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Joseph family sues attorney over proceeds from sale of land to the city

Friday, December 12, 2008 by Austin Monitor

In a suit filed in Travis County district court, relatives of Austin real estate attorney John M. Joseph Sr. have accused him of fraud and breaching his fiduciary duty in actions related to the sale of land slated to be the site of Austin’s Water Treatment Plant 4. The relatives and related trusts are seeking $15 million in damages from Joseph and his son, John M. Joseph Jr., and the latter’s business partners.


The land in question at RM 620 and Bullick Hollow Road (RR 2222) had been owned for years by a trust comprised of dozens of Joseph family members called JoMar Joseph Partners II. However, just before the City of Austin purchased the land, the trust sold the property for $1.7 million to a separate group, DHD Ventures. That partnership, lead by John Joseph, Jr., then re-sold the land to the City of Austin. The suit claims that DHD Ventures paid approximately $42,000 per acre for the property and re-sold it for more than $400,000 per acre, making a profit of about $13 million.


According to the lawsuit, “Marjorie Joseph, known to her many nieces, nephews, grand-nieces and grand-nephews as Aunt Margie, trusted her nephew John M. Joseph Sr. to act as attorney in many matters and on many occasions over the years.” The other named plaintiff in the lawsuit is Horace A. Joseph, who along with John Joseph Sr., his brother, is a beneficiary of the Joseph Brothers Trust.


Marjorie Joseph claims that her nephew used his unique position as a member of the family trust and its attorney to defraud the other members of the trust. She claims Joseph Sr. withheld information about the true value of the property, as reflected in an independent appraisal, then arranged to have it sold to his son’s partnership, for which he was also acting as an agent. She also claims that Joseph Sr.’s law firm, Clark, Thomas & Winters, was negotiating with the city on behalf of DHD Ventures even before that partnership acquired the land.


Because Joseph, Sr. acted as attorney for the JoMar Partners II trust, Marjorie Joseph claims he had a duty to present offers to that group, not to DHD Ventures. She is asking that DHD Ventures be forced to surrender its profits from the sale of the land to the city. The timeline outlined in the lawsuit shows the City of Austin and DHD Ventures entering into a contract on December 13, 2007, the same day the City Council voted to acquire the property. DHD Ventures actually acquired the property on December 21, 2007 and sold it to the city on Jan. 15, 2008, according to court documents. The lawsuit does not allege any wrongdoing by the City of Austin and the city is not a party to the suit.


In Fact Daily contacted John Joseph Sr. for a comment and he referred reporters to his attorney, Eric Taube, who was not immediately available. The other defendants could not be reached for comment.


Part of the Josephs’ defense may be that the partnership that bought the land from the family trust originally intended to develop the property. They had filed an application seeking a zoning change to facilitate building a mixed-use development there. However, that application had not made it through the city process by the time the city and the Josephs reached an agreement on the city’s purchase.


Joseph, Sr.’s official response to the lawsuit, filed in Travis County District Court, denies all of the allegations. His attorney argues that the JoMar Partners II trust was aware of the actions he had taken and approved the sale of the property to DHD Ventures despite any concerns they might have had. He also argues that the plaintiffs gave up any such claims in their contract of sale.

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