State v. Kaiser
| Decision Date | 16 May 2011 |
| Docket Number | 63616–2–I.,Nos. 63111–0–I,s. 63111–0–I |
| Citation | 254 P.3d 850,161 Wash.App. 705 |
| Court | Washington Court of Appeals |
| Parties | STATE of Washington, Respondent,v.Joseph M. KAISER and Heidi M. Kaiser, husband and wife, G. Hobus Investments, LLC; Bobo Buys Real Estate, LLC; Pre Flop, LLC; and Unclaimed Funds, Inc., a Washington Corporation, Appellants. |
OPINION TEXT STARTS HERE
Joseph M. Kaiser, Heidi M. Kaiser, Steilacoom, WA, for Appellants.James T. Sugarman, Jason Eric Bernstein, Assistant Attorney Generals, Seattle, WA, for Respondent.SCHINDLER, J.
[161 Wash.App. 708] ¶ 1 Joseph Kaiser, doing business as G. Hobus Investments LLC, Bobo Buys Real Estate LLC, Pre Flop LLC, and Unclaimed Funds Inc. (collectively Kaiser), preyed on property owners facing a tax foreclosure by falsely offering to help save the property from foreclosure if the owner agreed to enter into an agreement giving Kaiser an ownership interest in the property. The Attorney General on behalf of the State of Washington filed an enforcement action against Kaiser alleging violation of the Consumer Protection Act (CPA), chapter 19.86 RCW, and seeking declaratory and injunctive relief. Kaiser appeals the decision on partial summary judgment that as a matter of law he violated the CPA by soliciting property owners facing tax foreclosure with false promises to help save their property or home, inducing property owners to enter into unconscionable and unfair agreements giving Kaiser ownership or control of their property, intercepting tax funds that should have been paid to the property owners, using a power of attorney and retaining attorneys to collect tax overage funds, acting as both a trustee and beneficiary in land trust deals, and falsely soliciting and inducing former property owners to enter into agreements to obtain restitution funds. Kaiser also claims the trial court erred in allowing testimony contradicting the terms of the agreements entered into by the homeowners, in concluding that the partial interest deal agreements violated the CPA, and in failing to address whether four other real estate transactions affect the public interest in violation of the CPA. We reject Kaiser's arguments on appeal and affirm the partial summary judgment order, the trial court's findings of fact and conclusions of law, and entry of the injunctive relief order.
¶ 2 The facts are not in dispute. Between 1998 and 2008, Joseph Kaiser and his partners, Walter Scamehorn, Arliss Morgan, and Tina Worthey, doing business as Fiscal Dynamics Inc., Cumulative LLC, Dove Realty Inc., Northwest Assets Inc., G. Hobus Investments LLC, Bobo Buys Real Estate LLC, and Pre Flop LLC engaged in approximately 400 transactions with property owners facing tax foreclosure.
¶ 3 Kaiser and his partners sent thousands of letters and postcards to property owners who had received a certificate of tax delinquency. The solicitations offered to act on the owner's behalf to “help them keep their property” or “keep their home,” and falsely claimed that they had successfully prevented foreclosure.
¶ 4 For example, in the “Equalizer” letter, Kaiser falsely claims that he will act on the owner's behalf, carefully explain the available options, and help “stop foreclosure and save your property.” 1 Another series of letters describes his partner Tina Worthey as “Wonder Woman” and falsely claims she will act on the property owner's behalf to get them out of trouble because she lost her own home in foreclosure and was “an experienced foreclosure professional.”
¶ 5 The “Missed Opportunity,” “Can You Believe It” solicitations and “Why This Postcard?” also falsely claim that Kaiser and his partners will “help the owner keep their home” and prevent foreclosure “like it never happened in the first place,” and they “will help owners by fixing real estate problems and figure out solutions to their unpaid taxes.” Kaiser also sent hundreds of postcards suggesting that Kaiser and his partners are “in the business of assisting” property owners and warns that other investors will come “knocking on your door trying to steal your property.”
¶ 6 If a property owner contacted Kaiser or his partners in response to the solicitations, the property owner was induced to enter into one of two transactions that Kaiser referred to as an “overage play” agreement, or a “partial interest deal” or “partnering up” agreement.
¶ 7 When a property owner does not pay taxes the county issues a certificate of delinquency to the record property owner. If the taxes remain unpaid, the county proceeds with a tax foreclosure sale. After deducting the delinquent taxes and fees from the sale, the remaining or “overage” amount is paid to the record owner at the time the certificate of delinquency was issued.
