Bill & Garrett Is This Fraud? - Posted by REG/Va.

Real Estate Investing Real Estate Law
1

Posted by JohnBoy on November 26, 2004 at 13:27:40:

So the sellers did eventually get their down payment when the investors bought the property from the two partners, correct?

That being the case then the sellers accepted that and the breach was cured!

As far as the rest of this, it would appear the partner that was the buyer and that took upon himself to deed the property back to the seller’s is the one in all the trouble. He did this with no legal right to do so since he already assigned all his interest away to the investors.

The other partner acting only as trustee of the trust did nothing wrong. So it’s the partner that was the buyer that created a mess and is the one in deep doo doo.

You as the trustee partner need to get yourself a good attorney to protect your interest. In the end, it doesn’t sound like you would have much to worry about since it was the other partner who did everything behind everyone’s back without their knowledge, including the trustee.

2

Bill & Garrett Is This Fraud? - Posted by REG/Va.

Posted by REG/Va. on November 22, 2004 at 17:17:05:

2 partners buy a house sub 2 but do not comply with the terms of contract. 1 partner is trustee the other beneficiary. Partners agree to assign interest and beneficiary verbally consents to the assignment so trustee assign without written direction. But trustee assumed that if there were ever any problem that each would back one another up.

Sellers inform partners that they want house back, partners refuse and then assign interest to new investors, which at the point of possesion the new investor complied to the terms of the trust agreement and sales agreement. New investor request that the trustee partner remain in position due to thier lack of knowledge of land trust. So the new investors rehab property and place renters in property and are a week away from cashing the out and getting thier equity.

3 to 4 weeks prior the beneficiary partner receives notice of suit for specific performance and inturn quit claim deed the title back to the partners sellers. Not consulting with partner prior to doing so.

Trustee call the sellers to inform them of the cash out and want to negotiate the equity owed at a discount. That’s when the trustee was inform of the conveyence of the title back to them. Beneficial partner admitts to the conveyence and pleads ignorance to the fact of the agreed upon assignment of interest which still entitled the partner to terminate the trustee position and apoint themself as successor trustee and quit claim deed the title back the sellers. There was a consideration paid to both the partners indiviually. I’m pretty sure that in the recording of deed, the beneficial partner did not disclose the documents of assignment nor was this provided to the attorney’s of both the sellers or the beneficial partner which happen to be both the partners attorney. Can you see the position that the trustee partner is in only for the actions of the beneficiary partner.

Please tell me what you think.

Thanks in advance,

REG/Va.

3

Re: Bill & Garrett Is This Fraud? - Posted by JohnBoy

Posted by JohnBoy on November 25, 2004 at 12:31:47:

Your post is so confusing and unclear that it would take to long to even try and figure out everything you said.

But if the sellers deeded the property to the two partners then the sellers are out! They no longer have a legal interest in the property. They can’t force the partners to give the house back to them.

The sellers remain liable on the loan whether partners make good on their contract with the sellers or not. The sellers only recourse is to file suit against the partners for breach of contract if they do not perform on their end of the contract with the sellers. Even if the partners deed and/or assign their interest over to another investor, the two partners remain liable to the sellers to perform on their end of the contract unless they got the sellers to sign a release of liability releasing them from their contract upon assigning the interest to another party.

The only way the seller could ever possibly get the house back is if the buyers agree to deed it back, or if the seller sues for breach of contract and the court orders the partners to give the property back.

But if the partners assigned their interest to another party who is going to complete a sale where the sellers loan is going to be paid off then what is the sellers going to base a case on to get the property back? They sold it! They deeded away their interest. Their loan is going to be paid off. So they won’t have any grounds to get it back. They may however have grounds to pursue suing the two partners for breach of contract and collecting damages if the partners breach caused the sellers to suffer by damaging their credit if the partners didn’t pay the mortgage on time as agreed. But as far as the house goes, it sounds like the sellers loan will be paid off soon when the new buyer closes on the sale.

Any recourse would be against the two partners who breached their contract with the sellers and the court could award the sellers damages to paid by the partners.

