Everhous LLC and Moe Seraj and the Real Estate CatBurglar v PHH Mortgage

PROFITING OFF THE POOR

A cat burglar in the house

Felon claims decaying homes without the owners’ knowledge and sells them to unsuspecting clients at inflated prices

Published May 18, 2014

Douglas T. “Chase” Fonteno has made a living acquiring other people’s houses, particularly in the lowest-income neighborhoods of southern Dallas.

If he had paid the legal owners or obtained their consent, his story wouldn’t be remarkable.

But according to official property records and Fonteno’s own statements, his empire was built in part by acquiring scores of houses without the owners’ knowledge and without paying them a dime.

SPECIAL REPORT

Fonteno, who was convicted of felony securities fraud in 1996, produced a series of online videos in 2011 referring to himself as the “real estate catburglar.” He posted blog commentaries referring to these house acquisitions as “property you steal.”

On his many websites, Fonteno presents himself as a well-meaning investor and philanthropist working to uplift neighborhoods and give poor, credit-starved people a chance to own a home.

In reality, his acquisitions have left behind rotting properties, enormous unpaid tax bills and legal headaches.

His clients tend to be uneducated, low-income individuals with no credit.

Many don’t speak English and might easily be confused by the key words “adverse possession” that appear in many of his sales contracts.

Adverse possession — commonly known as squatter’s rights — made dozens of his acquisitions possible, though not necessarily legally defensible.

It’s based on a century-old law that applies almost exclusively to rural land, mining rights and boundary disputes.

Experts can’t point to a single time it has been upheld in court as a means of taking urban houses.

Throughout the last decade — and as recently as last month — Fonteno and his associates saw a way to profit by acquiring what they believed to be abandoned houses for which they paid nothing to the legal owners.

Instead they filed claims of adverse possession, then sold these houses at inflated values to clients lured by promises of low mortgage payments and no credit checks, according to official property records and interviews with former Fonteno clients and business associates.

Fonteno did not respond to repeated interview requests.

Attorney Fredreck S. Hudgens, who has represented Fonteno in court, said there would be no comment because of pending litigation.

Texas courts have held that adverse-possession house seizures and sales constitute theft and fraud.

For example, between 2002 and 2004, Richard Lawrence Nugent and Craig Davidson used adverse possession to seize and resell houses in the Houston area.

A court sentenced Nugent to 10 years in prison, then suspended the sentence, placed him on 10 years’ probation and ordered him and Davidson to pay nearly $250,000 in restitution.

In 2012, a Tarrant County jury sentenced David Cooper to three months in jail, 10 years probation and a $10,000 fine for theft and burglary after he occupied a vacant Arlington house and claimed it under adverse possession.

Earlier in 2012, Kenneth Robinson invoked adverse possession to seize a $340,000 bank-foreclosed house in Flower Mound. A judge rejected his claim and ordered him to leave.

Unless Fonteno’s clients were well-schooled in the verbose, complicated legal terms in his organization’s sales contracts, it’s unlikely they knew they were agreeing to pay mortgages on houses that belonged to someone else.

This Points special report is the first in a series unraveling the Fonteno organization’s massive paper trail and explaining the upheaval he continues to introduce into the lives of legal property owners as well as the clients he placed in these homes.

Steve Souter and his family successfully sued Chase Fonteno over his adverse-possession acquisition of the Oak Cliff home of Souter’s late father.

But it took years, and lawyers’ fees drained the settlement money Fonteno paid out.

Fonteno’s organization has dozens of holdings that property records indicate were acquired through conventional means.

What distinguishes the unconventional holdings is the complete absence in public records of a document trail linking the legal owner with a knowledgeable deed transfer to Fonteno or his associates.

The Dallas Morning News has documented more than 80 of these deals between 2000 and 2014.

The typical document trail in a house’s history lists an unbroken chain of conveyances between legal owners and buyers.

In Fonteno’s cases, that handshake chain is interrupted by the insertion of an adverse possession claim.

