Hancock v. Kulana Partners, LLC.

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Electronically Filed
Supreme Court
SCCQ-XX-XXXXXXX
13-NOV-2019
08:02 AM

IN THE SUPREME COURT OF THE STATE OF HAWAIʻI

---oOo---
________________________________________________________________

WILLIAM R. HANCOCK, individually and as Trustee of the
HANCOCK AND COMPANY, INC. PROFIT SHARING TRUST,
under trust instrument April 3, 1983, Plaintiff-Appellee,

vs.

KULANA PARTNERS, LLC, a Hawaiʻi limited liability company;
FIDELITY NATIONAL TITLE & ESCROW OF HAWAII, INC.,
a Hawaiʻi Corporation, Defendants-Appellants.
________________________________________________________________

SCCQ-XX-XXXXXXX

CERTIFIED QUESTION FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF HAWAII
(CIVIL NO. 13-00198 DKW-RLP)

NOVEMBER 13, 2019

RECKTENWALD, C.J., NAKAYAMA, McKENNA, POLLACK, AND WILSON, JJ.

OPINION OF THE COURT BY McKENNA, J.

I. Introduction

In a federal court lawsuit, a grantor asserts that an

escrow company’s alleged deletion of an easement from the
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property description attached to a deed he executed renders the

deed a “forged deed” that is void ab initio. The escrow company

and the grantee, on the other hand, assert that the grantor’s

claim sounds in fraud and is subject to, and barred by, a

statute of limitations. They assert that the statute of

limitations has run because the grantor is deemed to have had

constructive notice of the allegedly modified deed upon its

recordation.

The United States District Court for the District of Hawaiʻi

(“district court”) certified the following questions to this

court:

1. Whether a claim relating to a forged deed is subject to
the statute of limitations for fraud?

2. Whether the recording of a deed provides constructive
notice in an action for fraud?

As it is unclear whether, under Hawaiʻi law, the underlying

case involves a claim relating to a deed that is void ab initio

or a claim that is subject to a statute of limitations, we

reframe1 the questions as follows:

1. Under Hawaiʻi law, when is a deed void ab initio for
fraud, such that a claim challenging the validity of
the deed is not subject to a statute of limitations?

2. Under Hawaiʻi law, what statute of limitations
applies to a claim that a deed was procured by fraud
of the type that does not render it void ab initio?

1
This court may “reformulate the relevant state law questions as it
perceives them to be, in light of the contentions of the parties.” Allstate
Ins. Co. v. Alamo Rent-A-Car, Inc., 137 F.3d 634, 637 (9th Cir. 1998)
(citations and quotation marks omitted).

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3. Under Hawaiʻi law, when does the statute of
limitations begin to run on a grantor’s claim that a
deed was procured by fraud of the type that does not
render it void ab initio: upon recordation of the
deed or at some other point in time?2

To answer the first modified certified question, we hold

that, under Hawaiʻi law, a deed is void ab initio for fraud,

such that a claim challenging the validity of the deed is not

subject to a statute of limitations, when (1) a deed is forged,

meaning it has been falsely made, completed, endorsed, or

altered with intent to defraud; or (2) a deed has been procured

by “fraud in the factum,” such as when a person is fraudulently

deceived about the nature of a document that has been signed, as

when a document is surreptitiously substituted for signature.3

Gonsalves v. Ikei, 47 Haw. 145, 384 P.2d 300 (1963); Adair v.

Hustace, 64 Haw. 314, 640 P.2d 294 (1982) (abrogated on other

grounds by Ass’n of Apartment Owners of Royal Aloha v. Certified

Mgmt., 139 Hawaiʻi 229, 386 P.3d 866 (2016)).4

2
As the property at issue was not Land Court property, we also do not
address the effect of Hawaiʻi Revised Statutes § 501-106.
3
Under Hawaiʻi law, a party alleging fraud must prove fraud by “clear and
convincing evidence.” See, e.g., Iddings v. Mee-Lee, 82 Hawaiʻi 1, 14, 919
P.2d 263, 276 (1996) (“[T]he clear and convincing standard is typically used
in civil cases involving allegations of fraud or some other quasi-criminal
wrongdoing by the defendant.”) (citation omitted).
4
We note that the courts are split as to whether a void deed can be
ratified. According to 26A C.J.S. Deeds § 68, “most courts hold that an
instrument that is void by reason of defective execution may be ratified by
the grantor, subject, however, to certain limitations as to the manner of
ratification, as, for example, by a reacknowledgement, or the execution or a
confirmation deed, or by a will, or by an authorization under seal to
(continued. . .)

