Justia California Court of Appeals Opinion Summaries

Articles Posted in Bankruptcy
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In 2007, plaintiffs-respondents Jason Rubin and Cira Ross, as cotrustees of the Cira Ross Qualified Domestic Trust (judgment creditors) obtained a civil judgment against defendant-appellant David Ross (judgment debtor). In 2009, Ross filed for voluntary Chapter 7 bankruptcy. In April 2019, following an order denying judgment debtor a discharge in bankruptcy, judgment creditors filed for renewal of their judgment pursuant to Code of Civil Procedure sections 683.120 and 683.130. Ross moved to vacate the judgment on the ground that judgment creditors failed to seek renewal within the 10-year time period proscribed in Code of Civil Procedure section 683.130. The trial court denied the motion, concluding that judgment creditor’s renewal was timely because title 11 United States Code section 108(c) provided for an extension of time within which to seek renewal. Ross appealed, arguing that judgment creditors were not precluded from seeking renewal by his bankruptcy proceeding and, therefore, section 108(c) 2 did not apply to provide an extension of time to seek renewal of their judgment. The Court of Appeal agreed that judgment creditors were not barred from seeking statutory renewal of their judgment during the pendency of judgment debtor’s bankruptcy proceeding, but concluded that the extension provided for in section 108(c) applied regardless. Thus, the Court affirmed the trial court’s order. View "Rubin v. Ross" on Justia Law

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Fireman’s Fund issued insurance covering property damage at Stephens's warehouse. Three days after the policy became effective, Stephens discovered that burglars stripped the property of all electrical and conductive material. Stephens filed an insurance coverage suit, retaining attorney O’Reilly who had a first lien to assure payment of fees. The trial court entered judgment NOV, awarding Stephens nothing. O’Reilly withdrew from the case and was the subject of an involuntary bankruptcy petition. Following a remand, Stephens and Fund settled for $5.8 million. The bankruptcy estate claimed 40% of the settlement. Danko, the largest creditor, bought the claim and obtained the Stephens's files from the trustee. Based on O’Reilly’s failure to sign the retainer agreement, Stephens sent Danko a letter voiding the retainer agreement and sought declaratory relief. The court ordered Danko to return Stephens’s client file and granted a special motion to strike (anti-SLAPP) a claim for breach of trust against Fund based on the theory that Fund breached a fiduciary duty to O’Reilly and/or the bankruptcy estate by failing to advise the bankruptcy court of the Stephens-Fund settlement and “secretly disbursing” the proceeds and a claim for interference with prospective business advantage against Fund based on the same acts. The court of appeal affirmed the trial court’s denial of Stephens’s motion to disqualify the Danko from representing the corporate entity to which Danko assigned the claim; a protective discovery order regarding Stephens’s client file; and the anti-SLAPP order. View "O&C Creditors Group, LLC v. Stephens & Stephens XII, LLC" on Justia Law

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A 401k plan that a debtor, like the one in this case, creates and controls with the avowed purpose of protecting his assets from creditors is not a plan principally designed and used for retirement purposes, thereby rendering the funds in that plan fully exempt from levy. The Court of Appeal held that debtor's transferred funds to that 401(k) plan did not negate the partially exempt status those funds previously held while in the individual retirement accounts. Accordingly, the court reversed the trial court's ruling declaring that the funds were fully exempt from levy and remanded for the trial court to assess the extent of the partial exemption. View "O'Brien v. AMBS Diagnostics, LLC" on Justia Law

