The lawsuit comes just a day after Shawn Pendergraft was arrested in connection with an alleged scheme to take over ownership of foreclosed houses in the Triangle that are bank owned.
An ABC11 investigation in July revealed how people formed private trusts, made themselves the trustees, filled out a deed, got it notarized and recorded at the register of deeds office.
Pendergraft, who is tied to at least two of the trusts, was able to get the deeds to several homes in the Triangle just by filing new deeds.
In an interview with ABC11, Pendergraft didn't apologize for what he was doing and said "it's not a scam" and is perfectly "legal."
He said the trusts were private and focused on acquiring properties. He wouldn't say what entitled them to the deeds, but referenced common law, which basically states that if your name appears on a valid deed, you are the exclusive owner.
"People are millionaires all day long for working the system, all of them have found lawful way of working in the system and that's what the trust is," Pendergraft said.
However on Tuesday, investigators arrested Pendergraft after he moved into one of the bank owned homes valued at over $800,000.
The home is one of seven that Pendergraft, along with others, had the deed transferred into their names, without paying for them. They also filed $1.2 million liens on all the homes.
Six of the seven properties are foreclosed homes, meaning they are bank owned.
When asked in July what Pendergraft's trusts plan to do with the properties if the banks have the titles and they have the deeds, Pendergraft said he was "unable to disclose that information."
But it now appears they wanted to live in the homes.
An eyewitness sent ABC11 a picture of the U-Haul still sitting in the driveway of one of the homes Wednesday with Pendergraft's possessions in it.
The Wake County Sheriff's Office has charged him with breaking and entering, obtaining property by false pretence and trespassing.
Besides those charges, Pendergraft along with the five others involved are facing a lawsuit from the state's attorney general's office for unfair and deceptive commercial practices.
The judge issued a temporary restraining order Wednesday and Pendergraft did not say anything. The order bars Pendergraft along with the others, and the three trusts from trying to take possession of any homes by filing deeds and other documents that have no legal basis.
Pendergraft is due in court later this month on the criminal charges.
In the suit, Attorney General Roy Cooper alleges the defendants trusts are not legal entities and nothing more than illusory shams intended to deceive the public and they have no legal claim to the properties.
"This is something we got to stop, and we're going to send a strong message that we are not going to tolerate this in our property recording," Cooper said.
Cooper is also asking the court to order all the deeds, liens and any other notices filed on public record to be declared void and that they have no legal effect on the chain of title.
Currently, there are no criminal laws in place that specifically relate to filing alleged fraudulent paperwork at the register of deeds office. Cooper says with the rash of recordings, his office will be proposing to lawmakers to make it a crime so law enforcement has more tools in place to prevent this from happening.
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