Opinion ID: 889153
Heading Depth: 1
Heading Rank: 4

Heading: Bona Fide Purchasers for Value

Text: ¶ 21 Montana law generally protects a subsequent innocent purchaser of real property who gives value and lacks notice of impropriety. Such a purchaser is known as a bona fide purchaser for value (BFP) and his interest in the property can be preserved, even if the deed was fraudulently procured. Section 70-20-404, MCA. However, where a property is fraudulently transferred, a subsequent purchaser's rights are void if the purchaser was privy to or had notice of the fraud, because an individual with notice of the fraud lacks BFP status. Sections 70-20-401, -402, MCA. Only where the individual is a BFP and is the first BFP to duly record his interest will the curative statute, § 70-20-404, MCA, save the BFP's interest against a subsequent purchaser's interest. Section 70-21-304, MCA. The recording system imparts constructive notice to subsequent purchasers that there exists another interest in the property. As such, a subsequent purchaser who parts with value for the property but is on constructive notice of a prior interest in the property is not a BFP and may not rely on § 70-20-404, MCA, to save his interest. ¶ 22 However, the curative statute operates to protect BFPs only with regard to fraudulent conveyances, not forged deeds. This is because fraudulent conveyances are voidable between the parties, whereas forged conveyances are void ab initio and do not transfer title. However technical this distinction may appear, various courts have determined that a forgery is one of the few defenses that can defeat the claim of a BFP. See Upson v. Goodland St. Bank & Trust Co., 823 P.2d 704, 706 (Colo.1992) (bona fide purchaser status is immaterial when faced with a forged deed); Burns v. Ross, 190 Cal. 269, 212 P. 17, 20 (1923) (the rights of a bona fide purchaser are defeated where the contract of sale was a forged assignment); Harding v. Ja Laur Corp., 20 Md.App. 209, 315 A.2d 132, 135 (1974) (a bona fide purchaser may not prevail on a forged deed because the deed is void); see also Second Refuge Church v. Lollar, 282 Ga. 721, 653 S.E.2d 462, 468 n. 18 (2007). A forgery is the false making or material alteration, with intent to defraud, of any writing which, if genuine, might apparently be of legal efficacy or the foundation of legal liability ... A forged deed is absolutely void and wholly ineffectual to pass title, even to a subsequent innocent purchaser. 23 Am.Jur.2d. Deeds § 164 (2002). As we have stated in the context of tax deeds, `a curative statute cannot breathe life and validity into ... void ... deeds.' McWilliams v. Clem, 228 Mont. 297, 308, 743 P.2d 577, 584 (1987) (quoting Lowery v. Garfield County, 122 Mont. 571, 583, 208 P.2d 478, 485 (1949)). ¶ 23 Accordingly, § 70-20-404, MCA, cannot save a BFP's interest if that interest is dependent upon a void deed. While we were not clearly presented with the issue of forgery in McWilliams v. Clem , we concluded that a deed without the proper grantor signature renders the deed void as to that grantor. This holding is consistent with the accepted view that forged deeds or fraudulently altered deeds are either entirely void or partially void as to the grantor whose signature is not genuine. McWilliams, 228 Mont. at 308, 743 P.2d at 584; see also Pub. Adminstr. Kings County v. Samerson, 298 A.D.2d 512, 750 N.Y.S.2d 301, 302 (2002) (a person cannot be a bona fide purchaser for value through a forged deed, as it is void and conveys no title.). ¶ 24 Here, the District Court correctly determined that a forged deed is void and transfers no rights, even if the subsequent purchaser is a BFP. The court was presented with uncontested evidence that the Osburn-Erler, Hill-Questa, and Hill-Sherick deeds were forged, and therefore, the court concluded that all three deeds were void ab initio and transferred no rights. [2] Neither party contests this conclusion on appeal. Accordingly, the curative statute does not save Erler's interest in the property, even though Erler parted with value, had no notice of the forgery, and duly recorded the appropriate transfer documents. The District Court then considered the doctrine of ratification and ultimately quieted title in Erler pursuant thereto.