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socrateaser
socrateaser, Lawyer
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Experience:  Retired (mostly)
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Jd, here is a question about contracts. Say someone comes

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Jd, here is a question about contracts.
Say someone comes to you, lets call him Jim, and says he wants to buy your house, you assume Jim is the buyer,  Jim's girlfriend signs the contract and disclosure,  you figure well they are buying the house together, how quaint. Jim communicates all his contingencies and concerns about the house with you etc.  at closing Jim and his girlfriend are with their  lawyer and the papers are signed, but now you see that they are signed by his girlfriend in the name of an llc.  No indication still by the Jim and his GF  that they are not the owners,  they take possession and paints and  fixes the house  up.  Then the seller finds out that neither  jim nor his GF,  bought the house, but an llc that niether Jim nor his GF  are members  of.  Then you find out that the llc is the plaintiff in a lawsuit against you, for failure to communicate a lead report to the owner.  Yet you told the JIm about the lead report.  During deposition Jim and his GF both claim to never have been members of the llc, neither did they have POA.  then you find out that Jim didn't sign anything because he was headed to federal prison a month after closing, on unrelated drug conspiracy charges, apparently Jim sold all his properties in a short sale to his girlfriend before he went into the pen, so obviously did not want his name on one more.

How is it Jim's GF could sign All the closing papers for the house?
How could the seller be responsible to an owner llc that didn't exist until 10 days before closing?
At best could it not be said that Jim was the buyers agent? 
If he can't be described as buyers agent,  nor the owner what would his legal title be?
would the seller be wrong for assuming Jim and his GF were the owners since they acted as such?
Could it be said there was misrepresentation on Jim and his GF's behalf
Submitted: 1 year ago.
Category: Legal
Expert:  socrateaser replied 1 year ago.
Hello,

You asked:

How is it Jim's GF could sign All the closing papers for the house?

A: Because you also signed the contract. Under the "statute of frauds," which is several hundreds of years old, all contracts for the transfer of an interest in real estate for more than one year must be in writing. If both you and the buyer signed, then there is a valid contract to transfer real estate, and the statute of frauds is satisfied.

How could the seller be responsible to an owner llc that didn't exist until 10 days before closing?

A: If you, as seller executed a deed conveying the property to the LLC, then by your actions, you consented to that transfer -- regardless of the sales contract. However, if Jim and GF were notified of the lead issue, then that notice would be imputed to the LLC, because owners of an LLC are agents of the company -- and whatever an agent knows, is imputed knowledge of the agent's principal -- in this case, the LLC.

Assuming that you provided the necessary disclosures, then you are not responsible.

At best could it not be said that Jim was the buyers agent?

A: I think there is no doubt about this. If Jim doesn't have a valid real estate brokers license, then his actions as agent were probably illegal. But, this isn't particularly relevant to the disclosure or notice to the LLC. What matters is that notice was provided according to law. If it was, you're not liable -- otherwise, you may be liable.

If he can't be described as buyers agent, nor the owner what would his legal title be?

A: An agency relationship can be created by actual authority (express or implied appointment by a principal); apparent authority (manifestation to third parties by a principal that a person is their agent); or ostensible authority (by operation of law, such as where a person who engages in the negotiation of a transfer of real estate on behalf of another).

In short, Jim was the agent -- possibly an illegal agent, but the agent, nevertheless.

would the seller be wrong for assuming Jim and his GF were the owners since they acted as such?

A: I don't think this is relevant. What matters is the documents: the purchase contract and the deed. Under the "doctrine of merger," the deed generally extinguishes the contract at the time of delivery -- except where the contract is supposed to survive transfer of title. So, if you executed the deed in favor of someone, that someone is the owner, regardless of anything that preceded the deed transfer.

Could it be said there was misrepresentation on Jim and his GF's behalf

A: Misrepresentation requires a false statement of material fact, intended to induce justifiable, detrimental reliance and causing damages. A seller who observes that a transaction is not occurring as originally represented, but who nevertheless proceeds with the transaction, is not justified in relying on prior misrepresentations of fact that are contrary to what is obvious. Your facts suggest that you saw the transaction change forms on multiple occasions, so I believe that regardless of the original alleged false statements, there probably is no actionable misrepresentation. But, even if there was, misrepresentation may be intentional/fraudulent, negligent or innocent. Any one of these species is grounds to rescind a contract. But, once the deed is signed and delivered to the new owner, the contract is merged, and so the misrepresentations, unless fraudulent, are likely extinguished as well.

The issue is whether or not Jim and GF were provided notice of the lead issue. If yes, and you can prove it, then you're not liable. Otherwise, you may be liable.

I realize that this may be simplifying things a great deal. However, judges usually try to distill a case down to the central issue, and resolve everything around that. Here, that issue is notice concerning the lead. I doubt that a judge would look past this in rendering judgment. That's how I would probably resolve the case if I were sitting as judge.

Hope this helps.
socrateaser, Lawyer
Category: Legal
Satisfied Customers: 33541
Experience: Retired (mostly)
socrateaser and 10 other Legal Specialists are ready to help you
Customer: replied 1 year ago.
just one more thing if GF says she is an agent and worked for the LLC, collecting rent, paying bills, signing contracts for work meeting with authorities basically as a property manager, yet both owner and her claim in deposition that she never received a paycheck. What do you nmake of that, can a reasonable peron believe or less reasonable, the irs, believe that even though she states she was unemployed at the time, that there was no renuumeration? If I told my audit, "yea, I didn't pay my manager and neither did she ask for it " would they take that at face value? Btw sorry about not rating you I got busy and lleft my computer, will do!
Expert:  socrateaser replied 1 year ago.
just one more thing if GF says she is an agent and worked for the LLC, collecting rent, paying bills, signing contracts for work meeting with authorities basically as a property manager, yet both owner and her claim in deposition that she never received a paycheck. What do you make of that, can a reasonable person believe or less reasonable, the irs, believe that even though she states she was unemployed at the time, that there was no renumeration?

A: An undisclosed agency is a lawful proposition. Large organizations interested in purchasing land cheap frequently hire an agent to undertake the transactions without disclosure of the organization, which would otherwise cause prices to skyrocket in the target area.

Obviously, this sort of conduct with a small business entity would be a silly argument to make in court. However, the issue is one for a jury or judge to determine at trial. See HEINE v. PAPP, 471 N.Y.S.2d 18, 97 A.D.2d 929 (1983) ("...an agency relationship may be established by conduct, oral agreement or written instrument"). So, if the goal is to establish or disestablish the agency relationship, it must be accomplished through testimony and documentary evidence.

Hope this helps.

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