In some cases, the legal owners have continued their normal trail of property transactions, unaware that a “catburglar” organization, as Fonteno describes his operation, has placed a claim on their property.

In many cases, the opening for acquisition occurred when a homeowner died and the heirs failed to claim what was theirs.

Wes Gilliland, a former Fonteno associate, said the standard procedure was to cruise southern Dallas streets looking for dilapidated properties that appeared to be vacant.

He would note the addresses, search county records for telltale signs of abandonments, then file deed claims.

Gilliland said he quit the work after deciding the acquisition procedure was “a sham.”

In blog postings, Fonteno has described his acquisition methods as legal and ethical and said his organization made every effort to locate the legal owners.

An active partner in Fonteno’s enterprise was former Dallas City Attorney N. Alex Bickley, who died in 2008.

Bickley’s name and signature began appearing all over the Fonteno organization’s property documents in 2004.

And he was the attorney and agent listed on company filings in Colorado, where numerous Fonteno enterprises were registered.

Bickley’s participation as a director and corporate counsel is another big curiosity, considering his 17 years as city attorney, then his service as executive vice president of the powerful Dallas Citizens Council.

According to online postings, Bickley and Fonteno built their business on the premise that abandoned property — or apparently abandoned property — was up for grabs.

If you were a smart person, it was yours for the taking.

But Texas law outlines strict procedures for adverse possession. The seizure has to be openly visible and hostile to the legal owner’s claim.

The adverse possessor must live in the house uninterrupted for periods of 10 years or more.

In the case of Fonteno’s acquisitions, the adverse possessors — that is, Fonteno or his associates — would file their claims, then sell the houses without any indication in the public record of ever having occupied the properties for a day, much less 10 years.

If buyers defaulted on their mortgages, Fonteno’s organization would reassert its claim on the property.

In nearly every case, according to public records, the neglected and vacant houses have come with enormous labor liens attached by the city.

Typically, when property is abandoned, the city must perform weed-cutting and other maintenance, charging $60 to $700 per visit.

Then there are back taxes, which are assessed to properties claimed by Fonteno and associates.

Rarely do they pay the taxes, according to Dallas County property records.

Texas adverse possession law also requires claimants to pay taxes on the property.

Dallas County records show that a tax bill of $1.7 million is owed on the property portfolio of Foteno and associates, not counting labor liens and other fines.

Federal and state authorities also are demanding thousands of dollars in unpaid taxes.

On his websites, Fonteno, convicted of felony securities fraud in 1996, says he’s an investor and philanthropist whose goal is to give neighborhoods a boost and poor people a chance to own homes.

He describes his approach as doing Dallas officials a favor by relieving the city of the burden posed by abandoned, blighted properties.

SEC complaint, then ouster

Fonteno moved from Houston to Dallas in the 1990s.

According to a Securities and Exchange Commission statement, Fonteno was released from prison in 1997 and continued on probation for his securities fraud conviction.

He then began doing real estate work for the Remington-Hall Corp.

The SEC said in a 1998 complaint that he violated terms of his probation by issuing at least $1 million in unregistered stock for the company.

The SEC complaint said Fonteno claimed that Remington-Hall’s real estate holdings were worth $30 million.

In fact, the SEC said, “Remington-Hall does not own most — if not all — of the properties it claims.”

The SEC alleged that Fonteno used corporate money to “pay his speeding tickets, a girlfriend’s legal fees, and he also purchased an automobile for his maid.”

Reacting to the SEC complaint in October 1998, Remington-Hall’s board of directors ousted Fonteno.

It was before his ouster that Fonteno appears to have adopted the “cat burglar” persona.

A news release quoted Fonteno as stating about Remington-Hall, “We have been referred to as ‘Cat Burglars of Real Estate,’ and that’s a title we plan to keep.”

Still on probation, about a decade ago, Fonteno and his associates launched their effort to acquire property through adverse possession.

The Texas secretary of state lists the franchise registries on his numerous real estate companies as expired.

His mortgage companies do not appear on registries of the Texas State Department of Savings and Mortgage Lending, as required.

