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Court uses equitable considerations to give legal force to a forged deed to protect one of two innocent victims who had less ability to prevent the harm

July 7th, 2013 by Joseph William Singer

In Pasqualino v. Washington Mutual Bank, 982 N.E.2d 72 (Mass. App. Ct. 2013), the court was forced to decide which of two innocent parties should bear the financial burden of a forged deed. Although the normal rule is that a forged deed is a nullity and conveys nothing, in this case, the court protected the party that relied on the forged deed because the original owner contributed to the problem by making the forger the trustee of the property. The property was originally conveyed by Salvatore Pasqualino to a trust controlled by his son Ronald. The father Salvatore knew his son used aliases in his real estate business and the recorded documents listed the trust of the trustee of the trust as “Jonathan Pasqualino III,” an alias used by Ronald. Ronald subsequently forged a deed from the trust to a fictitious buyer who then took out a $166,600 loan from a bank (Washington Mutual Bank) in exchange for a mortgage. Ronald died shortly thereafter in police custody on unrelated charges and the bank sought to foreclose on the mortgage.

The court framed the question as a choice of which innocent party should bear the risk (and the loss) associated with the forgery. A forged deed usually conveys no title and that would suggest that the bank should bear the loss of the money. But the court determined otherwise, allowing the bank to foreclose on the property. It did so on the grounds that the father knew his son Ronald engaged in deceptive activities by using an alias in his real estate transactions and was in a better position to prevent the forgery from occuring.

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