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In May 1995, Charlene’s parents created CJPM Family Partnership, Ltd. Charlene’s parents are the general partners. Charlene, her parents, and her siblings are limited partners of CJPM. Philip and Charlene married in June 1995. CJPM made three loans to Philip totaling $150,000, which were credited against Charlene’s partnership interest. Philip did not repay the debt. The two divorced in 2011. Their stipulated dissolution judgment awarded Charlene all interest to any community interest in CJPM, assigned to Philip, as his separate obligation, his debt to CJPM, and required Philip to indemnify Charlene from that debt. Philip filed for Chapter 7 bankruptcy. All of his debts, including his CJPM loan, were discharged. Years later, Charlene unsuccessfully moved to reopen bankruptcy proceedings to obtain a ruling that Philip’s debt to CJPM was nondischargeable. Charlene then moved to recover Philip’s CJPM debt in state court. The trial court determined that Philip’s CJPM debt was nondischargeable under the 11 U.S.C. 523(a)(15) exemption and calculated that Philip owes Charlene $345,963. The court of appeal affirmed. When the nature of a debt is such that its discharge will directly and adversely impact the finances of the debtor’s spouse or former spouse, it is nondischargeable in bankruptcy, even if it is not directly payable to the spouse. View "Marriage of Vaughn" on Justia Law

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Defendant Anice Plikaytis appealed an order awarding her attorneys' fees in a breach of contract action brought by plaintiff Debra Roth. In the published portion of its opinion, the Court of Appeal agreed with Plikaytis's contention that the trial court erred when it declined to consider previously filed documents she incorporated by reference as part of her motion. In the unpublished portions of the opinion, the Court discussed Plikaytis's arguments that: (1) the court failed to apply the lodestar method; (2) erroneously denied fees for equitable and cross-claims and for obtaining relief from bankruptcy stays; and (3) substantially reduced her award without explanation. The Court of Appeal concluded the trial court erred by denying fees for obtaining bankruptcy stay relief that related to the breach claim and failing to provide an adequate justification for significantly reducing the number of hours allowed. Accordingly, the trial court was affirmed in part, reversed in part, and the matter remanded with directions. View "Roth v. Plikaytis" on Justia Law

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Coles sued to recover an overdue loan that he had extended to a real estate investment company, Cascade. The loan was guaranteed by Glaser and Taylor. That case was settled when Cascade ostensibly paid off the loan, and Coles, in return, executed a release. Shortly after the settlement, Cascade filed for bankruptcy. Coles was forced to surrender most of the settlement proceeds to the bankruptcy trustee as a preferential payment. In a second suit, against Glaser and Taylor, the trial court found that the defendants had breached the settlement agreement and entered judgment in favor of Coles. The court of appeal affirmed, holding that a debt of a contractual co-obligor is not extinguished by another co- obligor's​ pre-bankruptcy payment to a creditor that is later determined to be a bankruptcy preference. View "Coles v. Glaser" on Justia Law

Posted in: Bankruptcy, Contracts
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In 2005, Crossroads Investors, L.P. borrowed $9 million subject to a promissory note. The note was secured by a deed of trust recorded against an apartment building Crossroads owned in Woodland. Defendant Federal National Mortgage Association (Fannie Mae) was the beneficiary of the deed. The note imposed on Crossroads a prepayment premium should Crossroads pay the unpaid principal before the note’s maturity date or should Crossroads default and Fannie Mae accelerate the loan. Crossroads defaulted on the note in late 2010. Fannie Mae served Crossroads with a notice of default, and accelerated the loan. In February 2011, Fannie Mae initiated nonjudicial foreclosure proceedings. In April 2011, Crossroads entered into a contract to sell the property to Ezralow Company, LLC (Ezralow) for $10.95 million. A few weeks later, Crossroads and Ezralow proposed to Fannie Mae that Ezralow would assume Crossroads’ obligations and pay off the loan on Fannie Mae’s agreeing to waive the prepayment premium. Fannie Mae refused to waive the prepayment premium and rejected the proposal. By June, Fannie Mae recorded a notice of trustee’s sale against the property, stating the total unpaid amount of Crossroad’s obligations was estimated at more than $10.5 million. The day before the property was scheduled to be sold, Crossroads filed for Chapter 11 bankruptcy protection to protect its interest in the property. In its petition, Crossroads asserted it owed Fannie Mae $8.7 million. Fannie Mae sold the property after it was granted relief from the bankruptcy stay. Crossroads then sued Fannie Mae for wrongful foreclosure, breach of contract, fraud, and other tort and contract actions. Fannie Mae filed an anti-SLAPP motion, contending the actions on which Crossroads based its complaint were Fannie Mae’s statements in its papers filed in the bankruptcy proceeding. The trial court disagreed and denied the motion. This appeal challenged the trial court’s denial of Fannie Mae's special motion to strike the complaint under the anti-SLAPP statute. After review, the Court of Appeal affirmed the trial court’s order. "The principal thrust of Crossroads’ action was to recover for violations of state nonjudicial foreclosure law, not for any exercise of speech or petition rights by Fannie Mae. Even if protected activity was not merely incidental to the unprotected activity, Crossroads established a prima facie case showing it was likely to succeed on its causes of action." View "Crossroads Investors v. Federal National Mortgage Assn." on Justia Law

