You'll Get Nothing. And Like It.

David was in trouble. He owed $170,000 on his house, but it was only worth about $100,000. Barbara told him he could try to negotiate a short sale. That would get him out of the house, and out from under.

David's sister Patricia had some credit.  And a different last name. David pulled some (heart) strings.  He got Patricia to buy the house out of the short sale for about $100K. Barbara wanted no part of this.

David signed all the papers required for a short sale, like an affidavit that the transaction was at arm's length. Patricia signed what she needed to. Just like that, she owned two houses and had a full-time tenant paying all the house bills. Six months from now, David would buy the house back and this would be over - a simple favor for a brother.

Six months turned into three years. David was finally ready to re-buy his house. He couldn't get financing for his former property since he short-sold it. So, he hired Barbara to find him a different house. Patricia hired Barbara to sell the old one.

Barbara found David a nice house. His old house had recovered a bit.  They listed it at $150, but no one was interested.  They dropped it to $130 and boom - a buyer. Patricia pocketed about 30K on the deal.

David wanted it. Patricia gave him 5 and said "let's be done with this."

David wasn't done. David sued Patricia because she:

  • didn't resell him the house. 
  • made him pay rent to live in a house he did not own.
  • had Barbara talk with David about repairs to make the house saleable.

David sued Barbara because she:

  • used "you" in referring to Patricia and her tenants/agents. 
  • was a conspirator in an elaborate attempt to defraud David of the proceeds from the sale of the house.

According to David:

  • Patricia agreed that she would give all net proceeds to him since it was his house first.
  • He was not responsible if the house sold for less than what Patricia owed her lender.
  • "It was a conspiracy, I tell ya!" - David's view on Patricia treating David as her agent in dealing with Barbara. 

These fine folks showed up at my door. The Court sometimes appoints me as an arbitrator.  After listening to this story for two plus hours, I learned a few things. Patricia's purchase was done for family reasons, but she knew that "the game was afoot." David signed an affidavit that this was an arms length transaction. It wasn't.  He selected Patricia from among his siblings because her last name was different.

Patricia knew she hadn't lived in the house for three of the last five years when she sold it. Her signed affidavit says she had.  

Barbara told David she wanted no part of the short sale. She had duties to David in helping him, but no duties as to selling a house he did not own and could not buy. She could only talk to him about selling the house because Patricia said it was Okay.

After this hearing, the decision was easy enough. David got nothing. It was an illegal contract between Patricia and him if it started with the short sale. There was no consideration if it started with the second sale. David was trying to profit from his avoidance of $80k in debt, which he obtained through lying to the bank.

Patricia asked for $11K in attorney fees because she successfully defended. She got nothing either, because that would be like repaying the money she should not have had in the first place, since she should never have been a part of David's scheme.

Barbara was the only one who "won." However, she didn't ask for her fees.

(For the record, I didn't get paid either.)

Judge Smails would understand.