Daily Development for Monday, November 5
By: Patrick A.
Randolph, Jr.
Elmer F. Pierson Professor of
Of Counsel: Blackwell Sanders Peper Martin
Kansas City,
prandolph@cctr.umkc.edu
Another contribution from Bush Nielson:
VENDOR/PURCHASER; TITLE; PRIOR LIENS: Seller lands in prison for not paying off or
obtaining release from
blanket mortgage upon sale
of lot.
State v. Love, ___ S.W. 3d ___, 2002 WL
31012769 (Mo.App.S.D.) (not
yet released for publication).
The court here affirmed a felony conviction on an unlawful
merchandising charge, as to a
Gary Love, a real estate developer, sold two lots in a
sub-division to Roy Williams. The
closing was rather casual. Love produced
a title commitment showing a blanket mortgage, and a letter in which he
promised to get a release of the lots and have a title insurance policy
issued. Williams, like most consumers,
did not notice the fact that he never got his title policy. A year later, he learned that the $195,000
mortgage was still of record against his $75,000 lots. Worse, he discovered this when he learned
that the bank was foreclosing on the mortgage.
Williams bought the mortgage loan and called the sheriff,
who followed the money trail to one of Love's bank accounts. When he was hauled in, Love said he had kept
Williams' money "because he needed 'surplus money' and . . . he 'just
screwed up.'" He also volunteered that "I'm sure I'll have to pay for
that one."
Pay he will, perhaps more than he had expected. Love was charged with unlawful
merchandizing. The law prohibits
fraudulent business practices:
The act, use or employment by any person of any deception,
fraud, false pretense, false promise, misrepresentation, unfair practice or the
concealment, suppression, or omission of any material fact in connection with
the sale or advertisement of any merchandise in trade of commerce . . . is
declared to be an unlawful practice . . . .
Any act, use or employment declared unlawful by this subsection violates
this subsection whether committed before, during, or after the sale,
advertisement or solicitation.
A violation is a felony.
Love was sentenced to three years in prison. He appealed, but the judgment and sentence
were affirmed. One witness testified
that Love had been tardy in paying off a prior loan. The court decided that this incident did not
establish Love's intent to steal the money at the later Williams closing, but
neither did it warrant a mistrial.
Editor's Comment 1: This ought to get the attention of your
"careless" developer clients.
Editor's Comment 2: This is the relatively unusual situation
of the "seller to pay" transfer subject to a mortgage. More typically, when parties transfer
property subject to a mortgage, it is the expectation at least that the land
will stand first as security for the mortgage, even if the buyer doesn't assume. The price is adjusted accordingly. That didn't happen here. In this situation, the buyer will be able to
avail of the defense of equitable marshalling, permitting the buyer to invoke
the "inverse order of sale rule" to insure that the developer's property
and any lots sold after the buyer's lots must be applied to the debt before
buyer's lots are applied.
The Reporter for this item is Bushnell Nielson, writing in his excellent Title Insurance Law Newsletter. Visit WWW.woodridgelegal.com for information.
Readers are urged to respond, comment, and
argue with the daily development or the editor's comments about it.
Items in the Daily Development section
generally are extracted from the Quarterly Report on Developments in Real
Estate Law, published by the ABA Section on Real Property, Probate & Trust
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