The houses his operation acquires are in Dallas’ most neglected minority neighborhoods.

The Fonteno adverse possession model affects two sets of people: the legal owners of the property, who have to go to court to clear their deed records of the adverse possession claims, and the homebuyers, who might not understand the murky nature of adverse possession.

Steve Souter of Farmers Branch was one of the few who had the means to sue after realizing that Fonteno had sold an Oak Cliff house Souter’s family inherited from his father, who died in 1995.

The heirs asked a constable to get the buyers — squatters — out, Souter said, but the constable balked when the occupants produced a Fonteno sales agreement.

Souter and his siblings had to hire lawyers and spend years getting the house back after suing Fonteno, Gilliland and Hilton Head Properties.

They won in court, but Souter said lawyers’ fees ate up the settlement money paid by Fonteno.

Even as the court challenge was in progress, Souter said, the family constantly had to correct county records to register their ownership because an unknown person kept changing the registry back to another owner’s name. County documents indicate Hilton Head Finance, Novo Properties and BP Investments — all associated with Fonteno — were registering deed and loan documents regarding Souter’s property at that time.

“There was tremendous anguish on our part because this was our father’s property,” Souter said.

“Everything that we had to go through, the frustration of trying to get the squatters out and get this guy in court. … It was very frustrating.”

Gwendola Cole, 67, is a retired Dallas ISD teacher who now lives outside Washington, D.C.

In 2008, she signed a $41,200 mortgage to purchase a South Dallas house at 3104 Pennsylvania Ave. from what she thought were the owners — Fonteno and his associates.

She said she dealt directly with Fonteno on the sale.

County records show that Saige Properties claimed the property by adverse possession at the time.

Fonteno was Saige’s president.

Cole estimates that she spent $33,000 on repairs to make the property livable.

After renovation, city authorities told her that roughly $9,000 in back taxes was due.

But even if she paid them, city officials told her, the deed would remain in someone else’s name.

The actual owner’s, that is.

Gwendola Cole, a retired Dallas ISD teacher, bought this Pennsylvania Avenue home near Fair Park from Chase Fonteno in 2008.

After she spent about $33,000 on repairs, the city told her $9,000 in back taxes was due. She also learned that someone else still owned the home.

‘That’s my house’

She recalled that a man came to the door one day and said, “That’s my house.”

Cole told him she was buying it, and he left — still insisting it was his.

Dallas property records indicate the legal owner was Garry Norris.

Neither Cole’s name nor any of Fonteno’s company names appeared anywhere in official deed registries, even though the organization collected regular $430-a-month mortgage payments from her.

Cole went to Fonteno’s offices to confront his staffers, but said they “just kind of ignored me. …

They didn’t care.

All they wanted was their $430 a month,” Cole said.

Cole failed to get answers at Fonteno’s office, she said, “So I stopped paying,” reasoning that it would be foolish to keep making mortgage payments to someone other than the legal owner of the property.

Fonteno evicted her and reimbursed nothing of her investment, she said.

The house was to be her slice of “the American dream,” Cole said.

But besides having lost her life’s savings, she’s left “feeling much more betrayed, that you can’t trust people.”

Fonteno’s own auditor walked out on him when he studied the adverse-possession business plan.

Certified public accountant Jack Sprawls, identified in corporate documents as the independent auditor when Fonteno’s parent company registered in 2006 as a Colorado corporation, said he was troubled by Fonteno’s criminal background and the nature of these acquisitions.

“How can you sell something you don’t own?” said Sprawls, who works for a large Dallas accounting firm. “I just couldn’t get happy with the concept.”

The way Fonteno explains it online, he was doing local government a favor by relieving the city of the burden posed by these properties.

“Cities and Counties only have so many people to deal with abandon, distressed, tax delinquent, code violation type properties that are a blight on neighborhoods. … There are 1,000’s of them in almost every major city,” he wrote on his blog in July 2009.

