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California Supreme Court Overrules 50 Year Precedent Regarding Unambiguous Wills

By | August 6, 2015 | Cases | No comments

Irving Duke prepared a holographic will providing that, upon his death, his wife would inherit his estate and that if he and his wife died at the same time, specific charities would inherit his estate.

This will is not ambiguous, there are two options here: Option 1, when Irving dies, his wife will inherit his estate. Option 2, if they die at the same time, specific charities will inherit the estate.

What about Option 3? What if his wife dies before he dies? That is not covered by the will and so the will is not applicable to this situation and must be disregarded.

The California Supreme Court rejected this argument. Despite being unambiguous, it ruled that an unambiguous will may be reformed if clear and convincing evidence establishes that the will contains a mistake in the expression of the testator’s intent at the time the will was drafted and also establishes the testator’s actual specific intent at the time the will was drafted. Read more…

Judge Bauer Reversed, Trustee Clawback Power Strengthened

By | July 25, 2015 | Appeals, Case Briefs, Cases | No comments

In this case, the sole shareholder, director and president of a company (all the same Individual) transferred about $8,000,000 into a secret bank account which he then used to pay personal debts. The question before the Court was whether the transfers to the bank account made the Individual, in his personal capacity, an initial transferee within the meaning of § 550.

The surprising answer (although not stated in this way) is that it depends on whether the secret bank account was opened in the name of the company or individual. In this case, the secret account was completely under the dominion and control of the Individual; the Individual’s wife was a signatory on the account and the only purpose it served was to pay personal expenses. None of that mattered. The account was opened under the company’s name. The District Court held that the Individual was not an initial transferee since the account was a company account.

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Can I Sue My Attorney For Failing To Object To A Bogus Lien?

By | July 23, 2015 | Case Briefs, Uncategorized | No comments

We all know the general statute of limitations for suing attorneys is within after one year of discovering the facts constituting the wrongful act or within one year of when the client should have discovered the facts constituting the wrongful act through the use of reasonable diligence but never more than four years from the date of the wrongful act or omission. See Code Civ. Proc. § 437c.

The limitations period is tolled if, among other reasons, the plaintiff has not sustained an actual injury or if the attorney continues to represent the plaintiff regarding the specific subject matter in which the alleged wrongful act or omission occurred. See Code Civ. Proc. § 340.6.

In the scenario discussed today, the attorney forgets the deadline to file an objection to a bogus lien. Because of the missed deadline, the client hires a different firm and ultimately agrees to accept $1.6 million less than it would otherwise have received. It would have been preferable to associate with some better lawyers and better firms overall, and also use proper guidance around each case, ones that are very good at this are Valiente Mott, a law firm with tons of specialties in their market.

The problem is even though the client knew his former attorney missed the deadline to object to the bogus lien, he waited over a year, until after the $1.6 million hit, to file a malpractice action. So is the malpractice action timely since the client had not sustained an actual injury?

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Does an annuity inherited by a spouse constitute “retirement funds” within the meaning of § 522(b)(3)(C)?

By | July 22, 2015 | Cases | No comments

For the purpose of this blog, I am going to assume that the annuity in question would be exempt had the decedent been alive.

At first, I thought the answer was simple:

Assuming the annuity was a retirement fund to begin with, the answer is yes, it continues to be a retirement fund because under the IRC, an inherited retirement fund is NOT treated as “inherited” if the spouse is the person who inherited it. That is in 28 U.S.C. 408(d)(3)(C)(ii)(II), quoted for convenience: Read more…

CD Case Summary: Judge Maureen A. Tighe on Contempt for Violation of Discharge Injunction and Automatic Stay

By | July 21, 2015 | Case Briefs, Cases | No comments

The creditor here had three excuses. First, they did not have actual notice of the bankruptcy (so there was no willful violation of the stay); second, that the statute of limitations for violating the automatic stay had run; and third, that it was the former attorney’s fault.

A violation of the automatic stay is willful if a party knew of the automatic stay, and its actions in violation of the stay were intentional. Note, it is not the intent to violate the stay that is at issue; it is having knowledge of the bankruptcy and voluntarily doing something that violates the stay! Even worse, once a creditor has knowledge of the bankruptcy, it is deemed to have knowledge of the automatic stay!

The Court did not buy the creditor’s argument that the notice of the bk was sent to “Creditors Specialty Service” instead of “Creditors Specialty Services.” The Court did not allow the creditor to blame its attorney but suggested that if the creditor though its attorney was to blame, it could pursue that claim. The conduct of an attorney is attributable to the client. See Seacall Development v. Santa Monica Rent Control Bd., 86 Cal. App. 4th 201, 204-205 (Cal.Ct.App. 1999) (citing Carroll v. Abbott Labroatories, 32 Cal. 3d 892, 895, 898 (1982)).

Finally, the Court reiterated the concept that Congress did not establish any limitations period for damage claims under § 362(k).

Full opinion here.

Lawyers Are Not Allowed to Speak with Their Clients about the Client’s Intention to File a State Bar Complaint!