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To answer the second modified certified question, we hold

that, under Hawaiʻi law, the six-year “catch-all” statute of

limitations under Hawaiʻi Revised Statutes (“HRS”) § 657-1(4)

(2016) applies to a claim that a deed was procured by fraud of

the type that does not render it void ab initio, e.g., fraud in

the inducement and constructive fraud.

To answer the third modified certified question, we hold

that the statute of limitations begins to run on a grantor’s

claim that a deed was procured by fraud of the type that does

not render it void ab initio when the grantor discovers, or

reasonably should have discovered, the existence of the claim

or the identity of the person who is liable for the claim.

(continued. . .)
complete and deliver the instrument, where such as is performed.” (footnotes
omitted). Another possible manner of ratifying an unauthorized modification
of the deed is the acceptance of benefits under the deed with full knowledge
of the unauthorized act. See, e.g., Brock v. Yale Mortg. Corp., 287 Ga. 849,
855 (2010) (explaining that a person whose name is forged on a deed may later
ratify the unauthorized act where the person, with full knowledge of all the
material facts, accepts the benefits of the unauthorized act; a person
seeking to cancel a forged deed in equity must tender to the grantee any
consideration received under the forged deed); Erler v. Creative Finance, 203
P.3d 744 (Mont. 2009) (collecting cases from Florida, Georgia, and the United
States Court of Appeals for the Eighth Circuit permitting ratification of
void deeds and holding that “ratification of a forged deed may properly be
considered in equity”). In this case, we need not and do not address
whether, under Hawaiʻi law, a void deed could be ratified.
26A C.J.S. Deeds § 68 goes on to state, however, “Some courts have held
that a void deed, such as one that has been forged, cannot be ratified.”
See, e.g., Beazley v. Turgeon, 772 S.W.2d 53 (Tenn. Ct. App. 1988) (affirming
trial court’s decision voiding a deed procured by forgery and a falsified
notary acknowledgement and holding there could be no ratification of the void
deed because the grantor had not agreed to the exact terms set forth in the
transaction involving the forged deed); Bellaire Kirkpatrick Joint Venture v.
Loots, 826 S.W.2d 205, 210 (Tex. App. 1992) (“Because a forged deed is void
ab initio, it is not subject to being revived by mere ratification.”).
Again, we need not and do not address this issue.

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II. Factual Background

A. District Court Proceedings

This case involves a 2002 sale of real property from

William R. Hancock (“Hancock”) to Kulana Partners, LLC (“KPL”).

Hancock had allegedly agreed to include in the conveyance

documents an easement in favor of his neighbors, Robert and

Esther Grinpas (the “Grinpases”). The recorded conveyance

documents, however, did not include the easement.

In 2007, the Grinpases sued Hancock and KPL in the Circuit

Court of the Fifth Circuit (“circuit court”). The circuit court

rendered judgment in favor of the Grinpases and against Hancock,

and the appeal has been before the ICA twice. Grinpas v. Kapaa

382, CAAP-XX-XXXXXXX.

In 2013, in the United States District Court for the

District of Hawaiʻi (“district court”), Hancock, individually and

as trustee of the Hancock and Company, Inc. Profit Sharing

Trust, sued KPL and the escrow company for the sale, Fidelity

National Title & Escrow of Hawaiʻi, Inc. (“Fidelity”). He

alleged that, after he executed the deed, Fidelity fraudulently

modified it to delete the Grinpases’ easement, then recorded the

deed.

Hancock elaborated that, in August 2002, he reviewed two

deeds at Fidelity’s Kapaʻa office: a warranty deed conveying the

property from Hancock, individually, to Hancock as trustee, and

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a trustee’s deed conveying the property from Hancock as trustee

to KPL (“Trustee Deed”). Hancock alleged that he “identified a

limitation in the ‘Subject To’ section of the Trustee Deed in

Paragraph 12 that made the conveyance subject to ‘Any rights of

the parties in possession of a portion of, or all of, said land,

which rights are not disclosed by the public record.’” He

alleged, “But for the existence of this in the ‘Subject To’

section,” he “would not have executed the deed.” Hancock went

on to allege that Paragraph 16 of the Trustee Deed described an

easement in the north corner of the property “at or near the

location of the Grinpas Easement.” Hancock further alleged that

days later, the two deeds were transmitted from Fidelity to its

attorney.

