruled that being silent while your spouse is using a property – solely in your name – to secure fraudulent deeds/conveyances/mortgages – will make your future legal rights evaporate.
An ex-wife, Mrs. Thurber, sued her ex-husband and 17 other defendants for an alleged fraudulent transfer of title to real estate. She claimed that her ex “fraudulently borrowed against and later sold the property, which was legally titled solely in her name.” In her original lawsuit papers, she said that the 17 others wrongfully aided in these fraudulent transactions, concerning an Ocean Township condominium property. On appeal, she claimed that the trial court’s decision was wrong.
A deed was issued in 1997 solely in Mrs. Thurber’s (while she was married) name and it was used as a vacation home. In 2003, the ex-husband tried to mortgage the property, and one of the 17 other defendants (the title company) found that it belonged solely to the Plaintiff, and that she must be present to sign a deed to the ex-husband, to complete the loan transaction.
Mr. Thurber got an imposter posing as her and the deed was signed, transferring the condo to the ex-husband. The bank gave him a mortgage of $241,077. Plaintiff found this out in August 2004, when she got notices of default and of the bank’s intent to foreclose. Shortly after that, she filed for divorce and also filed legal papers necessary to put a stop on the property, to prevent the husband from engaging in further fraud.
A few weeks later in what was a reconciliation, Mrs. Thurber dismissed these filings. In November, Mr. got another (second) loan, by a mortgage on the condo. The first debt was satisfied and a new debt created. In addition, he received $34,124.10. Four months later he obtained another (third) loan for $300,000. Apparently, the wife knew about that one. In October 2005, the second mortgagor tried to foreclose on the property. Then the third mortgagor did the same.
In November 2006, Mr. Thurber negotiated a lease-purchase agreement with an individual. The agreement called for a sale of the condo to the individual for $1,800,000, a promise he would lease it for a year, and that the husband/wife would have an option to repurchase it at a later date. Two mortgages (belonging to the buyer) financed the transaction. So the previous mortgages were paid in full, and the husband received $325,000, of which he placed $295,000 in his then wife’s bank account. One of the other defendants in the case, the title insurance company, provided the title insurance.
Mrs. again filed for divorce in March 2008 and a default judgment was entered against the husband in March 2009. She then filed suit against the 18 (including the ex, the title insurance company, lawyers, and the mortgage companies) asserting various claims that basically amounted to her arguing that the condo was hers and that all of the transactions/mortgages/conveyances were fraudulent.
The trial judge dismissed many of the claims. He said that Mrs. Thurber knew about all of the transactions and did absolutely nothing to stop them. So she waived any and all claims she might have had. She appealed as to other defendants. (a title company and lawyer & the title insurance company and the most recent mortgage banks, but not her ex-husband, who already had a default judgment against him.
On appeal, the ex-wife claimed that the trial judge did not consider that “a forged deed cannot pass good title; therefore, she had no obligation to act and [husband’s] forgery is invalid. From this she concluded that the mortgage liens of bank one and bank two must be discharged, or voided.
The appeals judge said that a person can waive his or her legal rights by engaging in behavior that is clear, unequivocal, and decisive.
In this case, Mrs. Thurber knew about the forged deed, because she filed papers attempting to prevent it in 2004. Also, she was found to have legally ratified this initially fraudulent transaction. Ratification means that a person can, by certain behavior, circumstantially agree to an otherwise improper conveyance.
As a result of at least one loan, nearly $300,000 was placed into her bank account – she was benefiting from her husband’s behavior. Even though the deed may have been fraudulent, numerous subsequent transactions were entered, of which she was both aware and benefitted. Thus, her behavior suggests she no longer had a problem with the original deed.
The appeal court concluded that the ex-wife waived her rights and subsequently ratified the transactions by: doing nothing, withdrawing her original 2004 filings, and benefitting from them. As with any property, it is your responsibility to secure your legal rights as soon as you realize they have been violated. The law says that you can’t simply know about fraud (even if you’re not part of it), do nothing, benefit from it, and then decide you’d like to claim those rights years later. Evan Xavier Bakhet is a J.D. Candidate at Rutgers School of Law-Newark with a scheduled graduation date in 2017. He collaborated with me on this blog.