From the Insolvency Law Committee Bankruptcy e-Bulletin:
A California appellate court has held that a mortgagor may recover for intentional infliction of emotional distress from a mortgagee that falsely promised to modify her loan but then proceeded to foreclose. [Ragland vs. U.S. Bank, N.A., 2012 Westlaw – – (Cal.App.)]
I’ll post the cite as soon as I get it.
Governor Brown Signs AB 2364 into Law, Centralizing the Location for Service of Levies, Attachments and Garnishments on Financial Institutions
The Consumer Financial Services Committee is pleased to report that an Affirmative Legislative Proposal on service of levies and other process on financial institutions that was sponsored by the CFSC has now become law. This will require large banks, and permit smaller banks, to designate a central location where judgment creditors must serve levies, attachments and garnishments on deposit accounts and safe deposit boxes. The advantage for plaintiffs such as tort victims suing underinsured or uninsured motorists, as well as debt collectors, is that they no longer will have to serve the correct branch of the bank holding the account, a requirement that was a vestige of the pre-computer era. Identifying the right branch bank for service of levies, attachments and garnishments has necessitated the costly use of orders of examination of the debtor and other procedures, and enforcement of money judgments could be frustrated by the judgment debtor moving money around. The advantage of the legislation for financial institutions lies in both the efficiency of centralizing this function and the reduced risk of errors by branch bank staff. The Department of Financial Institutions is required to create a procedure for banks to designate their central locations for service, and to establish a website where judgment creditors can obtain this information.
The law goes into effect January 1, 2013.
For the text of the Bill, click here: http://www.leginfo.ca.gov/pub/11-12/bill/asm/ab_2351-2400/ab_2364_bill_20120911_enrolled.pdf
Jonathan Leventhal, esq.
More Riverside news from our friend and member Michael Gouveia:
Your cases filed this week will be scheduled for creditors meetings at 3801 University, Riverside, CA 92501. The Court has scheduled the Chapter 7 hearings for October 26 with both Mr. Cisneros and Ms. Bui’s hearings both being heard at the same place: 3801 University, Riverside, CA 92501. The cases for October 29 will be: Danielson will be at 3801 University, Room 100-1 Anderson will be at 3801 University, Room 100-2 and Cohen will be at 3420 12th Street???
All the rest of week, the hearings will be on 3801 University (including Mr. Cohen’s November 1st hearing.)
The 14th Street/ Martin Luther King Blvd. Bridge on 91 freeway will be widened starting next week—for two years. Expect major delays using that exit. If you are going to The Riverside Bankuptcy Court, use the Mission Inn Blvd. exit (7th street) off the 91 freeway, or exit off the 60 freeway as the 14th Street bridge will go from three lanes down to one.
The Orange County Bankruptcy Forum and Chapman University School of Law, Co-Sponsors Present the October 20, 2012, Special Project:
Come Learn From Members of the Bankruptcy Court Bench, Top Practitioners and Financial Professionals About How to Handle Issues Including the Preparation of: (1) Cash Collateral Budgets; (2) Plan Feasibility Analyses and Projections; (3) Liquidation Analyses; (4) Operating Reports; and (5) Other Related Issues. These Topics and Others Will Be Examined from Both the Debtor’s and Creditors’ Perspectives, and Members of the Local Bankruptcy Court Bench Will Give Their Perspectives on These Subjects.
Speakers:
Honorable Scott C. Clarkson – U.S. Bankruptcy Court Judge
Honorable Deborah J. Saltzman – U.S. Bankruptcy Court Judge
Eric J. Fromme – Rutan & Tucker LLP
Adam Meislik – Glass Ratner Advisory & Capital Group LLC
Todd C. Ringstad – Ringstad & Sanders LLP
Brian S. Weiss – BSW & Associates
Program Committee: Christopher A. Minier Committee Chair, Beth E. Gaschen, Adam M. Greely & Melissa Davis Lowe
Date/Time: Saturday, October 20, 2012 8:30 a.m. – 12:00 p.m. Continental Breakfast at 8:30 a.m. Program to Commence at 9:00 a.m.
Location: Chapman University School of Law One University Drive, Orange
I attended the Bar Advisory Committee meeting today downtown. Kathy Campbell told us that her office is laying off 24 “temporary” clerks. The term temporary is used only because they are not permanent, that is they are basic “contract” employees. Kathy commented that the clerks have experience obviously with bankruptcy forms and bankruptcy cases and the process so if anyone is looking for a clerk with some experience, call Kathy Campbell and she will see if she can match someone up with your particular needs. Kathy invited the call. Call the clerk’s office downtown and ask for her.
Section 523(a)(1) of the bankruptcy code distinguishes the nondischargeable taxes from those that may be discharged in bankruptcy.