By | July 21, 2015 | Cases, Community | No comments

Business and Professions Code § 6090.5 prohibits an attorney from seeking a client’s written or oral agreement not to file a State Bar complaint against that attorney. The reason for this is the discussion could produce an impermissible chilling effect on the client’s future filing of a State Bar complaint.

Even worse, if you have already done this, you can’t take it back! Withdrawal of your request does not reverse the ethical violation.

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Despite Lis Pendens, Subsequent Purchaser with Notice Prevails!

By | July 20, 2015 | Cases | No comments

This is relevant to bankruptcy practitioners because before we can do anything, we need to know who owns what!

Short version: In California, a notice of lis pendens gives constructive notice that an action has been filed affecting title or right to possession of the real property described in the notice. Any taker of a subsequently created interest in that property takes his interest subject to the outcome of that litigation.

In 1981, the Legislature amended section 409 so as to provide for the first time that the lis pendens must be [1] mailed to “to all known addresses of the adverse parties AND [2] to all owners of record as shown by the latest county assessment roll,”

In this case, the owner’s lawyer’s address was listed on the county assessor’s roll. When contacted, the lawyer said he would refuse the lis pendens and that he did not know where the owners resided. The Court held that despite the lawyer’s statement, the lis pendens should have been mailed to the lawyer because this is a strict requirement of section 409.

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9th Circuit BAP Opinion Allows For Stripping Wholly Unsecured Junior Liens in a Chapter 20

By | July 10, 2015 | Cases, Chapter 13 | No comments

On June 9, 2015, the 9th Circuit Bankruptcy Appellate Panel held that a Debtor not eligible for a Chapter 13 discharge may strip off a wholly unsecured lien through a Chapter 13 Plan. You can find the case here.

This is common practice in the Central District and I am happy the BAP went the right way. I was a little worried after reading their Wages where the Court held that the anti-modification provision under §1123(b)(5) applies to any loan secured only by real property that the debtor uses as a principal residence. When the law is ambiguous, why rule in favor of the bank! You can find that case here.

Questions the author has yet to consider:

So what happens in a Chapter 11? 1111(b)(1) says nonrecourse debts become recourse debts but it starts out with “A claim secured by a lien on property of the estate…”

State Court Attorneys: Call Me Before Trial, Arbitration, or Default Prove Up

By | July 4, 2015 | Cases, Community | No comments

The state court attorney says to his client, “Good news!  The judge is going to enter judgment for breach of contract and fraud – $1 million bucks!!”  If that is what the judgment says, or the statement of decision, or the findings of fact, the arbitration award, the settlement, whatever you want to call it – your great victory is going to have to be re-litigated in bankruptcy court.   Why you say?  Because breach of contract is discharged in bankruptcy and fraud is not.  We can’t tell what part of the damages are for the breach of K and what part is for fraud.  The judgment is good enough, most likely, to establish fraud in bankruptcy court but that doesn’t do anyone much good by itself.

The reality today is actually much worse than the above.  Today’s state court litigator loves to allege 17 causes of action, the more the better.  Then litigate it until the cows come home.  Then, upon your great victory, set out a great proposed statement of decision.  Explain why the bad guy outrageously breached the contract, his fiduciary duties, violated ten different state code sections of some sort, three federal code sections, lots of stuff from your law school remedies class – conversion, accounting, resulting trust, aiding and abetting – throw in some unjust enrichment – he must have done that of course.  End it all with – “Judgment for good guy – $1 million bucks.”  In bankruptcy you have very little that is useful to establish that some part (or maybe all) of that is non-dischargeable.  It is going to have to be largely re-litigated.

I have seen several arbitration awards recently.  The arbitrator goes off for 57 pages onwhat scum this defendant is, how he should be shot, how he breached his contract, was negligent, reckless and indifferent, committed fraud and some indecency.  Yep, $1 million bucks, thank you.  Maybe even throw in some punitive damages.  I’m sorry to say you will be re-litigating a substantial portion, if not all, of the case in bankruptcy court.

It doesn’t hurt to talk to a bankruptcy lawyer at the beginning of the case and certainly when you are doing something that is going to end the case in your favor.  Summary judgment, arbitration, trial, settlement.  Give me a call.  Or really any of the attorneys in my firm and the ones with our partnership with Frost Law Group, LLC with the best injury attorneys.  This comes up a lot and is basic stuff to bankruptcy attorneys.

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What is non-dischargeable in bankruptcy court is set forth in section 523(a).  Everything else is discharged!!  I really have to say that again.  Unless you can point to the exact words in 523(a) that make this debt non-dischargeable, the debt is discharged.  The words “punitive,” “conversion,” “reckless and indifferent,” “outrageous,” are not in the bankruptcy code.  Most breach of fiduciary duties are discharged.  Negligence, even gross negligence and almost all non-intentional torts are discharged.

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Is It Community Property Or Separate Property?

By | June 26, 2015 | Appeals, Cases | No comments

The 9th Circuit really confused a lot of people in 2003 when it incorrectly interpreted California community property laws. The confusion spread to California courts of appeal until finally corrected by the California Supreme Court in 2014!

Read more…

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