Chart 1. MANAGEMENT OF THE BORROWERS
Kansas
Tennyson
Elliott
BORROWER (and owner) BORROWER ½ OWNER
- non-revocable trust - Hage Family Trust - SB 32nd Street Apts LLC - Loan Funds
Member of Owning entity
John Hage & Bonnie Hage
½ OWNER
Chart 2. LEGAL OWNERSHIP OF THE BORROWERS AND PROPERTIES
Kansas
Tennyson
Elliott
BORROWER (and owner) BORROWER ½ OWNER John Hage & Bonnie Hage - non-revocable trust - Hage Family Trust - SB 32nd Street Apts LLC - Loan Proceeds
Member Trustors Beneficiaries
½ OWNER
Chart 3. Standing to sue loan broker for damages suffered by the Borrower resulting from loans?
Kansas
Tennyson
LLC BORROWER (and owner) has standing
- Hage Family Trust - SB 32nd Street Apts LLC - Loan Proceeds
Member of a borrower LLC Has NO standing
John Hage & Bonnie Hage * Trustors of Member Trust – no standing (only Trustee of a Trust may sue) * Beneficiaries of Member – no standing (only Trustee of a Trust may sue) * Manager of LLC Borrower – no standing * Trustee of Member – no standing (same position as Trust – i.e., a member of the borrower entity)
Chart 4. WHO HAS STANDING based on Beneficial Ownership (substituting Trustees of the Revocable Trust)
Kansas
Manager of borrower LLC has no standing to sue
Tennyson
BORROWER HAS STANDING TO SUE SB 32ND Street Apartments, LLC
Elliott
BORROWER HAS STANDING (John Hage & Bonnie Hage, as Trustees)
½ OWNER NO STANDING Trustee of the Irrevocable Trust
- Revocable trust Member has NO STANDING nd - SB 32 Street Apts LLC to sue for damages incurred by Borrower - Loan Funds - Hage Family Trust
Beneficiary of Member, has NO STANDING to sue for damages incurred by Borrower
Chart 5. A DUTY IS OWED BY THE COMMERCIAL LOAN BROKER TO THE BORROWER
Kansas
Tennyson
BORROWER DUTY SB 32ND Street Apartments, LLC John Hage & Bonnie Hage
Elliott
BORROWER ½ OWNER ONLY and ½ OWNER NO DUTY DUTY Irrevocable Trust Revocable Hage Family Trust
- Revocable trust - Hage Family Trust - SB 32nd Street Apts LLC - Loan Funds
Member NO DUTY Revocable Hage Family Trust
Trustors – NO DUTY Beneficiaries – NO DUTY Managers of LLC – NO DUTY Trustees – stands in shoes of the Trust
Chart 6. TO WHOM IS A DUTY OWED BY THE COMMERCIAL LOAN BROKER ON A COMMERCIAL LOAN?
Kansas
Tennyson
COMMERCIAL LOAN BROKER Owes fiduciary duty only to the BORROWER (SB 32ND Street Apartments, LLC)
John Hage & Bonnie Hage
Managers of LLC – NO DUTY Beneficiaries of the Member – NO DUTY Trustor of the Member – NO DUTY Trustee of the Member – NO DUTY - Hage Family Trust
Member of the Borrower is owed no duty - SB 32nd Street Apts LLC Revocable Hage Family Trust - Loan Funds
Chart 7. WHERE DID THE OCTOBER 2014 CASH OUT LOAN PROCEEDS GO? $211,000 total to LLC, not traced further Kansas $159,300 to LLC, not traced further
Tennyson
SB 32ND Street Apartments, LLC
- John and Bonnie Hage - non-revocable trust - Hage Family Trust - SB 32nd Street Apts LLC - Traceable Loan Funds
$247,500 to Hage Family Trust, not traced further
Elliott
$247,500 to Irrevocable Trust, not traced further
$52,000 to LLC, not traced further Hage Family Trust (John Hage & Bonnie Hage, Trustees)
Trustee of the Irrevocable Trust
Of the $376,000 given to Osborn (via 69 checks paid to third parties over the next 12 months), ZERO loan proceeds were traced back to the borrowers’ accounts or to these loan proceeds. 100% of post-loan monies paid to third parties were from the Hages personal bank account. No money was traced from the borrowers, or these loan proceeds, into the account of the Hages that paid Osborn.