The sellers can’t just get the house back because they decide they want it back just because. If the sellers loan gets paid off then the breach is cured. That leaves the sellers left with pursuing damages against the partners if their breach caused the sellers any harm, such as damaging the sellers credit with late pays by not making the payments on time.

This is the best I can figure out based on your confusing post.

4

Re: Bill & Garrett Is This Fraud? - Posted by REG/Va.

Posted by REG/Va. on November 22, 2004 at 18:41:39:

I’d like to here from othes also.

Thanks,

REG/Va.

5

Re: Bill & Garrett Is This Fraud? - Posted by REG/Va.

Posted by REG/Va. on November 25, 2004 at 18:16:26:

JohnBoy,

We have the Sellers, Buyers(trustee and the assignee of beneficial interest), and the Assignees (new investors).

The Seller signed contract, cya letters, release loan info, escrow letter, trust agreement, warranty deed, assignment of beneficial interest. The partners recorded the deed.

Then four months later partners assigned beneficial interest to the new investors for a consideration.

So for seven months the partner of beneficial interest had nothing to do with this deal any longer.
But the partner who remained trustee did and was handling the trust accordingly for the new investors (assignees).

The former partner who was beneficiary was being sued for the bearch of contract because they had signed the sale agreement personally. So under the duress of the pending suit, they choose to find a loophole within the trust agreement and not provide all sufficient documentation that would not allow for the conveyence of the deed back to the original sellers.
You see the partner (beneficiary) knew that they didn’t have the right to deed it back and did so to hopefully save their own !#* if you know what I mean.

The more and more I research this deal I see the potential holes that can cause problems like this one.

For instance if you gave copies of all the documents of the transaction to you sellers, the seller could very well show the clerk at the court house only the trust agreement and have them read certain paragraphs that pertain to their power of direction and removal of the trustee. Then apoint a successor (themselves) and then quit claim deed it back to themselves. In this case that is what the partner who had beneficial interest did. Knowing that the partners agreed to sell the inerest of the trust to the new investoers.

Hope this clears it up a little better, but it can be just as confusing to me also.

To those that would like to know how to stop something like ths from happening to you, do the following:

Take the property subject to (If you are concerned about chain of title)by using a sales contract,cya letters, trust agreement, warranty deed, assignment of beneficial interest, Then record deed with a affidivit and memorandum concerning a real estate transaction…

Or just quit claim the deed to you or company and then place it in a land trust, but it leaves a trail so to speak of who owned the proerty prior to, but I say we do what we have to do in order to protect our interest whether it sound fair or not but that’s my opinion.

And the third thing would be to not have a weak partner that won’t communicate or consult with the other partner before making a decision out fear of being sued.

REG/Va.

6

Re: Bill & Garrett Is This Fraud? - Posted by REG/Va.

Posted by REG/Va. on November 25, 2004 at 22:43:41:

JohnBoy & Ray S,

To answer the question to whether or not both partners signed the sell agreement is no. The beneficiary partner signed as buyer only.

Where there is a breach of contract… the partners did not make the initial downpayment after the agreed upon date by buyer and seller nor were the keys ever passed to the buyer to show property to potential buyers because of the breach. Which took the partners about a month and a half to decide to just change the locks at partners expense.

Buyer, according to the sales agreement was to begin making mortgage payments as well as the installment payment towards sellers equity last Dec. and have not since.

When the partners agreed to assign interest to new investors they paid the initial down that the partners owed and began making the monthly mortgage payment and monthly installments towards the original sellers equity. The new investors have been current on the mortgage and equity payments since they took the assignment of beneficial interest.

I surely hope to hear from Bill and or Garrett soon to get their opinions on this deal.

Thanks to your response,

REG/Va.

7

Re: Bill & Garrett Is This Fraud? - Posted by Ray S

Posted by Ray S on November 25, 2004 at 21:48:37:

Hi Reg/Va. You said the following

"the seller could very well show the clerk at the court house only the trust agreement and have them read certain paragraphs that pertain to their power of direction and removal of the trustee. Then apoint a successor (themselves) and then quit claim deed it back to themselves. "

I WOULD NEVER GIVE THE SELLER THE TRUST AGREEMENT. And are you saying you give the power of Direction to the seller? I use the power of direction as a safety valve, with a person I Trust, it might even be me. Please clarify if I am misunderstanding.

