NJ Appeals Court OKs Forged Deed Used By Hubby To Swipe Estranged Wife's Interest In Marital Home Where Her Subsequent Conduct (Coupled With Title Transfer To Bona Fide Purchaser) Was Deemed To Constitute Ratification Of The 'Dirty Deed'

The following facts have been adapted from a 2013 ruling from a New Jersey appeals court:

1. On August 29, 2001, husband ("Randy") and wife ("Maria") (who had been married since 1991) acquired property together.
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2. In January 2003, Randy and Maria seperated, and she left the marital residence with their two children.
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3. On April 1, 2004, a deed (later alleged by Maria to be forged) reflecting that Maria granted Randy sole ownership of the property for $1.00 was executed.
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4. On April 14, 2004 (ten days later), Randy sold the home to an innocent purchaser, one Mangiliman. Mangiliman obtained mortgages to purchase the property for $429,000.
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5. In the summer of 2005, Maria discovered that, unbeknownst to her, Randy sold the home. At that time, she obtained copies of the April 1 and 14, 2004 deeds, and subsequently claimed that the signatures purporting to be hers on the April 1, 2004 deed and related paperwork were forged. She acknowledged at the time, however, that the mortgage on the marital residence may have been in default in March 2004.
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6. Upon learning about the deeds and the sale, plaintiff called Cantu. According to plaintiff, Cantu told her that he had done what he had to do and that if she did anything about it he would kill her.
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7. Plaintiff called her divorce lawyer, who told her that litigation to regain her interest would be costly. Because of the expense, she decided not to pursue the issue.
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8. For approximately the next three years, she continued to acquiesce.
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9. In August 2008, three years after learning about the deeds and sale of the marital residence and discussing the matter with her lawyer, plaintiff filed a complaint for divorce.
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10. In her divorce complaint, she states that their items of real and personal property acquired by the parties during the marriage have been distributed to each party's satisfaction.
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11. On February 2, 2009, a judgment of divorce was entered. It incorporates a property settlement agreement (PSA) bearing signatures of Maria and Randy that were notarized three days earlier. Among other things, and just as Maria's divorce complaint had, the PSA represented that the parties "have heretofore divided all marital assets to their satisfaction."
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12. In September, 2010 (over five years after discovering that Randy ripped off her one-half interest in the marital home, and then sold the home to an unwitting buyer), Maria filed a complaint to quiet title to the former marital residence against her now-ex husband, Randy, and the innocent purchaser, Mangiliman.
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13. During her deposition in this action, Maria gave several reasons for signing the PSA despite her awareness of the forged deed and the fact that the PSA did not provide her with any proceeds from the sale of the marital residence. She testified, "My understanding in the property settlement agreement was this was something I was signing in order to finalize my divorce." And she further explained that she did not seek a share of the proceeds because of the litigation expense. When asked why she commenced this action after the long delay, plaintiff's only response was, "I think it's fair."

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In assuming that the April 1, 2004 deed from Maria to Randy was forged (there was never an actual finding of forgery - the lower court disposed of the matter on summary judgment), both the lower court and the New Jersey appeals court validated the forged deed under the specific facts of this case. The relevant portion of the appeals court's ruling in reaching this determination follows (wife Maria is the plaintiff; husband Randy is referred to by his last name, Cantu; "PSA" refers to the property settlement agreement in their divorce proceeding):

• Generally, a deed that is forged is deemed void and a nullity. Sonderman v. Remington Const. Co., 127 N.J. 96, 115 (1992) (Stein, J., dissenting) (noting that a recorded deed that is a "`forgery'" or "`procured by fraud in the execution'" is void and "`the fact that it is recorded in no sense enhances its validity'" (quoting Roger A. Cunningham et al., The Law of Property § 11.9 at 782 (1984))).
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  Despite the general rule, a person such as plaintiff wronged by a forgery may engage in a course of conduct that bars her from obtaining redress.
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  One who knows a deed transferring his or her ownership in property has been transferred and does nothing to repudiate it may be deemed to have ratified the forged deed and lose the right to challenge the forgery later, when an anticipated benefit does not materialize. See Thermo Contracting Corp. v. Bank of N.J., 69 N.J. 352, 363-64 (1976) (approving and relying upon Rakestraw v. Rodrigues, 500 P.2d 1401 (Cal. 1972) (a case involving a husband's forgery of a deed to property owned by his wife, who acquiesced in and did not object to the forgery until her marriage deteriorated)); Todd v. Mutual Aid Sav. & Loan Ass'n, 19 N.J. Super. 532, 537 (Law Div. 1952) (finding ratification by successors to an incompetent who knew about and would have been prejudiced by the loss).
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  "Ratification requires intent to ratify plus full knowledge of all the material facts." Thermo Contracting Corp., supra, 69 N.J. at 361. While equities asserted by an innocent purchaser are irrelevant when a deed is a nullity, our cases suggest that such equities are relevant when a fraudulent deed has been ratified. See Knopf v. Alma Park, Inc., 105 N.J. Eq. 299, 301 (Ch. 1929), aff'd, 107 N.J. Eq. 140 (E. & A. 1930).
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  Here, plaintiff engaged in conduct amounting to a ratification. By Summer 2005, plaintiff was not only aware of the forged deed and resulting sale of her marital residence, but also had copies of the deeds, which she discussed with her attorney. Nevertheless, she did not repudiate the forged deed or act to invalidate the sale of the marital residence — a sale that relieved her of obligations under a mortgage that was in default. Her intent to ratify the deed she knew had been forged is demonstrated by her decision to forego litigation and her representation in the divorce action that she and her husband had divided all marital property to their mutual satisfaction.
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  We recognize that there is evidence that plaintiff's husband threatened to take her life if she took action to void the transaction. Giving plaintiff the benefit of an inference that she refrained from challenging the deed out of fear of her former husband does not change our view of her intent. In her deposition, plaintiff explained that she decided against litigation because of the expense. She is the person who filed the divorce complaint and opted to affirmatively assert her satisfaction with the division of marital property in that proceeding and urge the court to incorporate a PSA confirming her satisfaction in the judgment of divorce. That conduct compels a finding of intent to ratify the forgery and does not give rise to an inference of action taken under duress.
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  Respecting the balance of equities relevant to ratification, the evidence establishes, as the judge found, that Mangiliman had no way of knowing that the deed in her chain of title was forged, had been paying the mortgages and the property taxes for years and that, even though it may have declined in value, the property was Mangiliman's home. The judge determined, and we agree, that the equities favored Mangiliman, not plaintiff who had asserted in her divorce action that all marital property had been divided to her satisfaction.[3]
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  For the foregoing reasons, we conclude that plaintiff, acting with knowledge of the material facts — that her ownership interest in the marital residence had been obliterated with the issuance of a forged deed — and the intent to forego its repudiation, ratified the deed and is, thereby, barred from seeking redress against an innocent purchaser for value.

