Fraudulent Deeds...Can they be Set-Aside by Courts?

San Antonio Texas Real Estate Attorney Trey Wilson wrote:

Recently, I completed the successful defense of a client whose elderly parent had sued them to set-aside a years old deed to real estate in San Antonio on grounds of fraud.  

The fraud allegations in that case were unique, in that the parent was alleging fraud in the inducement, as opposed to fraud in securing the deed, or outright forgery. The parent alleged in the lawsuit that, even though the parent had knowingly and intentionally signed the deed in favor of the child, this conveyance was in consideration for a promise by the child (which was allegedly false at the time it was made) that such child would care for the parent for life.  

When the parent determined that the child wasn't doing a good enough job as a caretaker, suit was filed in an effort to have the Court determine that the deed was void, and should be set-aside.  Although the case was resolved quickly, in our client's favor, our research revealed some important points of law that are worth re-producing here.

First, deeds procured by fraud are voidable only, not void, at the election of the grantor.  

Second, it is well-settled law in Texas that a properly executed, notarized and recorded deed  (if if such deed is alleged to be fraudulent) is valid and represents prima facie evidence of title until there has been a successful suit to set it aside. See Meiners v. Texas Osage Cooperative Royalty Pool, 309 S.W.2d 898 (Tex. Civ.App. — El Paso 1958, writ ref'd n. r. e.); Whalen v. Richardson, 353 S.W.2d 941 (Tex. Civ.App. — Amarillo 1962, n. w. h.). To the same effect is Deaton v. Rush, 113 Tex. 176, 252 S.W. 1025 (1923), wherein the court stated that: A deed obtained by fraud is not void but voidable only. As between the original parties [Defendant's] title is prima facie good, and it could only be avoided by a suit and a decree annulling and canceling the deed.

Third, it is a fundamental rule of law that only the person whose primary legal right has been breached may seek redress for an injury. As such, a suit to set aside a deed obtained by fraud can only be maintained by the defrauded party. Smith v. Carter, 45 S.W.2d 398 (Tex.Civ.App. — Texarkana 1932, writ dism'd); Meiners v. Texas Osage Cooperative Royalty Pool, supra. A party who was not defrauded by the conveyance has not suffered an invasion of a legal right and therefore does not have standing to bring suit based on that fraud.

Fourth, at least one Texas Court of Appeals has allowed to stand a Judgment issued by a Texas District Judge setting aside a deed based upon an alleged false promise by the grantee to care for the grantor "for the rest of his life." Williams v. Kaufman, 275 SW 3d 637 (Tex.App. --Beaumont) 2009

While it appears that setting aside a deed based upon fraud in the inducement may be tough, and somewhat uncommon, deeds secured by forgery and other fraudulent artifices are more common. An individual involved in a dispute over a fraudulent deed should consult with an experienced real estate attorney to explain the law and discuss possible outcomes.

Defective Notarization /Improper Acknowledgment May (But Doesn't Always) Render Deed Unenforceable or Even Void

San Antonio Texas Real Estate Attorney Trey Wilson wrote:

As an attorney practicing real estate law in San Antonio, Texas, I am frequently called upon to challenge or defend the validity of a deed transferring an interest in real estate. 

Challenges to deeds come in all varieties, and for a host of reasons. When confronted with (or asserting) a challenge to a deed's validity, it is common practice to scour the language of the deed, itself, and the circumstances surrounding its execution, for defects. 

Generally speaking, deeds are presumed to be valid, and the filing of a deed is notice to all persons of the deed's existence and contents. See Alkas v. United Sav. Ass'n of Texas, Inc., 672 S.W.2d 852, 856 (Tex.App.-Corpus Christi 1984, writ ref'd n.r.e.);First Sav. & Loan Ass'n of El Paso v. Avila, 538 S.W.2d 846, 849 (Tex.Civ.App.-El Paso 1976, writ ref'd n.r.e.). Further, it is a conclusive presumption of law that a proper and legal recording of a deed in the county where the land lies is constructive notice of the recorded deed's existence. Quarles v. Hardin, 249 S.W. 459, 462 (Tex.Comm'n App.1923, judgment adopted); White v. McGregor, 92 Tex. 556, 50 S.W. 564 (1899). However, there are important qualifications to this presumption, including when an improperly acknowledged deed has been placed of record. 

The recordation of a deed without a proper acknowledgment does not constitute notice. Hill v. Taylor, 77 Tex. 295, 14 S.W. 366, 367 (1890) (deed acknowledged before an associate judge in Maryland state court, but not clear if this met requisites of Texas law allowing acknowledgment outside the state). 

However, the defect in the acknowledgment must appear on the face of the acknowledgment. Titus v. Johnson, 50 Tex. 224, 240 (1878); Peterson & Fowler v. Lowry, 48 Tex. 408, 412 (1877).  

An example of a defective acknowledgment that is not facially apparent occurs when one who is financially and beneficially interested in a transaction.  By law, such persons are disqualified from taking an acknowledgment concerning the transaction. Gulf Prod. Co. v. Continental Oil Co., 61 S.W.2d 185, 186-87 (Tex.Civ.App.-Texarkana 1933), aff'd, 139 Tex. 183, 164 S.W.2d 488 (1942). However, if the instrument and the notary's certificate are regular on their face, and in no way expressly disclose the interest of the notary in the property and/or transaction, the instrument is valid to subsequent purchasers without notice of the defect. Gulf Prod. Co. v. Continental Oil Co., 139 Tex. 183, 164 S.W.2d 488, 493 (1942); Titus, 50 Tex. at 240; Peterson & Fowler, 48 Tex. at 412.

Another non-facial defect with a deed occurs when the Grantor did not appear in person before the Notary who acknowledged the document. For better or worse, the law is well- settled that a certificate of acknowledgment is prima facie evidence that the grantor appeared before the notary and executed the deed in question for the purposes and consideration therein expressed. Bell v. Sharif-Munir-Davidson Dev. Corp., 738 S.W.2d 326, 330 (Tex.App.-Dallas 1987, writ denied); see also Stout v. Oliveira, 153 S.W.2d 590, 596 (Tex.Civ. App.-El Paso 1941, writ ref'd w.o.m.) (burden of proof is on party who denies genuineness of acknowledgment and instrument).  Again, if the Deed recites that the Grantor appeared in person (even if they didn't), this presumption is conclusive, and only "clear and unmistakable proof that either the grantor did not appear before the notary or that the notary practiced some fraud or imposition upon the grantor" will   overcome the validity of a certificate of acknowledgment.  Bell, 738 S.W.2d at 330.