Don Ballantyne and Susanne C. Ballantyne - Page 6

                    balance * * *   These funds [$1,100,000] will                     
                    be used: $1,050,000 for land purchase, and                        
                    $50,000 for costs and interest.  This land                        
                    acquisition loan can be secured by a first [ ]                    
                    deed of trust on 86 acres that we are                             
                    purchasing   for    $7,000,000. When the                          
                    development loan [$3,000,000] is recorded this                    
                    loan will be paid in full.                                        
               Petitioner led the bank to believe that Halling was the owner          
          of the Escondido property.                                                  
               Both loan requests were approved by the bank. Petitioner               
          individually guaranteed repayment of the $1.1 million land                  
          acquisition loan.  Closing for the acquisition loan (which was              
          handled by WTC) occurred on July 31, 1985.  As of closing, WTC had          
          received funds totaling $2 million; $1,050,000 from the bank, and           
          $950,000 from Balmac.  WTC issued a check for $1,960,680.25 ($2             
          million less seller's escrow-related fees and costs) made payable           
          to itself as petitioner's nominee under the Holding Agreement.              
          Recorded Documents                                                          
               On July 31, 1985, the following documents were recorded in             
          the San Diego County Recorder's Office:  (1) A grant deed from WTC,         
          acting under the Holding Agreement, to Balmac with regard to the            
          transfer of the Escondido property; (2) a deed of trust encumbering         
          the Escondido property executed by Balmac in favor of the bank to           
          secure the $1.1 million land acquisition loan; and (3) a                    
          subordinated purchase money deed of trust executed in favor of WTC          
          under the Holding Agreement to secure the balance due by Balmac as          
          evidenced by Balmac's $5 million note.                                      

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