The Commercial Loan Broker Gives information about potential loans to the Commercial Borrower, who then applies that information To the business plan, investment strategy, future assumptions, and level of risk created by the Borrower Business plan Investment strategy Level of risk/reward Future assumptions BUY/SELL/BORROW
.............. INTEREST RATE Commercial Borrower
Commercial Loan Broker
TERMS – interest only, amortized, balloon payment COST – Fees and costs of loan
INTEREST RATE ............... TERMS – interest only, amortized, balloon payment COST – Fees and costs of loan The commercial loan broker is NOT the borrower’s financial advisor, legal advisor, business advisor, or financial analyst
A Commercial Loan Broker tries to obtain the Best interest rate, terms, and costs for which the commercial borrower qualifies based on the needs of the commercial borrower, as expressed by that borrower
Commercial Lender 1
Commercial Lender 2
Commercial Lender 3 INTEREST RATE TERMS – interest only, amortized, balloon payment COST – Fees and costs of loan
Commercial Loan Broker Commercial Borrower
A Commercial Loan Broker contacts Commercial Lenders To see what programs are available to meet the needs of the borrower, as communicated by the borrower and is paid a commission for this service if the borrower obtains a loan
Commercial Lender 1
Commercial Lender 2
Commercial Loan Broker
Commercial Lender 3
INTEREST RATE TERMS – interest only, amortized, balloon payment COST – Fees and costs of loan
The commercial borrower decides whether to borrow AND what to do with the borrowed money
Commercial Lender 3
INTEREST RATE TERMS – interest only, amortized, balloon payment COST – Fees and costs of loan Commercial Loan Broker Commercial Borrower
The Commercial Loan Broker Gives information about potential loans to the Commercial Borrower, who then applies that information To the business plan, investment strategy, future assumptions, and level of risk created by the Borrower Business plan Investment strategy Level of risk/reward Future assumptions BUY/SELL/BORROW
Commercial Borrower
Commercial Loan Broker
INTEREST RATE TERMS – interest only, amortized, balloon payment COST – Fees and costs of loan
INTEREST RATE TERMS – interest only, amortized, balloon payment COST – Fees and costs of loan The commercial loan broker is NOT the borrower’s financial advisor, legal advisor, business advisor, or financial analyst
HOW THE BORROWER DECIDES WHETHER TO BORROW AND WHAT TO DO WITH THE MONEY
Friends
Business plan Investment strategy Level of risk/reward Future assumptions BUY/SELL/BORROW
Business associates Commercial Lender 3
Financial advisors
…………. INTEREST RATE TERMS COST Commercial Loan Broker
Commercial Borrower Family
Attorneys
Educators, advertisers
Accountants
Business plan Investment strategy Level of risk/reward Future assumptions BUY/SELL/BORROW
By allowing the commercial borrower and the commercial borrower’s owners/members to sue the loan broker, Judge Wohlfeil is imposing a duty on the loan broker to determine how the borrower, and each member of the borrower, will be affected by the commercial loan, and what the borrower and each member is likely to do with any loan proceeds or dividends potentially resulting from the loan.
…………. BORROWER
MEMBERS/OWNERS of the LLC
How does the loan broker keep track of the needs of each person or entity? What if the needs conflict with the needs of another person or entity? How can the broker know whether the person or entity will give the money away, invest It wisely?
Business plan Investment strategy Level of risk/reward Future assumptions BUY/SELL/BORROW
Judge Wohlfeil went even further, allowing the beneficiary of the owner of the Commercial borrower to sue based on the effect of the commercial loan on the Monthly cash flow of the beneficiary, thus creating a duty on the broker to Correctly analyze the finances of the commercial borrower, its owners, and the Beneficiaries of the owners. How can any loan broker do this?
How does the loan broker keep track Of the needs of each person or entity? What if the needs conflict with the needs of Another person or entity? How can the broker know whether the person or entity will give the money away in the 12 months after the loan funds, or invest the wisely?
…………………………………………………………………….…………. …………. BORROWER
MEMBERS/OWNERS of the LLC
Beneficiaries