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The Company was organized as a limited liability company in 2007; its sole managing member was another LLC, whose sole members were the Ngs, who controlled and managed the Company. Defendant was one of the Company’s lawyers. The Company’s stated purpose was to serve as an investment company making secured loans to real estate developers. The Managers actually created the Company to perpetrate “a fraudulent scheme” by which the Company transferred the money invested in it to another entity the Managers controlled. Defendant knew that the Managers intended to and did use the Company for this fraudulent purpose and, working with the Managers, helped the Company conceal the nature of its asset transfers. The Company was eventually rendered insolvent and its investors filed an involuntary bankruptcy petition. The bankruptcy trustee filed suit against Defendant, alleging tort claims based on Defendant’s involvement in the Company’s fraud. Defendant argued that the claims are barred by the in pari delicto doctrine. The court of appeal affirmed dismissal, finding that the in pari delicto applies to the trustee and rejecting an argument that the doctrine should not bar her claims because the wrongful acts of the Managers should not be imputed to the Company. View "Uecker v. Zentil" on Justia Law

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McCready's husband sold his business, Billy Bags, to Whorf before he died. Whorf failed to make payments. McCready sued and obtained a judgment of $134,927.36 that provided, "McCready is awarded an equitable lien on the assets and profits of [Billy Bags]." Whorf filed a Chapter 7 bankruptcy petition, showing an average net monthly income of $10,487.72 from Billy Bags. Whorf named McCready as a creditor. Personal liability on Whorf's debts was discharged in bankruptcy. The lien, however, remained on the assets and profits of Billy Bags. McCready sued for money had and received, claiming that Whorf had been receiving $10,487.72 per month profit from Billy Bags; that McCready has a lien against those profits; and that profits received from the filing of the bankruptcy petition to the time of trial were monies belonging to McCready. The complaint sought $134,927.36. The court ruled in favor of for Whorf, stating: "[McCready's] remedy, if any, was to seek to enforce the judgment that created the lien through the use of laws applicable to the enforcement of judgments.” The court of appeal reversed. A separate action on a judgment is expressly authorized by Code of Civil Procedure section 683.050. View "McCready v. Whorf" on Justia Law

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The law firm represented Raissi in a Chapter 11 bankruptcy case for a year, generating fees and expenses of $329,705.12. The bankruptcy case closed. Raissi failed to pay. The firm sued for breach of contract, account stated, open book account and failure to pay for goods and services rendered.It obtained an order extending the deadline for service and allowing it to serve Raissi via publication. Publication in the San Jose PostRecord generated no response. The firm obtained a default judgment. Its “Declaration of mailing (Code Civ. Proc., 587),” stated that Raissi’s address was “unknown.” Raissi moved to set aside the default, alleging that its counsel made a mistake in changing the address for its registered agent; that the bankruptcy court retained exclusive jurisdiction; and that the request for default was defective because it was not mailed to Raissi’s “last known address.” The firm stated that it had made eight separate attempts to personally serve Raissi at the property, which appeared vacant and had a sign indicating it was available to lease. The court of appeal reversed the ruling in favor of the firm. A mailing address is not “unknown” merely because personal service could not be effected at that address. View "Murray & Murray v. Raissi Real Estate Dev,, LLC" on Justia Law