Title by Laches
Back in April, Constructive Notice discussed the case of Wilds v. Heckstall. At the time, an esteemed member of the New York land title bar had this comment: “Lance, I hope you are not suggesting that laches alone, without regard to the law as to adverse possession, should be a basis for barring someone from asserting fee title.” While I assured counsel back then that I was not suggesting that position, the Second Department has, in fact, just adopted that very position as the law. Stein v. Doukas, et al., 2012 NY Slip Op 06204 (2nd Dept., September 19, 2012).
In 2004, Doukas allegedly “wrongfully manufactured” a deed for a shopping center from Claire Stein to Doukas’s company, Telcor. In August, 2007, Telcor conveyed the property to Jay Realty Enterprises, Inc. for $1,425,000. In 2008, Douglas Stein commenced this action to set aside both deeds.
The Court held that “Jay Realty demonstrated its prima facie entitlement to judgment as a matter of law by establishing that the doctrine of laches precluded the plaintiffs from asserting a claim against it” because it demonstrated that, as of February 2007, Douglas Stein knew of the existence of the [allegedly forged] deed ... . Further, Jay Realty demonstrated that, despite that knowledge, the plaintiffs took no action to assert their rights to the shopping center property until they commenced this action in April 2008, more than one year later.” That knowledge and delay, coupled with Jay Realty’s expenditure of funds to acquire the property gave rise to an equitable estoppel against Stein.
While Jay Realty prevailed on its laches claim, the Appellate Division panel also held that Stein had adequately “raised a triable issue of fact as to whether the deed transferring the shopping center property from Claire Stein to Telcor was forged.” So, the net result is that while the deed to the alleged forger may ultimately be overturned, the alleged forger’s purchaser can keep the property, to the detriment of the record owner!
Among other cases cited by the Court (including the Wilds case) is Kraker v. Roll, 100 A.D. 2d 424 (2nd Dept., 1984). Kraker, however, had held that “where title by adverse possession has not been made out, the true owner's inequitable conduct must essentially amount to a fraud to result in a deprivation of legal title. ... [T]here must be shown ... either actual fraud, or fault or negligence, equivalent to fraud on his part, in concealing his title, or that he was silent when the circumstances would impel an honest man to speak...." The Doukas Court does not state that the plaintiff’s behavior was fraudulent, negligent or dishonest, or when in the course of events he was “impelled to speak.” The expenditure that formed the basis of the estoppel was held to be the consideration paid for the deed, but there is nothing to indicate that Stein knew of the impending sale to Jay Realty and failed to take action to prevent it. In this case, the action was commenced only seven months after the sale. Nevertheless, why does it matter how long after the sale the plaintiff waited to sue? By the Court’s reasoning, even the day after the sale would have been too late.