In re Niland
| Decision Date | 25 April 1985 |
| Docket Number | 384-3300,Bankruptcy No. 384-30619-F,Adv. No. 384-3299 |
| Citation | 50 BR 468 |
| Parties | In re John Hugh NILAND, Debtor. Tim TRUMAN and John Hugh Niland, Plaintiffs, v. Darwin DEASON and Continental Savings Association, Defendants. Darwin DEASON, Plaintiff, v. John Hugh NILAND and Continental Savings Association, Defendants. |
| Court | U.S. Bankruptcy Court — Northern District of Texas |
Philip I. Palmer, Jr., Palmer, Palmer & Coffee, P.C., Dallas, Tex., for the Debtor, John Hugh Niland.
W. Mike Baggett, Winstead, McGuire, Sechrest & Minick, Dallas, Tex., for Darwin Deason.
John R. Stooksberry, Boyd, Veigel, Gay & McCall, McKinney, Tex., for Continental Sav. Assn.
Plaintiffs, Tim Truman (the Standing Chapter 13 Trustee in the Northern District of Texas) and John Hugh Niland, bring this action seeking to set aside a non-judicial foreclosure sale of certain real property owned by Niland in Dallas, Texas. Plaintiffs contend that the deed of trust lien held by Continental Savings Association on the property was invalid due to superior homestead claims by Niland thereby voiding the subsequent foreclosure sale. Defendants, Darwin Deason and Continental Savings Association, deny that the sale should be set aside and assert that Niland is estopped from claiming the protections of the Texas homestead laws by reason of prior fraudulent homestead statements and affidavits.
Trial to the Court commenced on February 12, 1985; and the Court, having heard the evidence and the arguments of counsel, finds the following facts and enters conclusions of law pursuant to Rule 7052 of the Bankruptcy Rules:
FINDINGS OF FACT
1. On September 21, 1971, John Hugh Niland was married to and living with Naomi Iree Niland. Niland was employed at the time as a professional football player for the Dallas Cowboys.
2. On September 21, 1971, the Nilands purchased a home and lot located at 4717 Miron Drive, Dallas, Dallas County, Texas (the "Property") from Terry N. Tomlin and wife, Doris Marie Tomlin. The Nilands immediately moved into the home, thereafter claiming and maintaining it as their homestead.
3. The real estate description attached as Exhibit "A" to the Complaint of Niland in Adversary Proceeding No. 384-3299 and to Plaintiffs' Original Petition in Case No. 84-4052-D, now Adversary Proceeding No. 384-3300, is the correct legal description of the Property.
4. The total purchase price of the Property in September, 1971, was $90,000.00, of which $20,000 was paid in cash to the Tomlins by the Nilands, $60,000.00 was loaned to the Nilands and paid to the Tomlins by Dallas Federal Savings & Loan Association, with $10,000.00 owed by the Nilands to the Tomlins.
5. Dallas Federal Savings & Loan Association secured its loan to the Nilands by a first lien deed of trust on the Property.
6. The Tomlins secured the $10,000.00 still due to them by the Nilands by a second lien deed of trust and vendor's lien on the Property. This second lien was paid in full by the Nilands in five years.
7. On the date of purchase in September, 1971, the Property was improved by a brick house containing 3 bedrooms, 3 baths, a living room, den and study, wet bar, stone walls and cathedral ceilings.
8. The land area of the Property is 1.574 acres with a 10-foot creek on the back side of the lot. Due to the unique topography of the lot, partition of the property into a one acre exempt portion and a .574 acre non-exempt portion would not be feasible or practical in this case. The Property is basically an irregular rectangle, fronting on the east line of Miron Drive, with its north line being along Bachman Creek, most of its east line also along the creek, and its west line contiguous to a single family lot. The house sits on the tip of a peninsula with steep grades to the creek on both sides. For an illustration, see p. 26 of Px. 95.
9. Because of periodic flooding, the entire lot is designated as "flood plain" by the City of Dallas.
10. On September 12, 1977, the Nilands purchased from Real Investments, Inc., a condominium unit ("the High Hollows condominium") known as Apartment No. 137 in Building J of "the Hollows North", a condominium project which is more particularly described in the Declaration of Condominium, filed March 8, 1977, recorded in Volume 77046, page 1256, of the Condominium Records of Dallas, County, Texas, together with an undivided .3652% interest in and to the general common elements described in said Condominium Declaration.
11. On or about January 1, 1980, Naomi Niland moved from the Property after filing an action for divorce styled, In the Matter of the Marriage of Naomi Iree Niland and John Hugh Niland, being Cause No. 82-2143-R, District Court, 254th Judicial District, Dallas, Texas.