“More than the City/County can handle by foreclosure (taxes) or demolition (code violations). … Our work in blighted areas of a number of cities — helps convert blighted homes into owner occupied homes.”

According to Texas law, though, it’s the local government’s job to initiate the process that leads to proper, legal transfer of abandoned properties.

It is a painstakingly slow process that can take years, culminating in a judge’s order declaring the property abandoned and formally granting permission for the local government to seize it.

Imagine the legal chaos that would ensue if, suddenly, the law allowed anyone to drive down the street and assert adverse possession of any number of houses, simply because the claimant deems them to be abandoned.

Fonteno’s two parent companies in this enterprise are Hilton Head Properties LLC and Hilton Head Finance LLC.

Then there’s a long list of companies formed by what he calls “investors” working in Fonteno’s offices, using his address and phone number to acquire additional properties.

Fonteno outlines his acquisition philosophy on his company websites, personal blogs and Twitter postings.

In a March 4, 2010, blog posting, he appeared to distance himself from the adverse possession acquisition strategy:

“Hilton Head Properties and Hilton Head Finance have ‘never’ during its existence purchase ‘any’ single family homes or acquired any adverse possession homes.

We ‘did’ rent space to over 40 investors [Fonteno’s office associates] that would acquire homes by many means, including tax sales, bankruptcy, foreclosure, judgment lien sales, auctions and more — including Texas Statute adverse possession.

The ‘vast’ majority of 100’s of mortgages we acquired were from properties the investor ‘purchased’ by these means.”

In a cursory search, The Dallas Morning News found five instances since the March 2010 posting where he and his associates recorded adverse possession deeds — three of which were signed by Fonteno.

On April 1 of this year, Fonteno filed a new document transferring an adverse possession deed to two purchasers who only occupied the property in 2012.

County property records now list the two purchasers, Antonia Perez Montanez and Antonio Perez Cuellar, as owners.

As for his assertion about Hilton Head, Dallas County property tax records show that of 15 properties currently listed as taxable entities under the control of Hilton Head Finance or Hilton Head Properties, three were acquired by adverse possession and seven more were acquired through similar processes without any deed-transfer record indicating the previous owner had consented to the transfer or even knew it was happening.

County records list more than 40 single-family homes acquired by various Fonteno organization companies through adverse possession.

Fonteno and his associates transferred ownership back and forth among Hilton Head Properties, Hilton Head Finance and more than a dozen other companies.

There are times when Fonteno, acting on behalf of different companies, signed the transfer document both as buyer and seller. His and Bickley’s names appear throughout the document trail.

Absence of clear title

More than 30 other property registries omit the words “adverse possession” but contain all the markings of an acquisition without the owner’s consent.

Typically, those deeds contain warnings that the seller — Fonteno and/or associates — “does not have clear title” but expects title to clear within five years.

Documents registered as recently as February and April of this year show that companies under the Fonteno umbrella continue to own, sell and resell houses they acquired by adverse possession years ago, making the trade of these properties an ongoing enterprise.

Houses obtained by adverse possession are churned into an expanding group of conventionally acquired dilapidated houses in the Fonteno inventory.

In numerous cases, county and city officials have ignored the Fonteno organization’s claims and continued to treat the previously registered title holder as the sole, legal owner.

The county’s rejection of some of these acquisitions but recognition of others is inexplicable.

But the sudden existence of a disputed title claim can lead to big headaches when the rightful owner tries to sell the property later.

Fonteno’s business took off about 10 years ago when he teamed up with Bickley, who brought intricate knowledge of vulnerable real estate opportunities, city government neglect and legal loopholes.

Fonteno retells his own history in various online postings, often referring to himself in the third person as if narrating an epic biography.

He didn’t make his millions with “‘get rich quick’ late night ads,” one Fonteno website explains.

“He focuses on seriously distressed multi-family and single-family properties, predominately in low income areas, buying distressed homes and resell to ‘homeowners’ on owner financed loans with little down (fix it yourself) to convert the cycle of a ‘lifetime’ of slum rent that depresses many in low income areas, to ‘Pride of Ownership’, giving those individuals an opportunity to ‘own’ instead of rent — eventually paying off and never paying again.”

