Sunday, February 15, 2009

Middle Tennessee Foreclosure Rescue Operator Faces Civil Suits; Accused Of Selling Houses Out From Under Homeowners

In Donelson, Tennessee, Newschannel 5 reports:

  • [N]ewsChannel 5 investigated one company that promised homeowners it would help save their homes. Charles Jones is behind and the man who claimed he could help homeowners who were facing foreclosure keep their home.

  • "I thought he was going to be my savior and help me out," said Kelly Reynolds. Reynolds was two months behind in her house payments for her home in Donelson. She said Jones claimed his company would cover her mortgage for a year, and then she could start paying him back. "He was very reassuring, and he said ‘I promise that you will not lose your home,'" Reynolds said. The Reynolds now face eviction because, it turns out, Jones sold their home right out from under them.


  • The amazing thing is that Jones actually bought the Reynolds' house a year ago. The Reynolds, who have lived at their home the entire time, had absolutely no idea until Jones stopped paying the mortgage. Now, his bank is telling the Reynolds they have to get out. NewsChannel 5 found at least three others in Middle Tennessee who are now suing Jones and his company, claiming he did the same thing to them.(1)

  • "The fact that all of these people feel like they were taken for a ride, believe they were defrauded out of their houses - I believe that says something," said attorney Sharmila Murthy. Murthy was involved with one of those lawsuits, which accuses Jones and his company of fraud. The Reynolds now fear they have not only lost their house, but also the $100,000 they had in equity.

For more, see Company Claimed It Could Save Homes From Foreclosure (read text) (watch video).

(1) Whether the financially strapped homeowners can successfully void the title transfers (and any mortgage liens created incident thereto) to subsequent purchasers and encumbrancers could turn on whether the subsequent purchasers and encumbrancers can be charged with inquiry notice of the alleged fraud and/or any other unrecorded rights (ie. equitable mortgage - see Perry v. Queen, (M.D. Tn. Civil No. 3:05-0599) 2006 U.S. Dist. LEXIS 17120, February 27, 2006 (unpublished); Hensley v. Britt, 1996 Tenn. App. LEXIS 793, No. 01A01-9607-CH-00296, 1996 WL 709375 (Tenn. Ct. App. Dec. 11, 1996)) the scammed homeowners can establish that they had at the time of the relevant conveyances. Lack of participation in the scam, and lack of any actual knowledge thereof, by the subsequent purchasers / encumbrancers is not enough to sustain a claim of bona fide purchaser. See Aslinger v. Price, No. E2006-00029-COA-R3-CV, 2006 Tenn. App. LEXIS 584, (Ct. App. at Knoxville; September 1, 2006), in which a Tennessee appeals court, quoting from earlier Tennessee cases, stated that a subsequent purchaser is:

  • "(c)hargeable with notice, by implication, of every fact affecting the title which would be discovered by an examination…of every fact as to which the purchaser, with reasonable prudence or diligence, ought to become acquainted."

The court also points out that "whatever is sufficient to put a person upon inquiry, is notice of all the facts to which that inquiry will lead, when prosecuted with reasonable diligence and good faith." See also: Wash. Mut. Bank v. N.K.T. Land Acquisitions Inc., No. M2007-02040-COA-R3-CV, 2008 Tenn. App. LEXIS 414 (Tenn. Ct. App. at Nashville; July 23, 2008) for a discussion of actual notice, constructive notice, and inquiry notice under Tennessee law, and their interplay with the Tennessee recording statutes.

Inasmuch as the scammed homeowners continued in possession of their homes after being duped by the foreclosure rescue operator, such possession, arguably, could end up creating notice of the fraud which might be imputed to the subsequent purchasers / encumbrancers. Being chargeable, by imputation, with notice of the fraud could then defeat any claim that they are bona fide purchasers / encumbrancers. For cases that support the proposition that possession of real estate by one other than the seller is enough to trigger this imposition of the duty to inquire as to possible unrecorded rights of the possessor, see Bona Fide Purchaser Doctrine, Possession Of Property By Occupants Other Than The Vendor & The Duty To Inquire.

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