Thanks
Ray

8

Re: Bill & Garrett Is This Fraud? - Posted by JohnBoy

Posted by JohnBoy on November 25, 2004 at 19:43:30:

When you drew up the purchase agreement with the sellers was only your partner named as buyer in the purchase agreement since you were being named as trustee of the trust? Or were you both named as buyers in the purchase agreement and had you named as trustee and your partner named as beneficiary of the trust?

If you were both named as buyers then I would question the validity of the trust since you were a party to the contract and named yourself as the trustee. If this could invalidate the trust then the sellers may still be the legal owners of the property and everything that transpired after the fact may not be valid. I don’t know for sure, but that is something I would be questioning.

If only your partner was named as buyer in the contract, and you only as trustee of the trust then it would seem to me your partner is the one in a legal mess.

If your only relation to this deal was being the trustee of the trust and your partner acted on his own behalf without your knowledge of him deeding back the property after the fact, then I would think you wouldn’t have much to worry about. It was your partner then that went behind your back and the investors back and frauded everyone by deeding a property over to the sellers that he no longer had a legal interest in.

But what I don’t understand is what grounds the sellers had to sue for breach of contract. If it was because the payments on their mortgage wasn’t being made then it would appear the investors your partner assigned his beneficial interest to weren’t making any payments either. That would put them in breach of contract with your partner as seller of the property. Unless the investors were paying your partner and your partner wasn’t making the payments even though he was getting the payments from the investors?

So what is the story behind all this? How was the sellers contract breached? Why did they want the property back?

Were the investors your partner assigned to making the payments on the sellers mortgage?

9

Re: Bill & Garrett Is This Fraud? - Posted by JohnBoy

Posted by JohnBoy on November 25, 2004 at 19:09:51:

What was the breach of contract the sellers were suing the partner for? How was the contract breached?

If the beneficiary partner assigned their beneficial interest to other investors then they have no legal interest in the trust, muchless the property. That isn’t a valid deed. That wouldn’t be any different than me drawing up a deed to your property and just deeding it to someone. Your partner committed fraud by deeding the property.

As far as showing the clerk the trust agreement, you can show where the sellers assigned their interest to your partner. The other investors can show where the interest of the trust was assigned to them making them the new beneficiary. This paper trail would show your partners deed back to the sellers was fraudulent and not a valid transfer. Your partner is the one facing the biggest problem for frauding everyone involved here.

This is a legal mess that is going to require a good attorney to get this mess straightened out.

Why did the sellers want the property back?

How did your partner breach the contract with the sellers?

Where the payments not being made that caused the sellers to want the property back since you and your partner were not performing on the contract?

As it stands now, in my opinion, the sellers do not own the property. They don’t have a valid deed. The investors you and your partner assigned the beneficial interest to own the property. You would still be trustee unless the investors you assigned to revoked your powers as trustee. The sellers or your partner have no power to revoke anything since they assigned all their interest away. The sellers to your partner, your partner’s to the investors.

I would think in the end the investors will end up with the property. Your partner and perhaps yourself will end up with lawsuits from both the sellers and the partners you assigned interest to.

I would think since it was your partner who acted on this after assigning away his interest you would have a decent defense against yourself as trustee of the trust. Only you as the trustee have the right to deed anything pertaining to the property unless your powers as trustee were revoked. In this case, only the investors who were assigned the beneficial interest of the trust have the power to revoke your powers as trustee. Your partner is the one who frauded everyone by providing documents under false pretenses to the clerk and deeding interest in a property he had no legal rights to over to someone else which is the sellers in this case.

You need to get a good attorney on this to cover yourself before your partners actions drag you down with him.

10

Re: Bill & Garrett Is This Fraud? - Posted by Tom-FL

Posted by Tom-FL on November 27, 2004 at 18:17:20:

“I surely hope to hear from Bill and or Garrett soon”

I wouldn’t hold my breath. Check here:
http://www.creonline.com/legal/wwwboard7/messages/23453.html

Lucky, it had almost scrolled off.