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After reaching this conclusion, the appeals court added a second, independent basis to support its decision not to invalidate the deed: the application of the doctrine of judicial estoppel.

• There is an additional reason for barring plaintiff's attempt to seek redress for her husband's forgery of the April 1 deed from Mangiliman. Our courts "protect the integrity of the judicial process by not permitting a litigant" to take conflicting positions or make conflicting representations in the same or related judicial proceedings. McCurrie ex rel. Town of Kearny v. Town of Kearny, 174 N.J. 523, 534 (2002); accord State v. Galicia, 210 N.J. 364, 398 (2012); see Newell v. Hudson, 376 N.J. Super. 29, 30, 38 (App. Div. 2005) (noting that judicial estoppel applies to related litigation and applying the doctrine to bar a malpractice action arising from a settled divorce case).
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  Although protecting judicial integrity is the purpose of this form of estoppel, courts invoke it only "when a party's inconsistent behavior will otherwise result in a miscarriage of justice." Ryan Operations G.P. v. Santiam-Midwest Lumber Co., 81 F.3d 355, 365 (3d Cir. 1996); accord State v. Jenkins, 178 N.J. 347, 359 (2004) (quoting Kimball Int'l, Inc. v. Northfield Metal Prods., 334 N.J. Super. 596, 608 (App. Div. 2000), certif. denied, 167 N.J. 88 (2001)).
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  Plaintiff's conduct in the divorce warrants application of judicial estoppel. In that action, she attested to the truth of the allegation in her complaint, one of which was that to her knowledge all marital property had been divided to her and her husband's satisfaction. In addition, plaintiff urged the judge to incorporate the parties' PSA in the final judgment. That PSA not only memorialized her agreement that marital property had been divided to her satisfaction but also agreements favorable to her, such as the award of primary residential custody of the children and $800 monthly child support.
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  Plaintiff's presentation of the parties' agreement facilitated her goals — on this evidence, her goals were more likely than not foregoing a challenge to equitable distribution to obtain some terms favorable to her and finalizing her divorce. With the PSA, plaintiff was able to obtain a judgment of divorce expeditiously and without the need to demonstrate "extraordinary circumstances" and "good cause" that would have been required to obtain a judgment of divorce before equitable distribution of marital property, custody and child support had been resolved. R. 5:7-8.
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  To the extent that application of judicial estoppel depends upon a court's acceptance of the inconsistent position in a prior proceeding, Kimball, supra, 334 N.J. Super. at 607-08, that element is satisfied in this case. In the divorce action, the judge accepted and incorporated the PSA in its judgment.
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  Neither the fact that plaintiff and her former husband settled questions of custody, child support and equitable distribution nor the fact that Mangiliman was not a party to that action precludes judicial estoppel. This court and others have applied the doctrine to bar a legal malpractice action against a third party that arose from a property settlement agreement in a divorce action. See Newell, supra, 376 N.J. Super. at 30, 38-40 (applying judicial estoppel in that circumstance and discussing cases involving grants of summary judgment "in legal malpractice actions based on the doctrine of judicial estoppel where a litigant repudiates a prior, sworn inconsistent statement made in order to secure an advantage in or judicial approval of the underlying settlement"). Given that precedent, there is no principled basis for concluding that the doctrine cannot be applied here.
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  It is also evident that application of judicial estoppel is necessary to avoid a miscarriage of justice in this case.[4] If we were to hold otherwise, Mangiliman, the innocent purchaser of the marital residence, would be left, as the trial judge found, without a home, with the debt secured by her mortgage, and without realistic means of recovering her loss from the apparent wrongdoer, Cantu, who has at this point apparently disappeared. Noting that plaintiff knowingly misrepresented her satisfaction with the division of property, the judge found that equity could not abide upsetting title that had passed effectively to Mangiliman. We could not agree more.
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  The judgment declaring Mangiliman to have good and valid title, free and clear of any title, interest, right, agreement, encumbrance or lien of plaintiff, is affirmed.

For the ruling, see Estevez v. Mangiliman, No. A-2097-11T3 (App. Div. 2013) (unpublished).

See Voidable Or Void Ab Initio (Or "Void Unless & Until Later Ratified")? on a Mississippi case discussing the issue of subsequent ratification when a court decides whether or not to invalidate a forged deed.