About a week later, on August 26, 2002, an internal

memorandum between Fidelity’s “Loretta” and “Jeannette” advised,

“WE NEED TO REPLACE THE SUBJECT TO PAGE ON BOTH OF THE DEEDS . .

. THE TOGETHER WITH PARAGRAPH (ON THE TOP) IS MISSING. I

BELIEVE THAT YOU ALREADY HAVE THE DEED AND I HAVE IT SET UP FOR

RECORDING ON WEDNESDAY.” To Hancock, this internal memorandum

reflected Fidelity’s “fraudulent[]” “intent to alter [Hancock’s]

executed and notarized Deeds” to “remove the easement at

paragraph 16 and paragraph 12 regarding unrecorded interests”

“without the knowledge or consent of Mr. Hancock.” According to

Hancock, the altered trustee’s deed was recorded in the Bureau

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of Conveyances5 on August 28, 2002. Hancock alleged that

“Fidelity is a fiduciary with a duty to disclose its own

malfeasance.” He also asserted that, as a result of “fraudulent

concealment by Fidelity and KPL,” he “did not learn of the

forged deed until 2013.” Relevant to the certified questions

before this court, Count I of Hancock’s Complaint sought a

declaration that the Trustee Deed was void as “an altered

instrument and . . . a forgery,” and to have the order declaring

the deed void recorded in the Bureau of Conveyances.

KPL then filed a motion to dismiss pursuant to Federal

Rules of Civil Procedure (“FRCP”) 12(b)(1) and (6), and Fidelity

filed its own motion for judgment on the pleadings pursuant to

FRCP Rule 12(c). Both KPL and Fidelity characterized Hancock’s

Complaint as an end-run around the state court judgment against

Hancock in the Grinpas case. Both argued that the allegedly

modified deed was publicly recorded in the Bureau of Conveyances

in 2002; therefore, Hancock had constructive notice of any

fraudulent conduct at that time.6 Both KPL and Fidelity further

argued that the applicable statute of limitations was the six-

5
According to Hancock, the deed was recorded only in the Bureau of
Conveyances and not in Land Court.
6
Fidelity also pointed out that Hancock had already testified in the
Grinpas case that the omission of the easement in the deed was “a mistake.”
In a later deposition (taken in 2013), Hancock testified that he realized in
2007 that there was no express mention of the easement in the Trustee’s Deed.
Therefore, Fidelity argued, Hancock had actual knowledge of the facts giving
rise to his claim for relief in 2007, if not earlier, or was at least on
inquiry notice.

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year statute of limitations found in HRS § 657-1, which began to

run in 2002 upon recordation of the deed; therefore, Hancock’s

federal complaint, filed over eleven years after the statute of

limitations had begun to run, was time-barred.

In his opposition to KPL’s and Fidelity’s motions, Hancock

appended as exhibits the 2002 Trustee’s Deed that Hancock said

he signed, which included paragraphs 12 and 16, as well as the

2002 Trustee’s Deed that was actually recorded in the Bureau of

Conveyances, which is missing paragraphs 12 and 16. He also

appended as an exhibit the internal memorandum between two

Fidelity employees referencing a missing provision in the deed.

In both of Hancock’s memoranda in opposition, he made the

same points. First, as to the statute of limitations, Hancock

argued that there is no statute of limitations on a claim that a

forged deed is void. Hancock quoted the following passage from

Palau v. Helemano Land Co., 22 Haw. 357, 361 (Haw. Terr. 1914),

to support his position: “The complainant being out of

possession is in position to, at any time, bring an action of

ejectment and therein litigate the title to the land, including

the question of the alleged forgery. A forged deed is void and

passes no title.”

Second, as to the argument that the recordation of the

Trustee’s Deed provided Hancock with constructive notice of any

fraud therein, Hancock counter-argued that “a forged instrument

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and its record are utterly void, and its record is not

constructive notice,” citing to Mosley v. Magnolia Petroleum

Co., 114 P.2d 740 (N.M. 1941).

Hancock also asked the district court to look to the Hawaiʻi

Penal Code’s definitions of “[f]alsely alter,” “[f]orged

instrument,” and “utter” to determine whether forgery occurred

in this case.

