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could declare the entire project in default if the club
failed to remit a mortgage payment, even though members of
the club had timely made all of their note payments to the
club.
After receiving the August 6, 1986, letter from the
Texas Real Estate Commission, Mr. Winslett, acting on
behalf of the club, authorized attorneys to seek registra-
tion of the project in California. Also, discussions were
held with representatives of the permanent lender, Sandia
Federal Savings & Loan (Sandia), to see if Sandia would
allow the permanent loan to be amended to alleviate the
blanket encumbrance problem by releasing members who had
fully paid their initiation fee note. Ultimately, these
discussions were not successful and registration was never
obtained in either Texas or California.
On or about January 16, 1986, the beach club secured
permanent financing for the project from Sandia. On that
date, Mr. Dixon, acting as the club's president, and
petitioner, acting as the club's secretary, executed a
secured promissory note to Sandia in the principal amount
of $4,760,000, payable in 60 equal payments of $181,308.08
each, due on the 15th day of each July, October, January,
and April during the term of the loan, commencing on
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