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Strategies & Market Trends : Mish's Global Economic Trend Analysis

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To: Think4Yourself who wrote (53305)	7/12/2006 4:16:39 PM
From: Elroy Jetson	Read Replies (3) of 116555

Perhaps you've heard the saying that "possession is 9/10ths of the law." Its true. Lennar owes Veemac money and is not paying. Lennar doesn't have to sue anyone. If Veemac wants their money, they have to sue Lennar. Lennar can clear the liens placed by the contractor by putting up a bond for that amount. An example. I worked on a project around 1985 as a consultant. A developer went to Chase Manhattan Bank and obtained a construction loan to pay for the cost of building an office tower on an expensive city lot he owned. Part way into construction process, after Chase Manhattan Bank had lent $28 million on the construction loan, the bank refused to advance any more money - even though the developer was in full compliance with all of the terms of the loan. Chase would not lend the balance of the $34 million, because they said they would lose less money by taking a loss on their current $28 million than they would by funding the full $52 million and taking a loss when the developer failed to lease the building in the then failing commercial real estate market. The developer filed for bankruptcy and sued Chase for breech of contract. Chase ended up owing the developer some damages, but not very much. Why? The court agreed with Chase that the developer's losses would have been far larger had Chase enabled him with additional loan draws to finish the building. In this Veemac case, if sued, Lennar will probably prove fraud or negligence on the part of Veemac. The court will disallow the fraudulent or negligent portion of the bill from Veemac, along with any damages and litigation costs incurred by Lennar. Lennar will also be able to deduct any payments to Veemac's workers which Lennar made directly. Veemac may not be awarded much of their billed amount at all, and the owner and employees involved may go to prison in a separate criminal trial. If the court does not agree there was fraud or negligent work, Lennar will end up owing the original bill, in addition to litigation costs and damages incurred by Veemac. .

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