KPL and Fidelity separately filed reply memoranda in

support of each’s motions. Both asserted that Hancock

misconstrued the Palau decision. Fidelity asserted that Palau

was “decided long before the rise of modern pleading standards”

(i.e., the merger of law and equity) and “dealt with the central

question of whether a plaintiff challenging the validity of two

deeds was required to proceed on an action at law or an action

in equity.” Fidelity argued that the Palau court then held that

the plaintiff did not have to bring an action in equity first in

order to bring an action in law when it stated that the

plaintiff “is in a position to, at any time, bring an action of

ejectment,” which was an action at law. Fidelity contended that

“at any time” in Palau referred “not to a statute of limitations

(or lack thereof), but rather the availability of a particular

form of action.” KPL interpreted Palau similarly.

Further, KPL argued that “Palau demonstrates that claims of

forged deeds sound in fraud,” as the complainant in that case

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“requested that the deeds in question be declared ‘fraudulent

and void.’” Therefore, KPL reiterated that the six-year statute

of limitations for fraud (HRS § 657-1(4)) applied.

KPL and Fidelity also argued that Hancock had constructive

notice of any alleged fraud upon the recordation of the

Trustee’s Deed with the Bureau of Conveyances in 2002. KPL

noted that there is no Hawaiʻi case holding that a recorded

document serves as constructive notice regarding actions

predicated on fraudulent conduct when the public record itself

constitutes evidence of the fraud; instead, KPL referred the

court again to cases from other jurisdictions for this point of

law. KPL and Fidelity did, however, distinguish Mosley, the

sole case Hancock relied upon, as addressing “constructive

notice for subsequent purchasers for value,” not constructive

notice for purposes of determining whether the statute of

limitations had begun to run.

The district court granted KPL’s motion to dismiss and

Fidelity’s motion for judgment on the pleadings. The district

court first stated that Hancock’s claims “unmistakably sound in

fraud”; therefore, HRS § 657-1(4)’s six-year statute of

limitations applied. The district court footnoted its agreement

with KPL and Fidelity’s interpretation of the Palau decision,

noting that the case “addressed the availability of an action in

equity or at law, and did not speak to whether a limitations

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period is applicable” to forged deed claims. The district court

also rejected Hancock’s argument that Hawaiʻi Penal Code

definitions of forgery applied in this case.

The district court then acknowledged that there were no

Hawaiʻi cases addressing whether the recording of a deed serves

as constructive notice for purposes of a fraud claim. It went

on, however, to note that Hawaiʻi appellate courts have

“recognized that the recording of a document gives notice to the

general public of the conveyance,” citing Markham v. Markham, 80

Hawaiʻi 274, 281, 909 P.2d 602, 609 (App. 1996) (holding that the

“central purpose of recording a conveyance of real property is

to give notice to the general public of the conveyance and to

preserve the recorded instrument as evidence”). The district

court therefore charged Hancock with constructive notice of the

contents of the Trustee’s Deed upon the date it was recorded,

August 28, 2002, and held that Hancock’s 2013 Complaint’s fraud

claims were time-barred by the six-year statute of limitations.

The district court also rejected Hancock’s assertion that he did

not discover the fraudulent modification of the deed until 2013

due to KPL and Fidelity’s fraudulent concealment.

Judgment was entered in favor of KPL and Fidelity. Hancock

appealed the judgment to the Ninth Circuit.

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B. Ninth Circuit Proceedings

The Ninth Circuit issued a memorandum opinion stating that

“a clarification of Hawaii law would resolve this case.” The

Ninth Circuit then vacated the district court’s judgment and

remanded the case to the district court with instructions to

certify two questions to this court. The district court issued

an order so doing, and this court agreed that the questions were

amenable to answer.

III. Certified Questions

This court may “answer, in its discretion . . . any

question or proposition of law certified to it by a federal

district or appellate court if the supreme court shall so

provide by rule.” HRS § 602-5 (2016). Hawaiʻi Rules of

Appellate Procedure Rule 13(a) (2000), on certified questions,

provides the following:

When a federal district or appellate court certifies to the
Hawaiʻi Supreme Court that there is involved in any
proceeding before it a question concerning the law of
Hawaiʻi that is determinative of the case and that there is
no clear controlling precedent in the Hawaiʻi judicial
decisions, the Hawaiʻi Supreme Court may answer the
certified question by written opinion.

A question of law presented by a certified question is

reviewable de novo under the right/wrong standard of review.

Francis v. Lee Enters., Inc., 89 Hawaiʻi 234, 236, 971 P.2d 707,

709 (1999) (citation omitted).

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IV. Discussion

In their briefing of the issues before this court, the

parties largely7 reassert the arguments made before the district

court. As there is no need to reiterate these arguments, we

proceed directly to answering the modified certified questions.

