Gannaway v. Torres, 2017 ND 287

Robert and Teryl Gannaway signed a purchase-and-sale contract in May 2014 purporting to sell property to Terra Nova; they also signed a separate notarized signature page that they believed was only for financing.
Nadir Torres recorded a quitclaim deed in August 2014 conveying the property from the Gannaways to himself, then recorded a deed to Terra Nova; the Gannaways later discovered the deed by chance and asserted they never intended to convey to Torres.
Torres solicited title work but exhibited unusual conduct (pre-signed quitclaim, self-prepared affidavit of marital status, claiming exemption from consideration-statement requirements); one title company declined to assist and another proceeded.
William and Karen Schneider loaned Torres $400,000 on August 28, 2014, taking a mortgage they believed was first lien based on title work and opinions; funds were wired to an account in Terra Nova’s name.
The Gannaways sued to quiet title; the district court found Torres committed fraud in obtaining the quitclaim deed and concluded the Schneiders had constructive notice and were not good-faith encumbrancers; title was quieted to the Gannaways.

Issue	Gannaway's Argument	Schneiders' Argument	Held
Was the quitclaim deed obtained by fraud?	Torres surreptitiously attached notarized signatures and recorded a deed the Gannaways did not intend to execute.	Deed was validly recorded and Schneiders relied on title work.	Court found Torres committed fraud in obtaining the deed.
Did the deed pass valid title (void vs. voidable)?	Deed should be void and inoperative because fraud went to execution.	Deed was not void; Schneiders acquired a valid encumbrance as innocent purchasers.	Court did not need to decide definitively; concluded deed could be void but focused on purchaser status.
Were the Schneiders good-faith purchasers/encumbrancers for value without notice?	N/A (plaintiffs argued Schneiders had notice)	Schneiders claimed they relied on title companies and legal advice and had no notice of fraud.	Schneiders were not good-faith purchasers; court held constructive notice existed.
Did facts put Schneiders on inquiry notice (constructive notice)?	Presented evidence of Torres’ irregularities and inconsistencies that would prompt inquiry.	Schneiders asserted they reasonably relied on title opinions and did not know of irregularities.	Court held several inconsistencies (quitclaim to Torres personally, exemption notation, project name mismatch, prior mortgages, atypical transaction structure) required inquiry; Schneiders failed to investigate.

Hoffer v. Crawford, 65 N.W.2d 625 (N.D. 1954) (distinguishes fraud in execution that may void a deed from fraud in inducement that renders it voidable; protection of innocent purchasers absent clear, unequivocal fraud)
Nodland v. Plainsmen Petroleum, Inc., 265 N.W.2d 252 (N.D. 1978) (good-faith purchaser for value prevails against voidable title; deed void only for fraud going to execution)
Moran v. Williston Coop. Credit Union, 420 N.W.2d 353 (N.D. 1988) (legal conclusion whether instrument is void or voidable is reviewable as law)
Glascoe v. Bracksieck, 85 N.W.2d 423 (N.D. 1957) (even fraud in execution may not defeat innocent purchaser when grantor lacked ordinary care)