-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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