A. A deed is void ab initio for fraud, such that a claim
challenging the validity of the deed is not subject to a statute
of limitations, when (1) a deed is forged; or (2) a deed has
been procured by fraud in the factum.

The first modified certified question asks, “Under Hawaiʻi

law, when is a deed void ab initio for fraud, such that a claim

challenging the validity of the deed is not subject to a statute

of limitations?” A survey of our case law reveals that we have

recognized void deed claims in two instances where fraud has

been perpetrated upon a grantor: (1) a deed is forged, meaning

the deed has been falsely made, completed, endorsed, or altered

with intent to defraud; and (2) where the deed itself is

procured due to fraud in the factum, such as when a person is

7
Hancock, however, newly raises the argument that HRS § 456-6(b) (2013),
governing notaries, contains no statute of limitations, as follows:

For the official misconduct or neglect of a notary public
or breach of any of the conditions of the notary’s official
bond, the notary and the surety on the notary’s official
bond shall be liable to the party injured thereby for all
the damages sustained. The party shall have a right of
action in the party’s own name upon the bond and may
prosecute the action to final judgment and execution.

There is no allegation in Hancock’s complaint that a notary fraudulently
modified the deed; therefore, this argument has been waived.

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fraudulently deceived about the nature of the document that has

been signed, as when a document is surreptitiously substituted

for signature. Under our case law, deeds executed as a result

of this type of fraud are void ab initio. Palau, 22 Haw. at 361

(“A forged deed is void and passes no title.”); Iaea v. Iaea, 59

Haw. 648, 650, 586 P.2d 1015, 1017 (1978) (per curiam)

(affirming the circuit court’s judgment that decreed a forged

deed to be “null and void”); Kapiolani v. Mahelona, 9 Haw. 676,

678, 680-81 (Haw. Rep. 1895) (affirming the circuit court’s

decree cancelling a deed containing the forged signature of King

Kalakaua); Gonsalves, 47 Haw. at 147 (“The fraud perpetrated on

[the grantor] went to the nature of the document and not mere

details, and therefore, all of the documents were void. . . .”).

First, a deed is void where it is forged, meaning it has

been falsely made, completed, endorsed, or altered with intent

to defraud.8 See, e.g., Iaea, 59 Haw. at 650, 586 P.2d at 1017

8
This definition of forgery is drawn from HRS § 708-850, which defines a
“forged instrument” as “a written instrument which has been falsely made,
completed, endorsed, or altered.” HRS § 708-852, titled “Forgery in the
second degree,” makes forgery of a deed a class C felony. This court has
previously looked to the criminal definition of “forgery” in the civil
context. See Maui Fin. Co. v. Han, 34 Haw. 226 (Haw. Terr. 1937). In that
case, Sarah Hong, the wife of Hong Chang Sok, signed Sok’s name as an
endorser on a promissory note while Sok was not present. 34 Haw at 228. Sok
could not read or write English, but Sarah could. Id. She waited until he
returned home for his approval, but Sok did not say anything. 34 Haw. at
229. The Territorial Supreme Court held that Sarah did not commit forgery
because she was entirely lacking in the “specific intent to deceive another
and prejudice him in some right.” Id. Furthermore, the Territorial Supreme
Court held that Sok ratified his wife’s action when he remained silent after
she sought his approval of her act. Id.

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(affirming the trial court’s finding that a deed was forged

where the plaintiff’s husband signed her name on it without her

consent); Palau, 22 Haw. at 358 (remanding allegation that two

different grantors’ signatures on deeds were fabricated);

Kapiolani, 9 Haw. 676 (affirming the circuit court’s

determination that a deed purportedly from King Kalakaua was not

signed by him).

Second, a deed is void where it is procured by fraud in the

factum. Gonsalves, 47 Haw. at 147, 384 P.2d at 302. Fraud in

the factum “goes to the nature of the document itself,” Adair,

64 Haw. at 320 n.4, 640 P.2d at 300 n.4, where, for example, a

grantor signs a deed fraudulently represented to be a lease.