In a 2008 blog posting, Fonteno offered candid insights:

“What type of property ‘always’ goes up in value?

What type of property — if you sell and have to foreclose — is ‘always’ in better condition when you get it back, than it was when you sold it?

What type of property regularly confuses the pros as to its true value (literally leaving real estate professionals giving values assessments that often are over 300% from one another)?

It is the property — you steal !

(legally and ethically of course …)”

Regarding the houses’ dilapidated condition, he exclaims:

“Oh — and we don’t fix ANYTHING !! EVER !”

Under Texas’ adverse possession law, there can be no attempt to hide the nature of such property takeovers.

The voluminous, complicated nature of Fonteno’s filings makes it very difficult to locate when an adverse possession has occurred.

Sometimes he waits years before filing notice of his acquisitions.

Among thousands of pages of documents attached to their transactions, Fonteno companies and associates have filed more than 1,330 deeds, 777 deeds of trust, 58 corrections to deeds of trust, 358 appointments of substitute trust, 314 assignments of lien and 320 trustee deeds.

They shuffle deeds, reshuffle, then shuffle again among multiple parties.

Buried deep inside this pile of documents are the single sentences that, sometimes, constitute the adverse-possession declaration.

City authorities have filed at least 1,105 labor liens against properties now in the Fonteno organization’s hands.

Such liens are designed to prevent the sale of property and transfer of deeds until the city’s claim is resolved.

But Fonteno’s associates conduct sales and deed transfers anyway, apparently bypassing the normal title search process that would flag such liens.

In online instructional videos showing how investors can make money reselling “distressed properties,” Fonteno calls himself “The Real Estate Catburglar” and overlays his video soundtrack with the copyrighted musical score from The Pink Panther.

On blog items, a cartoon depicts a burglar poking his head through an open window.

The mortgages attached to these adverse-possession sales are self-financed by one of the dozens of companies in the Fonteno organization, and purchasers pay interest rates of 11 percent or more.

There is no credit check.

The clients are people who lack credit, would not qualify for a bank loan and might not even have bank accounts.

According to letters Fonteno has sent to clients, he accepts payments by money order only.

This house at 1145 Betterton Cir., part of the Hilton Head Finance property portfolio, is under a judge’s demolition order.

Some of the derelict properties associated with Douglas T. “Chase” Fonteno appear to have been acquired through conventional means, including this one, while others were obtained without the owner’s permission using adverse possession methods.

The houses almost always are barely salvageable wrecks.

Many of them had already been targeted for court-ordered demolition by the city when he took them over.

Fonteno’s organization offered them for sale as is — at absurd prices.

Properties that the Dallas Central Appraisal District values at $6,000 to $12,000 have been sold by Fonteno and his associates for up to $68,000.

Why do buyers accept?

Even at high interest, the average mortgage payments of around $550 a month are regarded by many buyers as a bargain.

Some of his buyers are not legal U.S. residents, which limits their willingness to defend themselves in property or contract disputes, says Deborah Smith, a former Dallas County assistant district attorney who took over Fonteno’s case about two years ago.

Smith said she wound up settling out of court because she “wasn’t invested in the case” after inheriting it from another assistant DA.

Smith said she was unaware of the extent of the Fonteno organization’s adverse-possession holdings and would have been more aggressive had she known.

Fonteno acknowledged in a 2010 blog entry that, in June 2009, the district attorney’s office notified him of a review related to a real estate fraud complaint.

Rarely do his clients have the legal muscle or money to challenge Fonteno in court.

Ten clients did sue his associates and companies in 2006, but funding dried up, the plaintiff’s attorney withdrew, and process servers couldn’t find five of the 10 defendants, according to court records.

The case fizzled.

Only two of those 10 plaintiffs secured deeds to their properties.

Several property deeds remain in legal limbo. Hilton Head Finance still is listed in Dallas County records as owner of two properties listed in that lawsuit.

