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The Contract did not contain a reference to the Corbin
properties or to the $200,000 advance. There were, however, two
handwritten notations at the bottom of the Contract: (1) "Richard
& Carl Magness shall be responsible for framing and foundation
and supervision as per Ed Provost and Richard Magness agreement",
and (2) "If Ed Provost does not have the money to fund this
agreement there will no liability on his part."
Mr. Magness and petitioner also executed a "Secured
Promissory Note", dated June 1, 1991, wherein petitioner promised
to lend Mr. Magness $200,000 in eight equal installments of
$25,000. In return, Mr. Magness promised to repay petitioner the
principal sum of $200,000, plus interest at a rate of 10.5
percent per annum. The principal and interest were due on June
1, 1992. The note was secured by deeds of trusts on the Corbin
properties.5
Mr. Magness was unable to sell the Corbin properties. On
May 10, 1993, Mr. Magness and his wife filed Chapter 7
bankruptcy. They received their bankruptcy discharge on
September 14, 1993. Although petitioner filed a proof of claim
in the Magness bankruptcy, he did not receive any distribution
from the bankruptcy estate.
5Although the promissory note referred to second deeds of
trust, petitioner received a second deed of trust on one of the
Corbin properties and a third deed of trust on the other.
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