See also Gonsalves, 47 Haw. 145, 384 P.2d at 301 (affirming

trial court’s order denying specific performance of a lease,

bill of sale, and consent to mortgage, all of which were

fraudulently procured by a real estate agent who did not

disclose the nature of the documents to the grantor, who could

not read English). In these circumstances, deeds are void ab

initio and not subject to any statute of limitations.9

9
We note, however, that this court previously left open the possibility
that the defense of laches could bar a claim that a deed was procured through
fraud in the factum. Adair, 64 Haw. at 325 (“[W]e have no doubt that laches
may preclude an action to cancel a deed for fraud [in the factum] under
appropriate circumstances.”). We more recently held that laches is a defense
at law and at equity. Association of Apartment Owners of Royal Aloha, 139
Hawaiʻi at 231, 386 P.3d at 868. As the issue is not before us, we also do
not address whether or not adverse possession would also apply in favor of a
(continued. . .)

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Other jurisdictions have similarly held that a claim that a

deed is void is not subject to a statute of limitations. For

example, the Court of Appeals of New York stated, “For over a

century, . . . a forged deed has been treated in New York as

void ab initio. . . [A] statute of limitations cannot validate

what is void at its inception. Therefore, a void deed is not

subject to a statutory time bar.” Faison v. Lewis, 32 N.E.3d

400, 407 (N.Y. 2015). The Faison court went on to observe that

such a rule is “the prevailing approach in other jurisdictions,”

32 N.E.3d at 405, citing, inter alia, Moore v. Smith-Snagg, 793

So.2d 1000, 1001 (Fla. Dist. Ct. App. 2015) (per curiam)

(“[T]here is no statute of limitations in respect to the

challenge of a forged deed, which is void ab initio.”); and

Thompson v. Ebbert, 160 P.3d 754, 757 (Idaho 2007) (“Because the

lease agreement was void ab initio, it could be challenged at

any time. . . . [The plaintiff’s] action to declare the lease

agreement void [due to a lack of authority to lease a portion of

the property] was not time barred.”).

(continued. . .)
third party who is a bona fide purchaser of a property whose chain of title
contained a deed procured by fraud in the factum.

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B. The six-year catch-all statute of limitations under HRS §
657-1(4) applies to a claim that a deed was procured by fraud of
the type that does not render it void ab initio, e.g., fraud in
the inducement and constructive fraud.

The second modified certified question asks, “Under Hawaiʻi

law, what statute of limitations applies to a claim that a deed

was procured by fraud of the type that does not render it void

ab initio?”

In Hawaiʻi, there are three types of fraud recognized in the

conveyance context: (1) fraud in the factum, (2) fraud in the

inducement, and (3) constructive fraud. Aames Funding Corp. v.

Mores, 107 Hawaiʻi 95, 103, 110 P.3d 1042, 1050 (2005). First,

fraud in the factum “is fraud which goes to the nature of the

document itself.” Id. As stated, supra, Section IV.A., a deed

procured through fraud in the factum is void ab initio, and a

claim challenging the validity of such a deed is not subject to

a statute of limitations. Second, fraud in the inducement is

“fraud which induces the transaction by misrepresentation of

motivating factors.” 107 Hawaiʻi at 103-04, 110 P.3d at 1050-51.

Third, constructive fraud is “characterized by the breach of

fiduciary or confidential relationship.” 107 Hawaiʻi at 104, 110

P.3d at 1051.

Under Hawaiʻi precedent, the latter two fraud claims are

governed by HRS § 657-1(4). That statute states, “The following

actions shall be commenced within six years next after the cause

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of action accrued, and not after: . . . Personal actions10 of any

nature whatsoever not specifically covered by the laws of the

State.”

This court has applied HRS § 657-1(4) to claims involving

fraud. See, e.g., Au, 63 Haw. 210, 626 P.3d 173 (applying HRS §

657-1(4) to plaintiffs’ claims that defendants fraudulently

and/or negligently misrepresented to her that the home she

bought from them did not have a water leak); Eastman v. McGowan,

86 Hawaiʻi 21, 946 P.2d 1317 (1997) (applying HRS § 657-1(4) to

plaintiffs’ claims that defendant fraudulently misrepresented to

them that she would reconvey real property to them); cf. Small

v. Badenhop, 67 Haw. 626, 701 P.2d 647 (1985) (engaging in a

laches analysis, based upon finding that the analogous statute

of limitations would be the six-year statute of limitations

found in HRS § 657-1, to a claim involving constructive fraud).

Therefore, we answer the second certified question, as modified,

as follows: HRS § 657-1(4)’s six-year statute of limitations

applies to a claim that a deed has been procured through fraud

10
A “personal action” is
an action brought for the recovery of personal property,
for the enforcement of a contract or to recover for its
breach, or for the recovery of damages for the commission
of an injury to the person or property; an action for the
recovery of a debt, or damages from the breach of contract,
or for a specific personal chattel, or for the satisfaction
in damages for injury to the person or property.
Au, 63 Haw. at 217, 626 P.2d at 179 (citations omitted).

