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Monday, May 27, 2024 | Back issues
Courthouse News Service Courthouse News Service

Cheated in Skyscraper Deal, Class Claims

SAN DIEGO (CN) — A group of investors who purchased space in a Philadelphia skyscraper in a massive $152 million deal claim their broker and lender cheated them out of millions.

Lead plaintiffs Dennis Dierenfield, William Gilmer and others say their broker Commonwealth Land Title Company cheated them out of millions when they purchased property at 1818 Market Street in Philadelphia in 2006. The class action was filed Oct. 26 in San Diego Superior Court and was Courthouse News' Top Download on Monday and Tuesday.

The class of less than 100 plaintiffs purchased property at the 40-story skyscraper, which houses business offices in downtown Philadelphia. They claim their lender, defendant Wells Fargo's predecessor Wachovia Mortgage, breached escrow instructions by tacking on a $9.6 million unauthorized mortgage loan which was used to pay out kickbacks, including $5.9 million in commission to an unlicensed real estate broker.

According to the 39-page complaint, each plaintiff paid a proportionate share of $47.8 million as an equity contribution in what was supposed to be $132 million loan, putting down $478,000 each for a 1 percent ownership interest in the property. A final "buyer closing statement" provided by defendant TICOR Title Company of California to each of the plaintiffs does not show any payments inconsistent with the closing instructions, the plaintiffs claim. They also point out they did not "receive or authorize any other instructions that would be in conflict with the instructions."

It wasn't until eight years later, in October 2014, that the plaintiffs say they discovered the defendants breached escrow instructions when closing on the massive property. They say they learned about the illegal and unauthorized loan used to pay kickbacks to promoters including the $5.9 million kickback to Triple Net Properties Realty, which the plaintiffs claim was not a licensed broker at the time of the transaction from attorneys involved in separate litigation related to the property who investigated and found three mortgages against the property and unauthorized distributions from escrow, the plaintiffs say.

Triple Net Properties is not a party to the class action.

The plaintiffs say TICOR "engaged in an atypical escrow arrangement" and disbursed the entirety of plaintiffs $33 million in deposits without delivering the required deed, "contrary to well-recognized and established industry practices and procedures for the protection of escrow clients such as plaintiffs."

The money was wired to an account controlled by Triple Net Properties, where plaintiffs' deposits were combined with loan proceeds from three loans, establishing lender reserves and millions which were paid in undisclosed kickbacks, according to the complaint.

That illegal third mortgage increased the total mortgage debt to 91 percent and reduced plaintiffs' equity, the plaintiffs say in their complaint. They also claim there were only supposed to be two loans totaling $132 million, but there were three loans disbursed to acquire the property for $152.8 million as determined from transfer tax stamps discovered by the plaintiffs' attorneys.

The class action involves 11 causes of action including breach of escrow contract, implied contract, statutory duties applied to escrow companies and fiduciary duty of escrow company; constructive fraud; negligence; breach of mortgage agreement; aiding and abetting breach of fiduciary duty; breach of title policy; estoppel; and unfair business practices.

The lawsuit is being brought on behalf of those who provided equity funds to directly or indirectly acquire tenant in common interests in the property in 2006.

Attached to the complaint are 158 pages in exhibits.

The plaintiffs seek unspecified damages, a temporary restraining order and preliminary and permanent injunctions to prevent the defendants from engaging in unlawful business practices.

Defendants include Commonwealth Land Title Company and its insurance company, TICOR Title Company of California and Wells Fargo Bank.

The plaintiffs are represented by Kenneth Catanzarite of Anaheim, California, who did not wish to comment on the case. Commonwealth Land Title Company did not return a phone request for comment.

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