Articles Posted in Bankruptcy

by
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

by
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

by
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

by
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

by
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

by
Plaintiff filed suit against defendant, a plastic surgeon, for medical malpractice. Defendant failed to answer the complaint but notified plaintiff that he filed a bankruptcy proceeding. Plaintiff then obtained an order from the bankruptcy court granting her relief from the automatic stay of proceedings against debtor. In this appeal, defendant challenged the subsequent default judgment entered against him. Defendant argued that plaintiff's failure to serve him with a statement of damages prior to entry of his default denied him a last opportunity to plead the complaint and avoid a default. The court found no error in the trial court's proceedings where, under these circumstances, service of the statement of damages on defendant was not necessary or permitted by the bankruptcy stay, would have served no useful purpose, and did not open up the default and allow defendant to answer the complaint. Accordingly, the court affirmed the judgment of the district court.View "Weakly-Hoyt v. Foster" on Justia Law