Garlock sold 81% interest in an office building to the Mathews family for $1.5 million, but also had them sign a fake $2.15 million promissory note without their knowledge. He later assigned this same fake note to East-West Bank. Several years later, Garlock conveyed the same fake note back to the Mathews in exchange for another property, without any of the parties realizing the note was fake. East-West Bank is now suing those involved, since their note was not actually paid off.

1. Chestnut Street, Menlo Park
Garlock sells the same fake mortgage to two different parties
ILLICIT SALES AND FAKE PROMISSORY NOTE
In November, 2004, the Mathews family bought an 81% interest in an office and retail building on
Chestnut Street in Menlo Park from Garlock's corporation, “1149 Chestnut Street LLC.” They paid $1.5
million in cash from a 1031 Starker exchange from another property they previously owned. Garlock
retained a 19% ownership interest, which he subsequently sold to other parties.
Around the time of the sale, Garlock put in front of the Mathews, for them to sign and notarize, a
“Purchase money promissory note secured by long form purchase money deed of trust.” Garlock
thereby burdened them with $2.15 million in obligations although they received nothing in return.
There was already, since 2001, an existing first loan on the property of $2.1 million from First Bank
and Trust.
First Bank's deed of trust had a due-on-sale clause prohibiting transfers of part or all of the property
without notification of and permission from the bank, thus subjecting the new investor-owners to
foreclosure if discovered. Naturally Garlock did not tell the bank he was selling shares of the property,
nor did he inform the bank of the second loan.
About two years later in August of 2006, Garlock assigned his second note to East-West Bank, which
subsequently paid off his existing loan from First Bank. The note now held by East-West Bank was
recorded in such a way that it did not appear on subsequent title reports. North American Title
performed the recordation, yet failed to notify the purported debtors, the Mathews family. First Bank
remained on title.
Garlock paid the purported net income to the Mathews and other investors until September of 2008,
omitting May, 2008. The owners then terminated Garlock as manager and demanded records and
monies related to the property. They then learned that Garlock had been neglecting property tax and
bank loan payments. The building was in disrepair. He provided only limited information, not all of the
leases, severely deficient financial reports, and no tenant deposit monies. Garlock's failure to disclose
delinquent utility payments resulted in a temporary power shutoff.
Although the building was fully or nearly fully leased with office and retail tenants, it could not
generate enough income to pay property taxes or more than $100,000 in back taxes owed.
The Mathews took over loan payments to East-West Bank on the $2.5 million loan, though only First
Bank appeared on the title report. Garlock's longtime bookkeeper Rosa Rodriguez instructed them to
pay East West instead of First Bank.
In June, 2009, Garlock conveyed the same note back to the Mathews in exchange for an equal-value
property in Redwood City that the Mathews owned. The Mathews did not discover the deceit until they
sold the property in early 2011.
East West Bank's note was not paid off, thus they are now suing Garlock, the Mathews, and others.
San Mateo County Superior Court, Case # 504510, East West Bank vs 1149 Chestnut Street, LLC, et
al., filed April 01, 2011.