Time: Sat Dec 06 19:36:10 1997 To: <brendamc@admin.hilconet.com> From: Paul Andrew Mitchell [address in tool bar] Subject: need to talk Cc: Bcc: References: Hi Brenda, I have put in approx. one hour so far, reviewing the file you arranged so nicely, in proper chronological order. Writing this message has taken another 45 minutes, or so, to think and draft. I would like to speak with you on the telephone, asap, about the theory of your case. Here are some observations, without going to the next level of analysis: The "quit claim" event is crucial. Situate it at Time 1 ("T1"), as follows: T0---------T1---------T2 | | | | | trust owns land | | | quit claim | Vernor owns land For Vernor to prove that the trust had allodial title at T2, he must be able to carry his burden of establishing: 1. allodial title at T0 2. lawful (not fraudulent) conveyance of allodial title to the trust, at T1 Now, without answering this question, consider the point, in time, at which Vernor took out the loan of $100,000. If that loan was made BEFORE T1, then Vernor relinquished his claim to allodial title thereby. If that loan was made AFTER T1, then the trust relinquished its claim to allodial title thereby. As we say in the legal profession, equity is brutal, and a bank loan, using real property as collateral, is a contract enforceable in equity. The District Court of Texas was convened in equity, and it was asked to enforce a contract, and that is exactly what it did. If Vernor no longer had allodial title at any time prior to T1, then he could not have conveyed allodial title to the trust, because it was not his to convey; the title was clouded by a lien on that real property, which was put up as collateral to secure the loan. The bank is merely foreclosing on its security interest, which appears to be a lawful interest, at this point. Likewise, if the trust no longer had allodial title, after obtaining allodial title via the Quit Claim, then the title was still clouded by a lien on that real property, which was put up as collateral to secure the loan. Again, the bank is merely foreclosing on its security interest, which appears to be a lawful interest, at this other point in time. I am telling you these things in order to make you aware of the major weaknesses which I see in the case, thus far. These weaknesses must be overcome, or you probably will lose at the appellate level, in my opinion. Failing to appear is your biggest weakness, all things considered. If Vernor, either as an individual or as a Trustee, now wants to argue that the bank never loaned anything of value, the bank can argue that he was estopped by his failure to appear, in either capacity. What is your response to this objection? I understand that he did not record the Quit Claim, and this appears to have caused some confusion, since the bank foreclosed against the owner of record, who was not the real owner any longer. But, again, your case is weak, because the complaint was brought against Vernor in his individual capacity, AND in addition to his capacity as Trustee for the trust. So, the bank must have known something about the Quit Claim. Otherwise, I have have missed something very important, and you need to help me out here, okay? I think he must make a really good case justifying his failure to answer the complaint and/or appear in court for any hearing(s), since they were suing him in both capacities (individual and Trustee). What I seem to be missing are the full set of documents he may have filed in that court AFTER the judgment was entered. Please correct me if I am wrong about this. If I do have ALL the documents he filed in that court AFTER the default judgment was entered, please tell me this is the case. Did he object timely to improper service of the original complaint? The judge found that service had been proper. If you can prove that the judge made an error here, you have something on which you can hang your appeal. However, the judge only had before him, the facts as presented by the Plaintiff, and those facts were not controverted in any way. Put yourself in the shoes of the judge: a failure to appear by the named defendant(s) is usually grounds for a default judgment, and that is exactly what happened. I do find it hard to fault the judge for what he did, given all the apparent facts before him. If he wanted to prove allodial title, he might be able to argue vagueness in the pertinent Texas state statutes, since it is not clear what people must do with the property records still extant in the County Recorder's office, if and when a title reverts to allodium. As Trustee for the trust, he may have been negligent for failing to perfect the record in this regard -- hence, another major weakness in his position. If the property is, in fact, in allodium, the moment it is put up as collateral for anything else, it is no longer in allodium. THAT is THE MAJOR WEAKNESS in his case. Last, but not least, how would Vernor answer the objection that he did not have authority to relinquish allodial title, by offering the land as collateral? Did the trust indenture authorize him to remove it from allodium, and to put it up for collateral? If not, then the trust may have a cause of action against him for fraud and breach of fiduciary duty. These are issues which you must be willing to confront, head-on, but please do so privately. Remember, a trust is a separate body (or "corpus") of rights. Alternatively, the trust may not have ever been perfected and that would put it in jeopardy of being considered Vernor's alter ego. That kind of finding is extremely difficult to reverse on appeal. I do think his position is somewhat weak on this point, and we need to address this privately, so that we are prepared to answer it, if and when it should come up. So, we are back to this crucial question: was the loan obtained before, or after, T1 in time? And, was Vernor aware, or should he have been aware, that he probably relinquished allodium when the loan was obtained? Please reply here with a time at which you can call me tomorrow, and I will do my best to be at the telephone right at that moment; otherwise, let me know exactly when, and where, I can return your call, okay? Please don't be discouraged by what I have written here. I must take care of the problems I have identified above, before we can decide on the most promising appellate strategy. Good night, Brenda! And Thank You!! /s/ Paul Mitchell, Candidate for Congress Counselor at Law http://supremelaw.com
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