IN RE COMMERCIAL INVESTMENTS, LTD.

• Decision Date: 17 April 1989
• Docket Number: Adv. No. 88-0023 M.,Bankruptcy No. 7-87-01882 M A
• Citation: 99 BR 455
• Parties: In re COMMERCIAL INVESTMENTS, LTD., dba Territorial Custom Homes, Employer ID No. 85-0165436, Debtor. SECURITY FEDERAL SAVINGS & LOAN ASSOCIATION OF ALBUQUERQUE, a national stock association, Plaintiff, v. COMMERCIAL INVESTMENTS, LTD., dba Territorial Custom Homes, a New Mexico corporation, et al. (including Mitchell), Defendants.
• Court: U.S. Bankruptcy Court — District of New Mexico

99 B.R. 455 (1989)

In re COMMERCIAL INVESTMENTS, LTD., dba Territorial Custom Homes, Employer ID No. 85-0165436, Debtor SECURITY FEDERAL SAVINGS & LOAN ASSOCIATION OF ALBUQUERQUE, a national stock association, Plaintiff, v. COMMERCIAL INVESTMENTS, LTD., dba Territorial Custom Homes, a New Mexico corporation, et al. (including Mitchell), Defendants.

Bankruptcy No. 7-87-01882 M A, Adv. No. 88-0023 M.

United States Bankruptcy Court, D. New Mexico.

April 17, 1989.

James C. Jacobsen, Albuquerque, N.M., for debtor.

Thomas A. Simons IV, Santa Fe, N.M., Ruth M. Schifani, Albuquerque, N.M., for plaintiff.

Deborah H. Mande, Albuquerque, N.M., for Western.

Myra C. Lynch, Albuquerque, N.M., for CST.

Richard E. Norton, Corrales, N.M., for Barraza.

MEMORANDUM OPINION AND ORDER

MARK B. McFEELEY, Bankruptcy Judge.

This matter came before the Court for hearing on plaintiff Security Federal Savings & Loan Association of Albuquerque's Motion for Summary Judgment on the counterclaim of CST Group. Having considered the arguments of the parties and the affidavits and exhibits submitted therewith, the Court finds that there are no material questions of fact and that plaintiff is entitled to summary judgment.

FINDINGS OF FACT

1. In 1981 Margaret Chavez purchased certain real property (the "land") in Albuquerque, New Mexico.

2. On January 1, 1984 Margaret Chavez, Robert S. Sanchez, Jr., Joanne Sanchez, Lina M. Trujillo, Joseph Mark Chavez and Mary Jane Chavez (the "partners") entered into the CST Group partnership for the purpose of developing the land. Under the terms of the partnership agreement each partner had an equal right to manage the business.

3. After January 1, 1984 Margaret Chavez oversaw the development of the land property and replatted it into a subdivision of ten lots.

4. On or about July 1, 1984 the partners amended the partnership agreement to appoint Margaret Chavez as the "managing partner" for financial affairs. This amendment stated, in part, "Margaret T. Chavez is hereby given authority to sign notes and mortgages on behalf of CST Group. All the parties named in the original Partnership Agreement, however, remain liable for payment of same."

5. On or about August 31, 1984 Margaret Chavez executed a warranty deed for the land to CST Group. Between August 29, 1984 and September 3, 1984 the remaining five partners also executed warranty deeds for the property, naming CST Group as grantee.¹ These deeds were filed for record on September 5, 1984.

6. In March of 1985, CST Group sold lot 4 to a third party.

7. On December 16, 1985 CST Group entered into the Villa Palomar joint venture agreement with Commercial Investments, Ltd. ("CIL"), now the debtor in this bankruptcy. A portion of that agreement reads:

WHEREAS, CST desires to enter into a joint venture agreement with CIL for the purpose of acquiring financing for the construction and selling of custom single-family residences on the property.

NOW THEREFORE, the parties to this Agreement, in consideration of mutual confidence and stipulations set out herein, agree as follows:

1. CST agrees to the assignment of the property to Villa Palomar Joint Venture.

2. CIL agrees to coordinate, manage, and oversee the construction of the homes on the property, and otherwise act as the general contractor.

3. CST agrees to permit the use of nine (9) of the lots currently owned by CST Group to be used as security for construction financing.

4. The parties to this Agreement agree to share equally in loan principal and interest costs of interim financing, as well as in all other legitimate costs associated with the construction and sale of homes on the property.

5. The parties to this Agreement agree to share equally in the net profits of the joint venture.

6. The parties further agree to accelerated release of the lots by the bank until the entire obligation to the bank is completely satisfied.

7. The parties to this Agreement agree that any questions which may arise, or any major decisions to be made as this venture progresses, will be resolved to the mutual satisfaction of the managing partners, Margaret T. Chavez and Wayne Crooks.

8. Time of Performance. This joint venture shall begin with the execution of this Joint Venture Agreement and shall continue for the duration of the construction of the improvements (homes), estimated to be a 15-month period ending on or before March 31, 1987.

The agreement was executed by Margaret Chavez for CST Group and Wayne Crooks for CIL.

