Legal definition of UNDUE INFLUENCE
The courts stringently examine transactions between people involved in fiduciary relationships toward one another. Particular scrutiny is placed upon any transaction by which a dominant individual obtains any advantage or profit at the expense of the party under his or her influence. Such transaction, in which Undue Influence of the fiduciary can be established, is void.
What is UNDUE INFLUENCE?
Virtually any act of persuasion that over-comes the free will and judgment of another, including exhortations, importunings, insinuations, flattery, trickery, and deception, may amount to undue influence. Undue influence differs from duress, which consists of the intentional use of force, or threat of force, to coerce another into a grossly unfair transaction. Blackmail, Extortion, bad faith threats of criminal prosecution, and oppressive Abuse of Process are classic examples of duress.
Exhortation – a communication intended to urge or persuade the recipients to take some action
What do you think? Could this be a case of undue influence? Below are some Summit 1031 Bankruptcy Deposition Questions & Answers…
Question – Would you agree there’s a potential benefit to making sure exchanges closed to try to mitigate any harm that might be suffered?
Answer – Yes, we wanted exchanges closed, and that’s what we thought we were hiring Kevin Padrick for. In fact, I had some communication with John Tanna very early on, and I told him about Kevin — he was trying to get ahold of Terry Vance. I said to talk to Kevin because he’s going to try to get these exchanges done. One of the promises that we believe he made to us was he had financial partners to bring in and bridge this liquidity problem and that he would concentrate on getting these exchanges closed as quickly as possible. And mitigating damages. And that’s what we wanted to get the money paid back to the creditors. We wanted the damages mitigated.
Question – Were there steps that you think could or should have been taken to mitigate damages that were not?
Answer – Yes. I mean, right off the bat, no one would answer phone calls from exchangers. You know. Susan Ford — you know, it just sticks in my mind all the time is its like a sales presentation to do a bankruptcy. I’ve had some other attorneys go, I’m not sure you got the right advice on this bankruptcy. And I had some doubts in my mind.
But sitting back and looking now, I don’t think — I think the real estate market was just heading that way and was going to continue. It wasn’t like a bad winter. It was just gong to continue that way. But I was very frustrated with Sussman Shank because Susan Ford had a comment — and I’ll never forget — was that “the day you declare bankruptcy, everything will be transparant and you’ll se it will be better.” I couldn’t undertand why Sussman Shank weren’t talking to exchangers. “Oh, we don’t have time to.” And so that just made the fear of exchangers just that much more.
We feel like we were told not to talk to anybody; exchangers, nobody. We weren’t supposed to do anything. We finally started talking to them, and Lane talked to a lot of them, tryng to get things done. I think the reverse exchanges just could have been done — done very easily. I don’t uderstand what the problem was with those.
Question – What are the specific steps you think should have been taken to close exchanges more quickly and mitigate damages?
Answer – I really think that a cooperateve effort would have moved things a lot quicker — especially on the reverse exchanges. I’m frustrated that we couldn’t help. And helped with mitigating the costs. And exchangers were calling us when, you know, like I had one exchange I could have finished and I was just — so scared from kind of the, don’t do anything. Exchangers begging me. Can you just please sign this deed. You know. And it’s like I didn’t know what to do. I’d never been through anything like this.
I guess the other thing was — Kevin — led us to believe that he was bringing financial partners with deep pockets, and that he could bring in some money in the interim. That was the last I heard of it.
Question – When was that in a meeting that he told you that, or was it in writing?
Answer – His sales pitch.
Question – And when was that?
Answer – The first time we met with him.
Question – Wa that at your offices down in Bend?
Answer – Yes.
Question – Who was there?
Answer – I think we were all there, all the principals.
Question – Who was there with Mr. Padrick; anyone?
Answer – Just him?
Question – So it was just the five of you there?
Answer – Right.
Question – Was Mr. Vance there?
Answer – No. It was before we declared bankruptcy.
Question – And how did that meeting come about?
Answer – Bill Smith told Lane that he knows this guy in Sunriver, and that he would know how to liquidate the property quickly and could provide help.
Question – Did he send you anything in writing or hand you anything in writing, a proposal, anything like that? Even an e-mail.
Answer – I don’t know. There’s this contract, and I’ve looked at it. It was like Sussman Shank saying you’ve got to sign this and get it back. Like incredible pressure to sign everything. It’s almost like you don’t have time to look at it, you’ve got to sign it. We’ve got this deadline here and you don’t know what you’re doing – just doing what people — what attorneys tell you.
Question – Sussman wanted you to sign the contract with Mr. Padrick, is that — just making sure I understood your testimony correctly. They were pressuring you to sign it?
Answer – So we met with them, and we talked to Sussman about it. Kevin. And then they came back and said: Oh, yeah, he’d be good. We agree with you. Or whatever. But what I’m saying, signing things, I just remember there were a number of things I had to sign. It was always the pressure, like this has to be signed now. You know. And that was one of the documents. So…
Question – Now, you had a meeting with Mr. Padrick, and you and Rose and Terry Vance and others at the Summit offices?
Answer – Right.
Question – Were you aware that that meeting was being videotaped?
Answer – Yes.
Question - How did you become aware of thate?
Answer – Well, just because it was being set up and there was some discussion between Terry and Stephanie.
Question – What do you recall about that discussion?
Answer – I don’t recall the exact discussion.
Question – Was it set up behind you in the conference room?
Answer – Well, like I was sitting — Kevin was kind of sitting here. It’s a shorter table. And it was – it was right on the back table. It’s a much smaller room than this.
Question – Would it have been obvious to somebody sitting there, in your mind, that it was being videotaped?
Answer – I wasn’t looking at it. I don’t think I ever looked at the camera during the meeting. I was completely shocked when Kevin made his comment about the notes. And that was, like, why would you be worried about anyone taking notes if, you know, what — it was just shocking to me that I couldn’t write — you know, he didn’t want me to write notes, which told me he had something to hide. You know. That’s when all sorts of bells and whistles start going off. It’s like why would he be so freaked out about someone writing a note.
White Salmon, Washington, United States