A TRO for All Seasons
A Temporary Restraining Order can be used to buy time in tricky business situations.
When the client walked in the door, here was his situation:
1. He owned a building that was under contract to sell for $2.4 Million, but he was behind in his payments on the $1.3 Million mortgage and so the bank had posted it for foreclosure on the next Tuesday. However, the sale was not to close for another month and if nothing were done he would likely lose his million dollars of equity because the foreclosure was scheduled to happen before the sale of the building that he had arranged.
2. Due to some shady dealings by a “workout specialist” that was supposed to help him refinance the property and avoid foreclosure, a lien had been placed on his property that was clearly fraudulent.
3. A tenant in the property that was not paid for his $50,000 tenant finish out allowance placed a lien on the property for the $132,000 that he actually spent finishing out his space.
4. A business partner of the client’s filed a lien against the property for over $200,000. The business partner could not substantiate the basis of the lien.
Situations like this one are tailor-made for a Temporary Restraining Order. You can review our discussion of this process by clicking here. But a TRO is not all this client needed. We also did the following:
1. We filed a summary action to have the fraudulent lien filed by the “workout specialist” vacated and taken off the property records. This device is a motion presented to a District Court wherein you file a affidavit that explains the facts to the Court and then ask the Court to strike the fraudulent lien. This is done subject to some pretty severe penalties if you are wrong, but in this case we were clearly in the right and the Court signed the order after reviewing the affidavit and the documents we submitted. But the lien was now off the county records and the title company accepted that and was willing to close.
2. The bank agreed to delay the foreclosure for one month once we contacted their lawyer and explained our position. However, the closing on the property was delayed for more than a month and the bank posted the property for foreclosure the next month and would not agree to remove it from foreclosure a second time. So, in order to stop the foreclosure the next month, we were forced to file an application for temporary restraining order. We presented the application to the Court and the Court granted our request, holding off the foreclosure for at least another month.
3. In the meantime, we negotiated with the tenant to lower the lien from the $132,000 they were claiming to the $50,000 that they were entitled to under their lease. The title company agreed to withhold the $50,000 at closing and to pay the tenant once the sale of the building was accomplished.
4. We negotiated with the business partner to have $250,000 withheld from the proceeds of the sale of the building and held by the title company until we could either negotiate a figure that we think is fair or file a lawsuit to have a court determine what is fair.
So the sale of the building was finalized and everyone was paid off and the client received their million dollars of equity. Obtaining a Temporary Restraining Order can be tricky business, but this case demonstrates how useful a device it can be to solve problems when there is very little time available to reach a solution.