12. Niland was the principal of a business known as Video Information Network, Inc. ("VIN").
13. The business was not successful, and survived only by constant cash advances from Niland.
14. In late 1981, VIN was in need of additional cash to continue operations.
15. Neither VIN nor Niland had either the unsecured credit or available collateral for a loan in the amount needed.
16. The only assets of any consequence then owned by Niland was the Property and the Hollows North Condominium, Apartment No. 137.
17. In order to obtain the additional cash for VIN, Niland applied to Richardson Savings for a loan in the amount of $113,500.00. As part of the loan transaction on January 4, 1982, Niland executed an affidavit to Richardson Savings and Loan Association in which he claimed Apartment 137 of the Hollows North Condominiums as his homestead. The affidavit stated that it was executed to induce Richardson Savings & Loan Association to make a mortgage loan to Niland. The affidavit was filed on January 21, 1982, in the Deed Records of Dallas County, Texas, in Volume 82014, page 0022. A copy of the affidavit was admitted into evidence as Exhibit No. 26.
18. Richardson Savings & Loan Association agreed to and did lend Niland $113,500.00 using the Property as security upon a one-year "roll over" note at 18½% interest.
19. At that closing of the loan, the Nilands executed a deed of trust on the Property to 5.11 Corporation, as trustee, to secure the repayment of the loan from Richardson Savings & Loan Association. The deed of trust was filed of record on January 20, 1982, in the Deed Records of Dallas County, Texas, in Volume 82014, page 0011.
20. The balance remaining from the proceeds of the loan, after the payment of fees, taxes and expenses was $101,951.11 which was available to Niland.
21. The $101,951.11 was then utilized by Niland as follows:
22. The affidavit to Richardson Savings & Loan Association was a false representation by Niland.
23. The affidavit to Richardson Savings & Loan Association concerned a material fact relied upon to the extent it was a material factor in inducing Richardson Savings & Loan Association to make a mortgage loan to Niland.
24. At the time Niland executed the affidavit on January 4, 1982, Niland knew the affidavit was false or that it was made recklessly without any knowledge of its truth.
25. Niland made the affidavit with knowledge that it would be acted upon by Richardson Savings & Loan Association.
26. Richardson Savings & Loan Association acted in reliance upon Niland's affidavit.
27. On September 1, 1982, Niland entered into a Lease Agreement with Carol Wilkey and Elizabeth Lambert for a term of six months. The lessees agreed to pay Niland $600 per month to lease from Niland all of the Property except one bedroom for storage.
28. Throughout the three years prior to this time, Niland also rented the Property to other individuals although no written lease agreement was signed.
29. During the fall and winter of 1982-1983, Niland continued to seek additional financing for VIN.
30. In February, 1983, the Nilands entered into an agreement styled Agreement Incident to Divorce ("the Divorce Agreement"). In the Divorce Agreement, it was provided that Naomi Niland would execute a warranty deed conveying her interest in the Property to Niland. Said deed was executed by Naomi Niland on February 10, 1983, and filed in the Deed Records of Dallas County, Texas, in Volume 83038, page 2669, on February 23, 1983.
31. On January 15, 1982, VIN executed a promissory note for $46,651.83 in favor of Niland, agreeing to repay Niland by sending monthly payments to Richardson Savings & Loan Association in the amount of $2,079.00.
32. The financial condition of both Niland and VIN continued to deteriorate throughout 1982.
33. By late 1982, the financial situation of both Niland and VIN had reached desperate straits.
34. During that same period, Niland had urgent need to receive back the $46,651.13 he had loaned to VIN.
35. The corporation was in no position to make the repayment, but instead required additional working capital in the amount of $100,000.00.
36. Niland then approached Continental Savings Association ("Continental") to borrow funds for himself and VIN, and Continental agreed to lend Niland $300,000.00 secured by a deed of trust upon the Property.
37. Niland was urgently in need of the money and offered $5,000.00 to Jerry Dale, the Continental loan officer, as a bribe or "grease payment" to expedite the loan. Dale took the money, and thereafter, on February 14, 1983, a closing was held on the Continental loan to Niland.
38. At the closing, Niland executed a Deed of Trust conveying the Property to David Wylie, as Trustee for Continental, to secure the $300,000 note. Niland also executed a Homestead Affidavit and Designation "to induce Continental to make a mortgage loan secured by a Deed of Trust" upon the Property, wherein Niland designated the High Hollows condominium as his legal...
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