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The Gutierrez Law Firm wins lawsuit against Clayton Homes affiliate Vanderbilt Mortgage and Finance, Inc.

CORPUS CHRISTI, Texas – (Nov. 18) – Attorneys Baldemar F. Gutierrez and J. Javier Gutierrez of The Gutierrez Law Firm, Inc. have prevailed in a federal Civil RICO jury trial against Berkshire Hathaway subsidiary Vanderbilt Mortgage and Finance, Inc. A federal jury has found Vanderbilt liable of civil racketeering and fraud related to a mortgage loan scheme used to sell manufactured homes.
The case involved the owners of a mobile home in Jim Wells County who had paid on a mortgage for four years after their loan had been declared “paid in full” – and who, despite this, had faced foreclosure and loss of that home.

The case was against Vanderbilt, Clayton Homes, Inc., based in Maryville, Tenn., which describes itself as the nation’s leading maker of manufactured (mobile) homes, and which became a unit of Berkshire Hathaway, Inc., of Omaha in 2003, and CMH Homes, Inc., the retail arm of Clayton Homes. The jury also found Clayton Homes, Inc. and CMH Homes liable for filing fraudulent liens against land owned by Maria and Arturo Trevino of Alice, Texas.

The jurors found Vanderbilt engaged in a pattern of racketeering activity in violation of the federal anti-racketeering act known as RICO. (Racketeer Influenced Corrupt Organization Act.) Vanderbilt Mortgage, the financing arm of Clayton Homes, was ordered to repay $30,000 in payments made by the homeowners and $600,000 in punitive damages.

According to evidence produced at the trial, Cesar Flores and Alvin King bought a manufactured home in January 5, 2002 from CMH Homes. Two days later, documents fraudulently notarized by CMH employees were filed in Jim Wells County, placing liens on property owned by the Trevinos to secure Flores and King’s note. The documents allegedly including forged signatures of the Trevinos.
Alice, Texas-based attorney Baldemar F. Gutierrez said the case evolved from prior litigation in which dozens of lawsuits were filed in South Texas making similar allegations of fraud and forgery.

Beginning in 2003, a group of Texas manufactured homeowners and landowners accused the three companies of filing forged and fraudulent documents securing real property as collateral for manufactured home loans. If those buying the homes failed to make payments on their notes, the companies would then foreclose on the property even when the landowner had not executed the loan documents. In many instances, the foreclosure notice was the first time the property owners had learned their property had been used as collateral.

“Clayton Homes allowed, authorized and encouraged this fraudulent activity by allowing their salesmen to notarize transaction and land documents and close transactions in which they had a financial interest rather than a title company,” said the Trevinos’ attorney, David L. Rumley, of the Corpus Christi based firm of Wigington Rumley Dunn, L.L.P. According to Rumley, this company fraudulently notarized deceased and disabled peoples’ signatures to land documents.

In trial testimony, Vanderbilt’s president, Paul Nichols, testified that notary practices in Corpus Christi were “deplorable.”
As a result of the 2003 litigation, the companies began secretively filing hundreds of releases in the fall of 2005 covering 13 South Texas counties, stating that the customer loans had been “paid in full”.

Flores and King were two of those customers. While the Clayton companies contended that the releases were filed only to release the land, the Jury found the “paid in full” releases not only discharged the debt owed under the contract but awarded Flores and King money damages for payments they made after the releases were filed.

“This verdict is significant not only for my clients Flores and King, but to the hundreds of people who, unbeknownst to them, have the same “paid in full” release filed on their loans.” said Gutierrez.

The evidence revealed that the Clayton companies did not notify their customers that releases had been filed. “According to this jury’s verdict, hundreds of people are not only entitled to receive all of the money they have paid this company since the fall of 2005, but are entitled to complete discharge of their loan.” said Flores and King’s attorney J. Javier Gutierrez.

Not only were customers and landowners not told of the releases, but also the evidence in the case revealed that Vanderbilt had failed to disclose the releases to investors who purchased those loans through securitization offerings.

According to allegations made in court documents filed by the Trevinos, the Clayton companies raised hundreds of millions of dollars from investors by packaging up and selling hundreds of loans that were backed by fraudulent liens on land.

Warren Buffet’s company Berkshire Hathaway bought Clayton in 2003 for $1.7 billion.

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