Macdonald | Fernandez LLP


221 Sansome Street
San Francisco, CA 94104
Telephone: (415) 362-0449
Facsimile: (415) 394-5544
914 Thirteenth Street
Modesto, CA 95354
Telephone: (209)549-7949
Facsimile: (209) 236-0172

Tuesday, July 30, 2013

Assets Excluded From Personal Guarantee Did Not Extend to Proceeds

In Series AGI West Linn of Appian Group Investors De LLC v. Eves, 13 C.D.O.S. 6177 (1 Dist. Cal. App. 2013), the court upheld a ruling that a personal guarantee that excludes a particular asset from the reach of the creditor does not also exclude the sale proceeds of that asset without specific terms to that effect.  Specifically, the personal guarantee of a $3.1 million loan provides that "the personal guarantee may only be collected from assets not expressly excluded" as provided on an attached schedule, including the guarantor's residence.  The agreement and the attachment did not mention the proceeds of any sale of the residence.  Strictly interpreting the contract, the court held that it could not read in an implied term where the contract provided that only assets specifically identified would be excluded.  In light of this opinion, it will be important for borrowers and lenders to consider specific language extending excluded assets to sale proceeds, rents and profits, commingled funds, exchanged assets (as in a 1031 exchange) and the proceeds of loans secured by such assets.

Monday, July 29, 2013

Reno Fernandez Named Super Lawyers Rising Star

We are pleased to announce that Reno Fernandez has been named a Rising Star by Super Lawyers for the second year running. 

Thursday, July 25, 2013

Assignee of Sold Out Junior Could Not Sue Borrower Upon Fraud Claim Not Specifically Assigned

In Heritage Pacific Financial, LLC v. Monroy, 2013 Westlaw 1779278 (Cal.App.), the buyer of a junior note secured by a mortgage that was extinguished by the foreclosure of a senior lien sued the borrower for fraud, alleging that her loan application falsely stated that her monthly income was $9,200.  The borrower demurred and brought a counterclaim alleging that the plaintiff's demand letter violated the Federal Fair Debt Collection Practices Act by attempting to collect an unenforceable  debt.  The trial court granted the borrower's demurrer, granted her summary judgment on her counterclaim and awarded her $90,000 in attorney's fees.  The appellate court affirmed, holding that the fraud claim was not transferred to the debt buyer; it was not "incidental" to the overall sale, and there was no specific transfer of the fraud claim.  This case is emblematic of recent hostility toward bulk buyers of consumer debt.

Wednesday, July 10, 2013

New Procedures for Sole Proprietorships in Chapter 7 Cases in Fresno and Bakersfield

On July 2, 2013, Chapter 7 Trustees James Salven, Trudi Manfredo and Peter Fear announced new procedures they will follow in administering sole proprietorships in chapter 7 bankruptcy cases filed in Fresno and Bakersfield, California.  Specifically, the Trustees will promptly move for an order authorizing them to shut down the business until the case is closed.  The debtor may avoid shutting down by demonstrating that all property used in the business is exempt, offering to purchase the non-exempt equity in the property (and paying a deposit), or filing a motion to compel abandonment.  It is important to fully analyze a debt it's assets and understand these procedures before filing a chapter 7 case in Fresno or Bakersfield.

Tuesday, July 9, 2013

Improper Punctuation Prevents Perfection

In In re C. W. Mining Co., 2013 WL 888677 (D. Utah 2013), the district court of Utah held that a UCC-1 Financing Statement that omitted periods after initials in the debtor's name was unperfected and could be avoided under Bankruptcy Code Section 544.  Specifically, the recorded document identified the debtor as "CW Mining Company," as opposed to its registered name, "C. W. Mining Company," and the error prevented the company from appearing in a title search using Utah's standard search logic.  The fact that a reasonably diligent researcher might have found the lien was not relevant under UCC Article 9.  The error may cost the creditor almost $3 million.  The lesson:  cross your t's, dot your i's, and understand your state's search logic for recorded liens against personal property.