8. On or about March 15, 1986 the six partners listed both individually and as "d/b/a CST Group, a New Mexico General Partnership", executed a warranty deed for the land, granting "to CST Group, a New Mexico General Partnership, an undivided one-half (½) interest, and Commercial Investments, Ltd., a New Mexico Corporation, an undivided one-half (½) interest, d/b/a VILLA PALOMAR, a New Mexico Joint Venture." This deed was filed for record on March 20, 1986.

9. Contemporaneously with the partners' execution of the warranty deed to Villa Palomar each partner, at Crooks' request, signed a loose sheet of paper. This sheet stated:

IN WITNESS WHEREOF, we have hereunto set our hands and seals this 15th day of March, 1986.

__________________ JOSEPH MARK CHAVEZ __________________ MARY JANE CHAVEZ __________________ ROBERT S. SANCHEZ, JR __________________ JOANNE M. SANCHEZ __________________ LINA M. TRUJILLO __________________ MARGARET T. CHAVEZ

The only other contents on the sheet was a space for a notary public's acknowledgment. No partner questioned Crooks regarding this sheet or its purpose.

10. On or about April 7, 1986 a POWER OF ATTORNEY, consisting of two pages, was recorded with the County Clerk, naming Wayne Crooks as the six partners' attorney-in-fact. A portion of this document follows:

This is a Limited Power of Attorney. We grant unto our said attorney-in-fact, Wayne R. Crooks, the power to sell for us any interest we have or claim in the following described real property . . . (the land)

Our attorney-in-fact is authorized to make, receive, sign endorse, execute, acknowledge, deliver and possess such applications, contracts, purchase agreements, options, covenants, conveyances, deeds, trust deeds, security agreements, bills of sale, leases, mortgages, assignments and insurance policies and to execute releases and satisfaction of mortgages, liens, judgments, security agreements and other debts and obligations and such other instrument in writing of whatever kind and nature, including the execution of deeds, real estate contracts, notes, addendums to real estate purchase agreements and other documentation as may be necessary or proper in the exercise of the rights and powers herein granted.

The rights, powers and authority of said attorney-in-fact herein granted shall commence and be in full force and effect on March 15, 1986, and such rights, powers and authority shall remain in full force and effect thereafter until this Power of Attorney is specifically withdrawn by an instrument in writing.

GIVING AND GRANTING unto our said attorney full power and authority to do and perform all and every act and thing whatsoever requisite and necessary to be done in and about the premises as fully, with the same force and effect, and to all intents and purposes, as we might or could do if personally present, with full power of substitution and revocation, hereby ratifying and confirming all that our said attorney or his substitute shall lawfully do or cause to be done by virtue hereof.

Page two of the power of attorney is the loose sheet of paper signed earlier by all the partners. None of the partners knew that Crooks would attach the signature page to a power of attorney. At the time, no partner was aware that this power of attorney had been recorded.

11. CIL proceeded to build houses on lots 3, 6, 7 and 8.

12. On or about August 21, 1986 a warranty deed for Lot 7 was executed from "CST Group, a New Mexico General Partnership, an undivided one-half (½) interest, and Commercial Investments, Ltd., a New Mexico Corp., an undivided one-half (½) interest, dba VILLA PALOMAR as sic New Mexico Joint Venture" to Richard E. and Linda L. Howell. This deed was signed by Wayne R. Crooks for both CIL and CST Group. The acknowledgment for CST reads:

The foregoing instrument was acknowledged before me this 21st day of

August, 1986, by CST Group by: Wayne R. Crooks as Attorney in fact for the six partners, Partners of CST Group, a New Mexico General Partnership.

This deed was recorded on August 22, 1986.

13. CST received no proceeds from the sale of lot 7.

14. On September 4, 1986 Wayne R. Crooks executed another warranty deed from CST and CIL dba Villa Palomar to Commercial Investments Ltd. for lots 1, 2, 3, 5, 8 and 9. Wayne R. Crooks signed the deed for CST as "President". The acknowledgment section, as in the August 21, 1986 deed, refers to Crooks as "Attorney in fact" for the partners.

15. On or about September 5, 1986, CIL granted Security Federal a mortgage on lots 1, 2, 3, 5, 8 and 9.

16. On February 25, 1987 CIL granted a mortgage to Security Federal on Lot 2.

17. On April 8, 1987 CIL and CST Group, dba Villa Palomar granted a mortgage to Security Federal on Lots 1, 5, 9 and 10. Crooks signed for both CIL and CST Group. Crooks acknowledged for CST Group as its "Attorney in Fact."

18. None of the partners of CST ever signed the notes or mortgages.

19. The deposition of Bobby Nafus, the loan officer at Security Federal, indicates the following:

a. From his dealings with Mr. Crooks he understood that Crooks was the owner of the land "along with this group that he was representing and also had the power of attorney to do so." p. 8

b. He never saw the joint venture agreement.

c. The title binder for the loan on lots 1, 2, 3, 5, 8 and 9 indicated that CST had an ownership interest in the land. p. 10 See also Exhibit CST-5.

d. He received a copy of the power of attorney document

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