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Beach Property subject to the $4,700,000 loan from Anchor,
and it issued a promissory note, payable to the joint
venture, in the amount of $887,500 (i.e., $5,587,500 less
$4,700,000). Both the joint venture and the beach club
treated the transfer of the Moonlight Beach Property as
having occurred on or about January 16, 1986, the date on
which the permanent loan was funded and the construction
loan was paid off, as discussed below. The joint venture
retained title to the parcel of land on which the beach
house was located.
On December 23, 1985, an application to register the
project under the Texas Time-share Act was filed with the
Texas Real Estate Commission. The application was filed on
behalf of the beach club by the club's accountant, Mr. Tom
D. Winslett II. On August 6, 1986, the Texas Real Estate
Commission notified the club that, as a condition precedent
to registration in Texas, the project would have to be
registered and qualified in the State of California.
Originally, Mr. Dixon and petitioner had not sought to
register the project in California. In part, this was due
to the fact that they had been advised that the project
would not qualify under California law because of a so-
called blanket encumbrance problem. That is, under the
proposed structure of the transaction, the permanent lender
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