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of the kind that does not render it void ab initio, e.g., fraud

in the inducement and constructive fraud.

C. A plaintiff grantor’s claim for fraudulent modification of
an executed deed accrues when the plaintiff grantor discovers,
or reasonably should have discovered, the existence of the claim
or the identity of the person who is liable for the claim.

The third modified certified question asks, “Under Hawaiʻi

law, when does the statute of limitations begin to run on a

grantor’s claim that a deed was procured by fraud of the type

that does not render it void ab initio: upon recordation of the

deed or at some other point in time?” There are conflicting

decisions from other states as to whether the recordation of a

conveyance document charges a party to a conveyance with

constructive notice of any alleged fraud. See, e.g., 152 A.L.R.

461, “Public Records as constructive notice as regards actions

predicated upon fraudulent misrepresentation or concealment, so

as to start the running of the statute of limitations against

the bringing of such action” (1944 & Cum. Supp.). On one hand,

some courts hold that, “since public records . . . of

conveyances . . . are open to the public, everyone is bound by

notice of their contents,” including parties to the conveyance

themselves. Id. (citing, e.g., Blum v. Elkins, 369 S.W.2d 810,

813-14 (Tex. App. 1963) (charging grantor with constructive

notice of the consideration paid for the sale of grantor’s

property, once the deed was recorded)).

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On the other hand, “[o]ther courts take the view that a

public record of a conveyance of land being meant for the

protection of possible subsequent purchasers or encumbrancers,

only they – and not the innocent party to a fraudulent

transaction – are bound thereby.” 152 A.L.R. 461. These courts

reason that once a grantor has made a conveyance, the grantor is

under no duty to examine the property records to see if fraud

has been committed. See 152 A.L.R. 461 (citing, e.g., Gates v.

Kansas Farmers’ Union Royalty Co., 111 P.2d 1098, 1103-04 (Kan.

1941) (“[N]either is the recording of a deed executed by the

owner of a property constructive notice to the grantor of the

fact that there had been fraudulently included in the deed a

description of property other than that which the grantor had

intended to convey so as to start the running of the statute of

limitations. . . . Normally an owner of the property who

executes a deed therefor has no occasion to examine the record

after the deed is recorded, to ascertain if a fraud has been

committed upon him.”)).

Some courts further consider whether the one perpetrating

the fraud is in a fiduciary position with respect to the

defrauded party. 152 A.L.R. 461. In cases where a fiduciary

relationship exists, there is a “relaxed” duty to search

property records for fraud. Id. (citing, e.g., Hutto v.

Knowlton, 108 P. 825, 825 (Kan. 1910) (“Where fiduciary

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relations exist requiring the disclosure of the true state of

facts, there is no reason to anticipate unfaithfulness, and the

obligation to search the record is relaxed.”)).

Hawaiʻi’s appellate courts have not yet decided whether the

recordation of a conveyance document charges a party to the

conveyance with constructive notice of fraud for statute of

limitations purposes. The Hawaiʻi appellate cases concerning the

recordation of documents as providing constructive notice deal

primarily with constructive notice to subsequent purchasers or

encumbrancers. See, e.g., Lathrop v. Sakatani, 111 Hawaiʻi 307,

310, 141 P.3d 480, 483 (2006) (recordation of a lis pendens

provides constructive notice of a lawsuit to third parties);

Ass’n of Apartment Owners of Kukui Plaza v. City & Cty. of

Honolulu, 7 Haw. App. 60, 70, 742 P.2d 974, 981 (1987)

(recordation of leases placed buyers on notice that City had the

right to acquire parking areas for municipal parking); Harada v.

Ellis, 4 Haw. App. 439, 443, 667 P.2d 834, 838 (1983)

(recordation of lis pendens provided constructive notice of

counterclaim to prospective purchaser of the property).

In this case, we agree with Hancock that recordation of a

deed does not, as a matter of law, provide constructive notice

to the grantor that the deed was fraudulently modified after

execution. It is true that recordation of a deed provides

constructive notice to subsequent purchasers and encumbrancers

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of the contents of the deed. See Markham, 80 Hawaiʻi at 281, 909

P.2d at 609 (holding that the “central purpose of recording a

conveyance of real property is to give notice to the general

public of the conveyance and to preserve the recorded instrument

as evidence”). We have long held, however, that “the recording

of a deed is notice, not, as it is sometimes inaccurately said

to the whole world, but merely to those who are bound to search

the record.” In re Nelson, 26 Haw. 809, 820 (Haw. Terr. 1923).

