do we have a case or not

[dprovince]

What is the name of your state (only U.S. law)? Connecticut and Texas. transaction was in Connecticut and we now live in Texas.

My wife and I purchased and personally guarantied a commercial construction loan to buy and rebuild a commercial property using us and a newly formed LLC. Come to find out the appraiser for the bank uncovered that there was a major title defect and the title didn't include all of the property and specifically left out the area we needed to install a new septic system that the site needed to be fully utilized. The bank did not disclose this to us and only did we find out long after the closing by reading the appraisal report. We were held back 2+ years on getting the title defect corrected and due to the amount of time and carrying costs ended up giving the property back to the bank to escape personal ruin and lose our house (although we ended up selling it anyways to help did us out). They forced us to sign a hold harmless document in order to not go after us with the foreclosure. We lost everything that we had and reviewing all of the documents am getting more and more upset that the bank knowingly wrote a bad loan knowing full well that we would be stuck. They even made us get title and mortgage insurance. The seller gave us a recent A2 survey so we didn't. This just seems wrong, really wrong. We don't know what to do. We tried to sue the closing attorney for us and the sellers but that turned out poorly and have offered us a low settlement offer as they are claiming that they weren't aware of the issue and that it was a mutual mistake. any advice here would be helpful. just wondering if we have a case against the bank and if so can we get help from some organization to pursue. i would hate to try and tangle with a bank. Truly David and Goliath situation.

 

[justalayman]

not sure I understand your issue.

you purchased land but somehow, through a title defect? you did not actually purchase all the land you thought you were purchasing, right?


what type of deed was used to convey title to you?

did you have a title search or obtain an opinion of title from a lawyer prior to the purchase?

I don't see how you would have any claim against the bank. You brought a contract to them and asked for money. They are not required to confirm information to you that you should be obtaining elsewhere. The bank is not a title insurance agency.

and with that; did you purchase title insurance? Were there any exceptions noted that would have clued you into the problem?

 

[LdiJ]

not sure I understand your issue.

you purchased land but somehow, through a title defect? you did not actually purchase all the land you thought you were purchasing, right?


what type of deed was used to convey title to you?

did you have a title search or obtain an opinion of title from a lawyer prior to the purchase?

I don't see how you would have any claim against the bank. You brought a contract to them and asked for money. They are not required to confirm information to you that you should be obtaining elsewhere. The bank is not a title insurance agency.

and with that; did you purchase title insurance? Were there any exceptions noted that would have clued you into the problem?

Come to find out the appraiser for the bank uncovered that there was a major title defect and the title didn't include all of the property and specifically left out the area we needed to install a new septic system that the site needed to be fully utilized. The bank did not disclose this to us and only did we find out long after the closing by reading the appraisal report

Its surprising that the bank approved the commercial loan at all. They should not have.

 

[dprovince]

Its surprising that the bank approved the commercial loan at all. They should not have.

we did have title insurance but it was written out to the defective deed and the title insurance denied the claim as they are only responsible for the scope of the defective deed. Crazy I know.

Regarding the bank, bottom line is that they were the only one that knew that there was a problem and they wrote a bad loan and as I mentioned they knew that they were writing a bad loan and we didn't. If they had just brought it up prior to the closing, all of this would have been averted. But as I previously mentioned, they were completely protected by making me get mortgage insurance and title insurance for them.

I do understand that my closing attorney should have caught this since I paid her to do the title search. She has since filed bankruptcy and her malpractice insurance is claiming that there is no causation in the cloud that contributed to the failed business. The sellers are claiming that the defect was in place when they bought the property and they also are claiming the there isn't causation. Its a mess.

I just can't get over the part of the bank played in this.

 

[quincy]

we did have title insurance but it was written out to the defective deed and the title insurance denied the claim as they are only responsible for the scope of the defective deed. Crazy I know.

Regarding the bank, bottom line is that they were the only one that knew that there was a problem and they wrote a bad loan and as I mentioned they knew that they were writing a bad loan and we didn't. If they had just brought it up prior to the closing, all of this would have been averted. But as I previously mentioned, they were completely protected by making me get mortgage insurance and title insurance for them.

I do understand that my closing attorney should have caught this since I paid her to do the title search. She has since filed bankruptcy and her malpractice insurance is claiming that there is no causation in the cloud that contributed to the failed business. The sellers are claiming that the defect was in place when they bought the property and they also are claiming the there isn't causation. Its a mess.

I just can't get over the part of the bank played in this.

You are going to have to have all of the documents and facts relating to the property personally reviewed by an attorney in your area, dprovince. This personal review is impossible to do in a forum setting and there are numerous issues that will need addressing.

Your title insurance should have insured against all defects in the title.

You might want to check to see if any of the players in your situation have been, or are currently, involved in litigation.

Good luck.

 

[justalayman]

dprovince;3270451]we did have title insurance but it was written out to the defective deed and the title insurance denied the claim as they are only responsible for the scope of the defective deed. Crazy I know.

the title insurer is responsible for researching the title and applying exceptions themselves. If they did not and insured the property as described, then they are stuck with that. There has to be more to that issue.

Regarding the bank, bottom line is that they were the only one that knew that there was a problem and they wrote a bad loan and as I mentioned they knew that they were writing a bad loan and we didn't. If they had just brought it up prior to the closing, all of this would have been averted. But as I previously mentioned, they were completely protected by making me get mortgage insurance and title insurance for them.

why do you keep saying it is a bad loan? They are not responsible to protect you. They are responsible to protect their own investments and they did that by demanding mortgage insurance. That makes it a good loan.

I do understand that my closing attorney should have caught this since I paid her to do the title search. She has since filed bankruptcy and her malpractice insurance is claiming that there is no causation in the cloud that contributed to the failed business.

and? A lot of insurance companies deny claims. That is what we have insurance departments at most states governments and courts.

The sellers are claiming that the defect was in place when they bought the property and they also are claiming the there isn't causation.

it doesn't make a difference IF they conveyed the property using a warranty deed. If they didn't, then they may escape liability. If they used a warranty deed, they have guaranteed the title claimed in the deed.

I just can't get over the part of the bank played in this

I don't really see a problem with what the bank did. It sounds like a high risk loan that they demanded be insured which turned it into a no risk loan. Sounds like good business practices to me.



I think you are also trying to turn the land issue into the reason for your personal financial issues. That is the only place I can see why anybody would use the term causation. If so, then they would be correct. The land issue is not the blame for your personal financial issues. You should not guarantee a loan unless you can pony up if the time comes. That is a bad personal financial decision on your part. It was not the fact the bank loaned the money or the deed issue itself. It was you over extending yourself believing that personal loan guarantee would not be invoked.