Matthew S. Furman
As a litigator frequently
involved in real estate disputes, I often see claims to reform deeds and other
recorded instruments based on
In the Commonwealth,
reformation claims are contractual, and, therefore, must be brought within six
years of their accrual. See G.L.
c. 260, § 2; Stoneham Five Cents Sav. Bank v. Johnson,
295 Mass. 390, 395-96 (1936); CBK Brook House I, L.P. v. Berlin, 2004
WL 870122, at *20 (Mass. Land Ct. 2004); Meng
v. Yan, 2000 WL 1511555, at *2 (Mass. Super.
Ct. Sep. 14, 2000).
The question becomes when
does that accrual clock start to run. The
answer is not necessarily upon recording.
Rather, the Supreme
Judicial Court has long held such a claim does not accrue “until the mistake
has been or ought to have been discovered.”
Johnson, 295 Mass. at 396
(citing cases). Tolling the statute of
limitations period until meaningful notice of a problem exists is premised on
the idea that these are no-fault situations making judicial protection
appropriate. See Developments in the Law Statute of Limitations, 63 Harv. L.
Rev. 1177, 1213-14 (1950).
Misunderstanding vs.
Reality
The existing misunderstanding
is to treat the ‘ought to have been discovered’ language as, essentially, the
equivalent of the discovery rule applicable to damages claims. They are not the same.
For example, the discovery
rule can only apply if someone’s harm is inherently unknowable. By contrast, a flawed instrument’s recording could
render its mistake entirely knowable. After
all, recording is intended to be notice to the world under G.L.
c. 183, § 4.
The SJC, however, has never
pronounced that a mistake ‘ought to have been discovered’ simply because it is recorded. More importantly, several Massachusetts cases
have found reformation claims to be timely well past six years after a flawed
instrument’s recording. See, e.g., Buk Lhu v. Dignoti, 431 Mass. 292,
293-98 (2000) (affirming reformation
of 1980s deeds in action filed in late 1990s); American Oil Co. v. Cherubini, 351 Mass.
581, 588 (1967) (rejecting argument that reformation of 1951 lease was
time-barred in 1961 action); Franz v. Franz, 308 Mass. 262, 265-67
(1941) (ordering reformation of 1926 deed in action commenced no
earlier than 1939); McGovern v. McGovern, 77 Mass. App. Ct.
688, 699-702 (2010) (reforming 1986 deed in action filed in 2005).
This misunderstanding is
consequential, particularly in circumstances where the parties, and perhaps
their successors, have proceeded following a real estate transaction as if
everything were drawn up and executed perfectly. Mistakes happen, including scrivener’s errors
and other blunders that form the stuff of reformation. Massachusetts has never required landowners
to run into court for reformation if they are enjoying their property rights –
even those that were imperfectly conveyed – without first encountering an interruption
or objection from another party.
In these “nobody-realizes”
situations, record notice has never meant that even an obvious mistake ‘ought
to have been discovered’ by a would-be reformer. As explained by the SJC, “the defendant will typically be
hard put to offer persuasive resistance to the postponement of the running of
the statute, when the effect is merely to enable the court to restore the
transaction by means of a reformation to its true basis, on which the defendant
and [the] plaintiff were both agreed.” City of New
Bedford v. Lloyd Inv. Assocs., Inc., 363 Mass. 112, 121 (1973).
Simply stated, the SJC has long required more meaningful
notice of a problem than mere recording at the registry. For
example, in Cherubini, the lessee was
permitted to reform a property description in a recorded 1951 lease even though
suit was not filed until 1961. The
lessee only discovered the mistake after exercising its purchase option 10 years
into its lease. The SJC rejected the
lessor’s statute of limitations defense because the “first occasion which the [lessee]
would have had to check the sufficiency of the description of the land was its search
of the title subsequent to the exercise of its option to purchase.” Cherubini,
351 Mass. at 588.
Cherubini illustrates that record notice does not equate to
accrual of a reformation claim based on mistake in these nobody-realizes
situations. Any suggestion that the
clock always starts to run upon recording is fundamentally incorrect.
After all, “when a plaintiff knew or should have known
of his cause of action is one of fact which in most instances will be decided
by the trier of fact.” Riley v. Presnell, 409 Mass. 239, 240
(1991)). More importantly,
finding a reformation claim time-barred in a nobody-realizes situation leads to
an inherently inequitable result on a claim with its roots in equity.
A New York State of Mind?
It is conceivable more is
expected of those holding property rights today. An argument might be made that cases such as Johnson or Cherubini are outdated and parties should not get the benefit of
additional time to correct mistakes that are apparent from the registry (and,
nowadays, the online registry).
However, this approach would
be devastating to the nobody-realizes reformers who likely acquired property rights
from their predecessors well past a six-year window for a necessary reformation
claim and have enjoyed them since then without interruption or objection. Such
an interpretation would appear to require all landowners in the Commonwealth to
re-run title searches on their property and would flood the courts with claims
brought out of an abundance of caution, even on matters that may appear
relatively trivial or where no controversy even exists.
New York’s Hart exception presents an interesting
carveout to protect the nobody-realizes landowners if this harsher view were to
take hold. See Hart v. Blabey, 39 N.E.2d 230, 232 (N.Y.
1942). The exception provides that
“‘as to one who is in possession of the real property under an instrument of
title, the statute never begins to run against his right to reform that
instrument until he has notice of a claim adverse to his under the instrument,
or until his possession is otherwise disturbed.’” Wilshire Credit Corp. v. Ghostlaw, 300
A.D.2d 971, 973 (N.Y. App. Div. 2002) (quoting Hart, 39 N.E.2d at 232).
This “well recognized exception” has been widely
applied in New York to protect nobody-realizes landowners seeking reformation
well after the limitations clock would otherwise have run. TEG N.Y. LLC v. Ardenwood Estates, Inc. 2004
WL 626802, at *5 (E.D. N.Y. Mar.
30, 2004) (invoking exception to find limitations period to reform 1993
instrument did not start to run until 2002) (internal quotations omitted).
More importantly, this carveout
would be consistent with the public policy behind the longstanding (but
misunderstood) meaningful-notice accrual for these claims in Massachusetts. Its rational is consistent with the no-fault logic pronounced by the SJC in City of New Bedford. See Schlotthauer v. Sanders, 153 A.D.2d 731,
732 (N.Y. App. Div. 1989) (“a Statute of Limitations is . . . designed
to put an end to stale claims, and was never intended to compel resort to legal
remedies by one who is in complete enjoyment of all he claims.”).
The carveout would also appropriately treat the ‘ought to have been discovered’ question as
one of fact as opposed to treating nobody-realizes landowners as on notice
simply because of a flawed instrument’s recording many years or even decades
earlier.
The Commonwealth has always
protected landowners that are quietly enjoying property rights based on flawed
instruments without any interruption or objection. It should continue to do so.
Matthew S.
Furman, a litigation attorney at Todd
& Weld LLP in Boston,
concentrates his practice on complex commercial litigation, including business,
employment, and real estate disputes. He can be contacted at mfurman@toddweld.com.
