This case involves what should have been a "normal" residential real estate deal. The buyer offered to purchase the seller's house at $147,300.00. The parties exchanged counter-offers and ultimately, the buyer accepted the seller's counter-offer to sell the house for a price of $151,000.00. If that was the rest of the story, I would not be writing this account.
It appears that the seller soon realized that the purchase price was not enough to pay all of her costs, including the real estate commissions. So, she refused to close and sold the house to another buyer (presumably at a higher price).
The buyer sued the seller for breach of contract. As this case shows, a written document signed by both parties with an agreed upon price is not always a "contract."
In this case, the parties used a form residential real estate agreement published by the Tennessee Association of Realtors to document the transaction. Like many residential real estate contracts, the form referenced several addenda, including a "Short Sale Addendum." The Short Sale Addendum was not, however, attached to the agreement signed by both parties. We don't know why, but apparently this fact was undisputed. A short sale addendum typically states that the deal is contingent upon the agreement of the mortgage holders to accept less than what they were entitled to receive. But, I digress.
As every law student learns, the elements of a contract are: an offer, an acceptance and consideration. In this case, all three are present. But, there is one element that all contracts must have -- a meeting of the minds.
The court of appeals held that because of the omission of the addendum from the actual contract, "there was no meeting of the minds." The buyer argued that the parties intended to use the TAR form short sale addendum. The court of appeals, however, rejected this argument noting that the "form" agreement does not reference the specific TAR form.
THE MORAL OF THIS STORY:
Always attach your Addenda, or you may lose more than just your mind.
See Casey E. Bevans v. Rhonda Burgess, et al.
Wednesday, March 21, 2012
Tuesday, March 20, 2012
MORTGAGE ON A LIFE ESTATE - NO PROBLEM UNLESS THE LIFE TENANT DIES
Bankers are people, and people make mistakes. In this case, the Banker made a very costly mistake. Husband and wife wanted to borrow some money. They apparently did not have any collateral, so they offered to pledge Mom's house to secure the loan.
Mistake # 1 -- To make things easier, Banker agreed to make the loan to Mom instead of to Husband and Wife. He could have made the loan to all three without any problem, but I digress.
Mistake #2 -- Banker received an "attorney's title letter" but apparently fails to review it. I say apparently, because if the Banker had reviewed the letter he would have realized that Mom only had a life estate in her house. He needed to obtain the signature of husband and wife to the deed of trust to make sure that the lien survived Mom's death.
Mistake #3 -- Banker made the loan to Mom secured by a deed of trust on her house. This was a mistake because Mom then died leaving the Bank without any collateral.
The Bank sues Husband and Wife. Predictably, Husband and Wife said it is not our problem. The Chancellor agreed. Clearly, the Bank intended to make a loan to Mom secured by her interest in the property, and the Bank received the benefit of its bargain. The court of appeals remanded the case because the Chancellor failed to rule on the Bank's claim of "promissory estoppel." It is hard to imagine how the Bank will be able to assert that it "justifiably relied" upon any misstatements of fact when the Bank just failed to read the title report it ordered.
The Moral of this Story:
Don't bother getting a title opinion if you are not going to read it. Or, if you make a loan to one person secured by someone else's property, make sure that the real borrower signs the note or even better a personal guaranty.
See The Farmers Bank v. Clint B. Holland, et al.
Mistake # 1 -- To make things easier, Banker agreed to make the loan to Mom instead of to Husband and Wife. He could have made the loan to all three without any problem, but I digress.
Mistake #2 -- Banker received an "attorney's title letter" but apparently fails to review it. I say apparently, because if the Banker had reviewed the letter he would have realized that Mom only had a life estate in her house. He needed to obtain the signature of husband and wife to the deed of trust to make sure that the lien survived Mom's death.
Mistake #3 -- Banker made the loan to Mom secured by a deed of trust on her house. This was a mistake because Mom then died leaving the Bank without any collateral.
The Bank sues Husband and Wife. Predictably, Husband and Wife said it is not our problem. The Chancellor agreed. Clearly, the Bank intended to make a loan to Mom secured by her interest in the property, and the Bank received the benefit of its bargain. The court of appeals remanded the case because the Chancellor failed to rule on the Bank's claim of "promissory estoppel." It is hard to imagine how the Bank will be able to assert that it "justifiably relied" upon any misstatements of fact when the Bank just failed to read the title report it ordered.
The Moral of this Story:
Don't bother getting a title opinion if you are not going to read it. Or, if you make a loan to one person secured by someone else's property, make sure that the real borrower signs the note or even better a personal guaranty.
See The Farmers Bank v. Clint B. Holland, et al.
BASEBALL AND PRENUPS
Baseball is in the air -- Opening Day is almost here -- and the Cardinals will win the Series without Pujols. Okay, I was daydreaming.
In baseball, everyone knows that three strikes and you are out. This case emphasizes that Life often works the same way.
Strike 1 -- You file a joint tax return with your husband.
Strike 2 -- Husband Dies.
Strike 3 -- You signed a prenuptial agreement and Husband left all of his property to someone else.
In baseball, if the catcher drops the ball on the third strike, you can run to first base and avoid the out if you arrive before the ball. That almost never happens. In this case, the widow was trying to outrun the catcher's throw. She lost.
Because the couple filed a joint tax return, the IRS made the refund check payable to both Husband and Wife. When the executor asked the widow to endorse the check so it could be deposited into the Estate account. She said no, "the funds are all mine."
The court of appeals, acting as umpire, called the widow "Out." Specially, the Court held that the proper way to determine ownership of the refund was to look at who earned the income. The wife did not earn any income reflected on the return. As all of the income was attributable to husband, the Court held that 100% of the refund belonged to the Estate.
Arguably, the wife should be entitled to the amount by which the deductions or credits attributable to wife reduced the amount of income payable by the husband. But, it does not appear that the wife made that argument.
THE MORAL OF THE STORY:
Don't argue balls and strikes with the Umpire
Never sign a prenuptial agreement unless you really really intend to give up all of your claims to all of your spouse's assets.
See The Estate of Noel C. Hunt, III, H. Wayne Grant, Executor v. Trisha L. Jolley Hunt
In baseball, everyone knows that three strikes and you are out. This case emphasizes that Life often works the same way.
Strike 1 -- You file a joint tax return with your husband.
Strike 2 -- Husband Dies.
Strike 3 -- You signed a prenuptial agreement and Husband left all of his property to someone else.
In baseball, if the catcher drops the ball on the third strike, you can run to first base and avoid the out if you arrive before the ball. That almost never happens. In this case, the widow was trying to outrun the catcher's throw. She lost.
Because the couple filed a joint tax return, the IRS made the refund check payable to both Husband and Wife. When the executor asked the widow to endorse the check so it could be deposited into the Estate account. She said no, "the funds are all mine."
The court of appeals, acting as umpire, called the widow "Out." Specially, the Court held that the proper way to determine ownership of the refund was to look at who earned the income. The wife did not earn any income reflected on the return. As all of the income was attributable to husband, the Court held that 100% of the refund belonged to the Estate.
Arguably, the wife should be entitled to the amount by which the deductions or credits attributable to wife reduced the amount of income payable by the husband. But, it does not appear that the wife made that argument.
THE MORAL OF THE STORY:
Don't argue balls and strikes with the Umpire
Never sign a prenuptial agreement unless you really really intend to give up all of your claims to all of your spouse's assets.
See The Estate of Noel C. Hunt, III, H. Wayne Grant, Executor v. Trisha L. Jolley Hunt
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