Part two of this article focuses on issues that must be considered when this type of transaction has been proposed and the applicable laws that govern.
The Florida Supreme Court has defined the elements of civil fraud are as follows:(1) a false statement concerning a material fact; (2) the representor’s knowledge that the representation is false; (3) and intention that the representation induce another to act on it; and (4) consequent injury by the party acting in reliance on the representation. Johnson v. Davis, 480 So.2d 625, 627 (Fla. 1985).
Florida law further provides that the elements of civil conspiracy are as follows: (1) a conspiracy between two or more parties; (2) to do an unlawful act or to do a lawful act by unlawful means; (3) the doing of some overt act in pursuance of the conspiracy; and (4) damage to the plaintiff as a result of the acts performed pursuant to the conspiracy. Olson v. Johnson, 961 So.2d 356, 359 (2nd DCA 2007).
Florida Statute Section 817.03 makes it a crime to obtain property or credit via false information, and states:
Any person who shall make or cause to be made any false statement, in writing, relating to his or her financial condition, assets or liabilities, or relating to the financial condition, assets or liabilities of any firm or corporation in which such person has a financial interest, or for whom he or she is acting, with a fraudulent intent of obtaining credit, goods, money or other property, and shall by such false statement obtain credit, goods, money or other property, shall be guilty of a misdemeanor of the first degree, punishable as provided in s. 775.082 or s. 775.083
Florida Statute Section 817.54, further provides that it is a crime to obtain a mortgage via false information and states:
Any person who, with intent to defraud, obtains any mortgage, mortgage note, promissory note or other instrument evidencing a debt from any person or obtains the signature of any person to any mortgage, mortgage note, promissory note or other instrument evidencing a debt by color or aid of fraudulent or false representation or pretenses, or obtains the signature of any person to a mortgage, mortgage note, promissory note, or other instrument evidencing a debt, the false making whereof would be punishable as forgery, shall be guilty of a felony of the third degree, punishable as provided in s. 775.082, s. 775.083, or s. 775.084.
Florida case law has shown that the use of a strawman in real estate transactions has been found to be unlawful and/or illegal in a number of contexts, including, without limitation: where a strawman purchaser is used to thwart the rights of one with a right of first refusal to property, Kjesbo v. Ricks, 517 N.W.2d 585 (Minn. 1994); where a strawman purchase is used to circumvent the real estate commission to which the procuring real estate broker would be entitled if the true identity of the actual purchase was known, Shands v. Winton, 91 P.3d 416 (Colo. App. 2003); where a strawman is used to thwart the rent control laws/regulation and/or deprive a tenant of the benefits of same, Art Omni, Inc. v. Vallejos, 832 N.Y.S.2d 915 (N.Y.Civil Court 2007); and where a strawman is used to defeat the inheritance rights of a spouse, Karsenty v. Schoukroun, 959 A.2d 1147 (Md.App. 2008). See also, Alderman v. Bradley, 957 S.W.2d 24 (Ky.App. 1997) (unlawful to use strawman to circumvent gun purchase laws); Fishman v. Maginn, No. 040673BLS1 (Ma. Super. Court April 12, 2006) (use of a strawman to circumvent SEC rules regarding who may own/hold certain stock is unlawful); Szilagyi v. State, 564 So.2d 44 (Fla. 4th DCA 1990) (unlawful to use strawman to defeat rights of creditors to a corporation via the owners of the corporation raiding the assets thereof, then selling to a strawman for a deflated price, then leaving the creditors of said corporation in the lurch when the strawman purchaser closes the business); Grossman v. Greenberg, 619 So.2d 406 (Fla. 3d DCA 1993) (unlawful for partner to utilize strawman to hide profit from other partners, and take profit for himself).