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Tuesday, February 23, 2010

Self Help Against Foreclosure

Ohio homeowner Terry Hoskins bulldozed his house rather than let a bank take it in foreclosure.  Lest there be any ambiguity about his motives, he explained what he was doing on camera.  But Ohio, like many other states, has a statute making it a crime to "destroy . . . any of the person's property" with a "purpose to defraud a creditor."  Ohio Rev. Code 2913.45.   If the value of the property is more than $100,000, it is a Class 3 felony, which is punishable by up to five years in prison.   Is there some reason I do not see that this fellow should not be charged?  Surely this is not a solution that should be encouraged in any way.    

Posted by Marc Miller on February 23, 2010 at 12:20 AM | Permalink

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Main reason not to charge: jury nullification.

Posted by: Jennifer Hendricks | Feb 23, 2010 9:43:18 AM

Jennifer,

You may be right, but I don't think the sober citizens of Clermont County Ohio would approve of this, particularly after jury selection. Shouldn't anyone in foreclosure be struck for cause? In any event, iff'n it was me, I would try this flagrant violation even if I might lose.

Jack

Posted by: Jack | Feb 23, 2010 11:46:50 AM

Where's the fraud?

Posted by: AF | Feb 23, 2010 2:28:28 PM

AF,

Fair question, but these statutes have been read to include depriving secured creditors of their just entitlement without any requirement of reliance. Otherwise, it would be impossible to violate the statute by "destroying" the collateral, which is set out in the code.

J

Posted by: Jack | Feb 23, 2010 2:31:13 PM

Why charge this guy? Does the bank not have recourse in civil courts to continue to get its money? Let the bank pay for its own attorneys, no need for the public to foot the bill for prosecution and/or incarceration. Foreclosure of 160k debt on a 350k house--we should think about the act that is morally reprehensible here.

Posted by: R B G | Feb 23, 2010 4:46:23 PM

book 'em dano

Posted by: ctr | Feb 24, 2010 7:23:32 PM

The based on the video, the situation that he is in really isn't that unusual, other than the fact that he decided that bulldozing his house was a solution.

It looks like the bank may have relatively modest damages.

A decent share of the $350,000 home value is probably attributable to the lot, and their first priority mortgage is for $160,000. The lot is probably worth something close to that, and additional collateral in business inventory and equipment probably make up much of the difference. The mortgage is probably security for a personal guarantee of a business loan on the carpet business which went into default as a result of the filing of a federal tax lien which a covenant of the loan probably provided is a condition of default.

The federal tax lien is probably a condition of default because the bank probably has a blanket lien on the business property and the federal tax lien is eating away at their accounts receivable collateral as accounts turn over.

The federal tax lien also probably leaves him with no equity in the house and the IRS is probably the biggest loser in this transaction (and it is probably a federal crime to destroy property subject to a tax lien to spite the IRS). See e.g. 18 USC 7201 (attempt to evade payment) (includes concealing and presumably destroying assets willfully to evade tax); 18 USC 7212(a) (impeding or obstructing IRS administration with force or threat of force)

Most small business Chapter 11's result in the IRS getting the lion's share of all assets that don't go to secured creditors. But, he probably has no hope at this point of receiving a bankruptcy discharge as a result of the exclusion from discharge of intentional tort claims.

It isn't at all obvious that he won't be charged with a violation of a federal or state crime in the end, but white collar cases (which this is as they are embroiled in contract disputes and don't involve a third party's property) tend to go slower and be a lower priority. Tax crimes require interagency cooperation.

Posted by: ohwilleke | Feb 24, 2010 10:25:30 PM

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