Written by Mario A. Roque, Law Clerk, Underberg & Kessler LLP
A client recently approached our firm with an interesting legal question: if you purchase a vehicle with a valid certificate of title, can that title later be declared legally “void,” even if it appeared completely clean at the time of sale? Most people would assume the answer is no. After all, the purpose of a certificate of title is to show who owns a vehicle and whether any lender has a lien on it. If the state issued the title and it shows no problems, wouldn’t that be enough?
For years, courts across the country have often applied a strict rule in vehicle ownership disputes. If a vehicle’s title can be traced back to theft, forgery, or certain kinds of fraud, the title may be considered void, not just defective. And if a title is void, it conveys no ownership at all.
What Do “Void” and “Voidable” Actually Mean?
The difference between “void” and “voidable” may sound technical, but it can determine who ultimately keeps a vehicle.
- A void document is treated as if it never legally existed. It cannot transfer ownership under any circumstances.
- A voidable document is flawed but not automatically invalid. It can sometimes be undone but it may still pass ownership to a good-faith purchaser who relied on it.
New York’s highest court drew this line clearly in Faison v. Lewis, 25 N.Y.3d 220 (2015). There, the Court of Appeals explained that a forged instrument (such as a deed containing a forged signature) is void. But a document obtained through fraud, where the signature itself is genuine, is generally voidable. That distinction protects bona fide purchasers who rely on documents that appear valid.
In the past, courts have been stricter in motor-vehicle cases including those involving stolen vehicles or forged lien releases. For example, in Green v. Arcadia Fin. Ltd., 174 Misc. 2d 411 (Erie County Sup. Ct. 1997) the court enforced the lenders’ rights even when buyers relied on what they thought was valid title.
A More Complicated Scenario
Recently, some courts have been asked to consider a situation that doesn’t fit neatly into the typical stolen-vehicle cases. Imagine this:
- A state DMV officially issues a certificate of title.
- The title appears valid and shows no liens.
- A buyer relies on that title during a routine purchase.
- Later, the title is questioned, cancelled, or withdrawn.
Now the issue becomes more nuanced. The title was obviously not forged. It was not fabricated by a thief. It was issued by a government agency and appeared proper at the time of sale. Should that government-issued title be treated as if it never existed? Or should courts look more closely at the facts before deciding who bears the loss? That distinction is critical. If the title is void, the purchaser has no protection. If it is voidable, courts may evaluate whether the buyer acted in good faith and reasonably relied on the public title record.
Recent decisions, including Faison v. Lewis and Broder v. Pallotta & Assoc. Dev., Inc., 186 A.D.3d 1189 (2d Dep’t 2020), show that courts are taking a closer look at whether a transaction should automatically be treated as void. This is especially true where no forged signature is involved and the document is officially issued. In Broder, the court voided a real estate transaction but also required that funds be returned to restore the parties to their original positions and prevent an unfair windfall. These cases demonstrate the ongoing tension between strict title rules and equitable fairness when innocent parties are affected. While there has not been a sweeping change in the law, there are signs that courts are recognizing that not every defective title fits the same mold.
Why Title Laws Matter
Vehicle ownership is governed not only by general fraud rules but also by certificate-of-title statutes. These laws are designed to create a centralized public record of ownership and liens. Buyers, lenders, and dealerships are expected to rely on that system.
In Green v. Arcadia Financial Ltd., the court recognized that for motor vehicles, the certificate-of-title regime governs lien perfection and public notice, not just general filing principles. That makes the public title record especially significant.
When the system works properly, it promotes certainty and efficiency. When the system fails, however, Courts must decide who bears the loss. Is it:
- The original lender?
- The innocent purchaser?
- Or, in limited circumstances, the government agency that issued the title?
Historically, courts have often prioritized lenders, reasoning that a properly perfected lien continues even if the vehicle changes hands. In cases involving stolen vehicles or forged documents, courts have treated title as void even when a later buyer acted in good faith. For example, in Alamo Rent–A–Car v. Mendenhall, 113 Nev. 445 (1997), a renter obtained a California “quick title” using forged documents and then sold the vehicle to innocent purchasers. The Nevada Supreme Court held that ownership remained with the original rental company as the thief could not pass title to the purchasers.
Fairness and Commercial Reality
Judges have long recognized the tension in these cases. Protecting lenders supports the credit system. Protecting good-faith buyers supports everyday commerce. When both parties are innocent, someone still must bear the loss.
In some decisions, courts apply priority rules strictly. In others, they look more closely at fairness and whether the loss resulted from wrongdoing by a party or from a broader system failure. Small factual differences can make a major difference:
- Was the vehicle actually stolen?
- Was a signature forged?
- Did the title appear valid at the time of sale?
- Had it already been cancelled or flagged?
- Did the buyer have any reason to suspect a problem?
In title litigation, the details matter.
Key Takeaways for Businesses and Purchasers
• A “clean” title is strong evidence of ownership but it may not be absolute protection in every circumstance.
• The distinction between “void” and “voidable” can determine who ultimately bears the loss.
• Courts appear increasingly attentive to whether a title was forged or officially issued by a state agency.
• Vehicle transactions involving liens or multi-state transfers warrant careful review.
• If a lien assertion or ownership challenge arises, prompt legal evaluation is critical.
As interstate vehicle transactions increase and digital titling systems expand, disputes of this kind may become more common. Until legislatures provide clearer guidance, outcomes will remain highly fact specific.
In a system built on public records and reasonable reliance, courts may be refining older doctrines to address modern realities. For businesses that depend on vehicles, understanding these risks, and responding quickly, can make all the difference.
This article was written by Mario A. Roque, a Law Clerk in Underberg & Kessler’s Litigation practice. He assists with case preparation, legal research, and the development of litigation strategies across a broad spectrum of matters. Mario can be reached at (585) 258-2887 or mroque@underbergkessler.com.
Reprinted with permission from The Daily Record and available as a PDF file here.