No reimbursement

In the few cases where the real owners have challenged in court, Fonteno’s buyers have had to move out, losing everything they invested.

Fonteno states in his contracts that he will not reimburse for their fix-up expenses.

Fonteno’s operation has occupied a number of office suites in and around downtown Dallas, including most recently at 400 N. St. Paul St. Fonteno and his associates apparently vacated the top-floor office suite about four years ago.

But Fonteno continued using it as his address of record for some property transactions, such as one he filed with the county on Sept. 10, 2013, when he identified himself as president of MLE Partners LLC, one of his many companies.

A receptionist for the company now leasing his old office suite said Fonteno seemed to have moved out in a hurry in 2009 or 2010.

He left all kinds of furniture and equipment behind, and yet his mail still comes to that address, she said.

It’s not clear why he suddenly vacated.

Most current Fonteno filings now list the official address as Post Office Box 130687 in Dallas.

The change away from a physical address occurred shortly after a July 2009 report by Dallas’ KTVT-TV (Channel 11) outlining a fraction of Fonteno’s activities.

Days after that broadcast, Fonteno sent a letter to various buyers defending his tactics and advising them that their mortgage contracts clearly stated the adverse possession provisions.

The return address on those letters was Fonteno’s St. Paul Street office suite.

A month later, his written correspondence to clients no longer contained a physical return address, only the post office box.

That’s about the same time he posted blog items distancing Hilton Head from adverse possession.

Despite his ubiquitous presence on the Internet, Fonteno is a hard guy to find.

He didn’t return calls to the phone number listed on the brightly colored poster boards tacked to decrepit, abandoned houses in southern Dallas.

A reverse trace on the phone number lists it as belonging to Hilton Head Properties, 400 N. St. Paul St.

It’s unclear where prosecutors stand regarding Fonteno. Steve Souter, the property owner who successfully sued Fonteno, said he was called for jury duty in early March.

During juror interviews, he found himself face to face with Assistant District Attorney Stephanie Martin.

“Mr. Souter, I think we’ve met before. Does the name Chase Fonteno mean anything to you?” he quoted Martin as saying.

But the lack of prosecutorial follow-up, and the fact that his family had to pursue Fonteno at its own expense in civil court, leaves Souter somewhat cynical.

“It took a long time to get justice served on this,” Souter said.

Others might still be grappling with Fonteno, he added, “but he’s through cheating us.”

+++++

PROFILE: Chase Fonteno markets himself as a “consummate speaker/lecturer” and places a trademark symbol by his name on some postings.

ABOUT ADVERSE POSSESSION: Some Texas legislators want the state’s adverse possession law tightened to clarify that squatting isn’t a legal route to homeownership.

 EDITORIAL: How did this happen? Abandoned houses in southern Dallas became vulnerable to exploitation when authorities failed to exercise vigilance.

 VIDEO: Editorial writer Tod Robberson walks through how a group of people working together in southern Dallas are using adverse possession to acquire houses without the owners’ consent.

 INTERACTIVE MAP: See locations and learn more about nearly 100 properties claimed by Fonteno and his associates through various methods, including adverse possession and quitclaim deeds.

EXPLAINER GRAPHIC: How, exactly, does adverse possession work? You can’t just bust through the front door and declare yourself the owner. The process is complicated and multilayered.

Story by TOD ROBBERSON (trobberson@dallasnews.com) | EDITORIAL WRITER

MASTER’S REPORT SIGNED

DEFAULT JUDGMENT SIGNED

Petition re $32k judgment – Application for Garnishment – which would be nonsuited.

Last known address: 19618 Crossbranch Dr, Houston, TX 77094

Purchased at auction for $130k

Sold for $227k.

Transfer recorded July 27, 2016, but HREAL was never listed on HCAD. Majid would sell the following yr ($122k).

DCA Generic Letter (Case will be dismissed if no movement on or before Feb. 27, 2023).

Let’s just sit on the petition and do nothin’ for a while.

Judge; No need to notice the case for dismissal either.