Dead is not forgotten- chasing the defunct corporation.

For my clients who need to chase down defunct corporations, the Maryland Court of Special Appeals just issued a nifty little opinion. On June 28, 2012, the COSA published Thomas v. Rowhouses, Inc., No 2102, Sept. Term, 2010.

And by "defunct," I mean companies that no longer exist because of forfeit charters, dissolution, and the existence or location of past directors is not known. This is a frequent problem with old deeds of trust and judgment liens that remain in the court and land records. These old ghosts mess up home and business sales, refinancings and other transactions, every day. It also involves small companies, with one or two directors, who go forfeit, but continue to do business and incur business liabilities (perhaps to someone like you?).

Tracking down these entities to complete the Constitutionally required service of process can take months, and costs our clients a lot of money. It can require hiring investigators, and even staking out homes and business offices. Sleuthing out a dead corporation for service can make even a routine default judgment pretty costly.

Judge Robert Zarnoch does a very nice job summarizing several procedural rules, and statutes, leading to the conclusion that service on the Maryland State Department of Assessments and Taxation is available as a last resort.

The case involves claims against former property owners for lead paint poisoning, but the discussion about serving process on a defunct corporation will apply to any other type of case, too.

What to take away from the case:

• Be thorough, and request permission for alternate service on the SDAT only after all traditional and required methods of service have been exhausted.
• Service on a former corporate director that has since died cannot be made on the dead person's estate. 
• Start your lawsuit as soon as you reasonably suspect you have a claim. Filing suit early will toll, or stop, the running of the statute of limitation, and will give you time to perfect service or alternate service on the corporation.

So, don't think your case is over just because your target is a defunct company. Who can we find for you?

Visit the Young & Valkenet website.

It is important to keep track of the bad guys, and here is one operating in Baltimore City.

I just obtained a $31,000 judgment against a fellow who has been "title squatting" in Baltimore City. Take a look at the complaint that was filed in the circuit court and you'll see a very simple scheme, particularly in an economy where so many properties are being abandoned by their record owners. Another lawyer has been chasing him for the same conduct, and so I share the facts of my case and an outline of the scheme to alert those of you handling claims in Baltimore City to this type of fraud.

Here's the scheme, step-by-step:

• True owner of the property, "Good Realty LLC" allows its charter to lapse with the Maryland State Department of Assessments and Taxation.
• Mr. Kutchera, the title squatter, identifies the property and forms a new entity, called "Good Realty, LLC."  Notice the slight change in the name, by adding a comma after "Realty."
• Mr. Kutchera entices a settlement company to assist in the transfer of title to the property from "Good Realty" into his other entity, Acuity Real Estate Investments, LLC.
• Mr. Kutchera and Acuity then sell the property to an unsuspecting purchaser, who intends to renovate the property and place it on the rental market.
• Mr. Kutchera and Acuity take back owner financing for all but closing costs and the purchaser's deposit.
• True owner wakes up and sues buyer, alleging that she bought nothing from a thief. And he's right.

It's a close call on whether the settlement company should have caught this scheme on the sale from Mr. Kutchera to the innocent buyer.  Because he had already conducted a sham transaction to transfer title into his longstanding Acuity entity, it was not expected that the settlement company would go back to a prior transaction to investigate the bona fides of the limited liability company.

What was particularly galling about this case was Mr. Kutchera's early demands for payment under the owner financed deed of trust, and his threats of foreclosure. It didn't take much to demonstrate the true fraud to Mr. Kutchera's lawyer, who then withdrew from the engagement.

I suspect that this form of fraud is not limited to this case, and the one being handled by another lawyer.  And if Mr. Kutchera is doing it, then there are surely others engaged in the same scheme.

Be vigilant.