In most cases, the analysis is pretty simple. Generally, nondischargeable taxes are those where the return was due less than three years ago, where the return was actually filed less than two years ago, or where the tax was actually assessed less than 240 days ago (assuming the debtor is filing a bankruptcy petition today). This is, in the end, numerical.
If the debtor made a “fraudulent return,” the taxes are not dischargeable. This is also very easy to determine: did the IRS assert the fraud penalty and win? It’s a rare case when a debtor files a bankruptcy petition and the first allegation of fraud comes when the debtor wants to discharge taxes.
But there is one phrase that invites interpretation, and that can trip up the most conscientious practitioner: 523(a)(1)(C) says that “A discharge . . . does not discharge an individual debtor from any debt for a tax with respect to which the debtor made a fraudulent return or willfully attempted in any manner to evade or defeat such tax.”
There are two main functions to the IRS: audit and collection. Audit determines how much tax you owe; collection ensures that you actually pay it. This subsection implicates both functions, and they have very different standards of bad behavior.
Because the subsection starts with the “fraudulent return” element, it’s a reasonable assumption to believe that fraudulent intent extends to the element of “willful attempt to evade or defeat tax.” Not so.
“Willful evasion” includes both a conduct element (an attempt “in any manner”) and a mental state element (“willful” means “voluntary, conscious, and intentional”). The conduct may be an affirmative act, such as transferring property to another family member for no consideration while tax debts hang over the owner’s head, or an omission, such as failure by a law partner’s failure to tell the accounting gal to withhold taxes.
I drove all the way out to San Bernardino to attend the IEBF annual review today. It was worth the trip and the money. Five judges although I figuered Judge Jury has roughly three times more tenure that the other four judges combined. It was a great program. The materials are exceptional.
BEHIND THE WINDOWS OF THE CLERK’S OFFICE
UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF CALIFORNIA
OVERVIEW: This is a great opportunity for litigators to learn the ins-and-outs of practice in the Central District of California. Attendees will tour and learn about four of the main departments of the Clerk’s Office: Civil Intake, IT Department, Docketing, and Courtroom Deputies. Young lawyers — particularly those in their first two years of practice — are especially encouraged to attend. Take this opportunity to learn about the Clerk’s Office and the Court, and to ask questions about the filing procedure, from intake to calendaring.
DATE: Thursday, November 8, 2012
Registration: 9:00 a.m. – 9:30 a.m. – Program: 9:30 a.m. – 11:30 a.m. Starts promptly at 9:30 a.m. – Refreshments will be provided.
PLACE: United States Courthouse, 312 North Spring Street, Los Angeles, California Meet in the 10th Floor Jury Room.
FEES: $10 for current FBA members $25 for non-members. FREE for new FBA members, who fax or email proof of new membership along with this registration form. To sign up as a new member, please go to www.fbala.org/Join.php.
PARKING: Please note that parking is not provided. Participants will need to park in one of the pay lots adjacent to the Courthouse.
MCLE: 1.5 hours of MCLE credit will be awarded to those who attend the program
DEADLINE: You must register by October 25, 2012. A 72 Hour written notice of cancellation is required for refund.
Lately I’ve been filing chapter 11 petitions to save real property only to confront the lender’s demand for payment of the prepayment penalty. The prepayment penalties are literally the total interest to be earned by the lender over the life of the loan less one month. One lender told me “its not a prepayment penalty, its a “Yield Maintenance Guarantee.” “And no, we won’t waive it for payment in full right now.”
One case I have proposes to pay the loan according to its original terms other than certain non-monetary defaults which we cannot cure (so the loan is still impaired in the Plan). The lender, represented by a large well-known firm, insists that it still has the right to the prepayment penalty even though the loan is not going to be prepaid. The prepayment penalty is roughly 20% of the entire debt and 15% of the value of the property. In the “Yield Maintenance” case (above), the penalty is $1 million on a property worth $6 million! That is basically all the equity.
The bigger problem with these cases though is the practical problem. The lender, by forcing a sale or a foreclosure, gets a windfall and therefore has no motivation to work out a deal, i.e., a consensual plan. I appreciate the idea that the lender’s view is that it will get the money back and reloan it at lower rates but that can be fixed especially where the original loan, the “Yield” being preserved, is low (although not as low as other loans today). My gripe, to make it short, is that suddenly these lenders (or at least the law firms they hire who are printing money as long as there is equity for them) are suddenly intransigent because of the windfall they are looking at.
I am filing the first objection to the proof of claim and we’ll see where this goes. The basis for the objection primarily is that under California law it is an unconscionable penalty.
TO ALL USERS RE: CM/ECF System Unavailable – Saturday, September 22, 2012, 7:00 a.m. to 5:00 p.m.
The Court will be performing network maintenance on Saturday, September 22, 2012, 7:00 a.m. to 5:00 p.m.