A grantor is ordinarily not duty bound to search the record of

the completed conveyance to determine whether the documents

filed were fraudulently modified.

Further, as Hancock points out, Fidelity occupied a

fiduciary role with respect to the parties to the conveyance.

See DeMello v. Home Escrow, Inc., 4 Haw. App. 41, 47, 659 P.2d

759, 763 (1983) (“The general rule is that an escrow depository

occupies a fiduciary relationship with the parties to the escrow

agreement or instructions[.]”). As such, Fidelity was required

to “comply strictly with the provisions” of the parties’ escrow

agreement or instructions. Id. Hancock correctly alleges he

should have been able to rely on Fidelity to faithfully record

the deed he executed.

The question then becomes at what point does a fraudulent

modification claim accrue, for statute of limitations purposes?

Hancock asserts that any statute of limitations applicable to

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his case would be tolled due to Fidelity’s alleged act of

removing two paragraphs from the deed he executed without

disclosing the change to him. As such, Hancock claims

fraudulent concealment of his cause of action. See Au, 63 Haw.

at 215-16, 626 P.2d at 178 (“Fraudulent concealment involves the

actions taken by a liable party to conceal a known cause of

action.”).

HRS § 657-20 (2016), titled “Extension by fraudulent

concealment,” provides a six-year statute of limitations for

actions under HRS chapter 657, commencing when the plaintiff

discovers, or reasonably should have discovered, the claim or

the identity of the person who is liable for the claim:

If any person who is liable to any of the actions mentioned
in this part . . . fraudulently conceals the existence of a
cause of action or the identity of any person who is liable
for the claim from the knowledge of the person entitled to
bring the action, the action may be commenced at any time
within six years after the person who is entitled to bring
the same discovers or reasonably should have discovered,
the existence of the cause of action or the identity of the
person who is liable for the claim, although the action
would otherwise be barred by the period of limitations.

The statute makes clear that the statute of limitations for

bringing a fraudulent modification claim accrues when the

plaintiff discovers, or reasonably should have discovered, the

existence of the claim or the identity of the person who is

liable for the claim.

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V. Conclusion

To reiterate, the three questions before this court, as

reframed, are as follows:

1. Under Hawaiʻi law, when is a deed void ab initio for
fraud, such that a claim challenging the validity of the
deed is not subject to a statute of limitations?

2. Under Hawaiʻi law, what statute of limitations applies
to a claim that a deed was procured by fraud of the type
that does not render it void ab initio?

3. Under Hawaiʻi law, when does the statute of limitations
begin to run on a grantor’s claim that a deed was procured
by fraud of the type that does not render it void ab
initio: upon recordation of the deed or at some other
point in time?

To answer the first modified certified question, we hold

that, under Hawaiʻi law, a deed is void ab initio for fraud, such

that a claim challenging the validity of the deed is not subject

to a statute of limitations, when (1) a deed is forged, meaning

it has been falsely made, completed, endorsed, or altered with

intent to defraud; or (2) a deed has been procured by fraud in

the factum, such as when a person is fraudulently deceived about

the nature of the document that has been signed, as when a

document is surreptitiously substituted for signature. To

answer the second modified certified question, we hold that the

six-year statute of limitations under HRS § 657-1(4) applies to

claims that a deed was procured by fraud of the type that does

not render it void ab initio, e.g., fraud in the inducement and

constructive fraud. To answer the third modified certified

question, we hold that the statute of limitations begins to run

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on a grantor’s claim that a deed was procured by fraud of the

type that does not render it void ab initio when the grantor

discovers, or reasonably should have discovered, the existence

of the claim or the person liable for the claim, as discussed in

this opinion.11

Jade Lynne Ching /s/ Mark E. Recktenwald
for appellant
Kulana Partners LLC /s/ Paula A. Nakayama

Ryan H. Engle, /s/ Sabrina S. McKenna
Georgia Anton, and
Eric B. Levasseur, /s/ Richard W. Pollack
pro hac vice,
for appellant /s/ Michael D. Wilson
Fidelity National Title
& Escrow of Hawaii, Inc.

Timothy Hogan
for appellee

11
Our opinion is limited to answering the certified questions as reframed
by this court, and does not address alternate grounds identified in the
federal district court’s January 10, 2014 order.

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