¶ 8 In the overage play scheme, Kaiser offers to help the property owner avoid foreclosure. Kaiser typically paid the property owners $100 to $500 and induces the owner to enter into an agreement that gives Kaiser title to the property.2 Kaiser does not tell the property owners that he intends to allow the tax sale to go forward.
¶ 9 As part of the overage play agreement, a property owner signs a number of documents, including (1) a purchase and sale agreement, (2) a quit claim deed, (3) a seller acknowledgement, and (4) a power of attorney to Kaiser. After obtaining title to the property, instead of taking steps to avoid foreclosure, Kaiser allowed the property to go to a tax sale and either kept the entire overage amount or a percentage of the overage.
¶ 10 In response to several lawsuits challenging Kaiser's right to receive the overage amount after the tax sale, Kaiser continuously updated and added to the forms that he and his partners used in the overage play transactions in order to remove any contractual defenses and prevent the courts from “unwind[ing]” his transactions. For example, on the seller acknowledgement form, Kaiser had the property owner agree that the transaction was “Not A Loan,” “Fully Informed,” and “Not Under Duress.” Kaiser also later added an “Agreement to Irrevocably Assign Overage Funds” to him.
¶ 11 There is no dispute that Kaiser was not the record owner of the property when the county issued the certificate of delinquency. Therefore, in order to collect the overage, Kaiser had the owner sign a notarized form that allowed him to obtain a power of attorney. Using the power of attorney, Kaiser was able to apply for the overage on behalf of the record owner. Kaiser also retained lawyers to represent the record owners. The lawyers would apply for the overage funds on behalf of the owner. But based on the agreement between the property owners and Kaiser, the attorney would pay Kaiser the overage funds.
¶ 12 Overages ten times greater than Kaiser's purchase price were normal. Kaiser's partner Scamehorn estimated that 50 to 80 percent of the overage play transactions generated overages greater than $5,000 at the tax sale, with only 10 to 20 percent not generating any overage. Kaiser admits that if the property owners knew about the overage, they would never agree to allow him to collect it. Accordingly, Kaiser never fully explained the overage addendum to the property owners and any disclosure about the overage is buried in other contractual boilerplate.
¶ 13 In one example of an overage play transaction, Michael and Patty Radvick contacted Kaiser to help them avoid the tax sale and keep their property. Kaiser paid the Radvicks $500 and the Radvicks agreed to enter into a purchase and sale agreement and execute a quit claim deed to Kaiser. Kaiser did not pay the delinquent taxes as promised; instead, he let the tax sale proceed. After deducting unpaid taxes and fees, the sale generated an overage of $37,994. Kaiser used the quit claim deed signed by the Radvicks to collect the overage funds.
¶ 14 In another example, four days before the scheduled tax sale Borden and Edna Sagmoen entered into an agreement with Kaiser in order to keep their property. The Sagmoens owed $3,846 in unpaid taxes. Kaiser paid the Sagmoens $200 and the Sagmoens signed an agreement giving Kaiser a limited power of attorney. Kaiser allowed the tax sale to proceed. The property sold for $20,500 and generated an overage of $16,655. Kaiser collected the overage using the limited power of attorney signed by the Sagmoens.
¶ 15 In a variation of the overage play scheme, Kaiser sometimes split the overage with the property owner in a “participation overage play.” In a participation overage play agreement, any overage generated at the tax sale is first used to refund Kaiser's purchase price and attorneys fees, and then Kaiser can collect over 70 percent of the remaining funds. For example, Kaiser paid Phyllis Cunningham $200 to enter into an agreement. That entitled Kaiser to 80 percent of the overage. If Cunningham breached the agreement, damages were set at $100 per day until Kaiser received his money. After the tax auction, an attorney hired by Kaiser applied for the overage of $8,048. The attorney refunded Kaiser his $200, recovered his attorney fee of $500, deducted Kaiser's share of $5,878, and then paid Cunningham the remaining $1,470.
¶ 16 In partial interest deals, or what Kaiser describes as “partnering up,” Kaiser induces a homeowner facing tax foreclosure to place the property in a trust and designate Kaiser “through his business entities” as the trustee and co-beneficiary. The partial interest agreements allow Kaiser to have the exclusive power over the sale of the home. After obtaining title and control over the property, Kaiser pays the delinquent property taxes. Kaiser used the limited power of attorney obtained from the homeowners in partial interest deals to falsify mandatory tax affidavits to avoid paying excise taxes on the property transaction.
¶ 17 As part of a partial interest deal agreement, the homeowner signs (1) an irrevocable warranty...
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