Bankruptcy and Real Estate - Contra Costa County Bar Association

Contra Costa Lawyer
Volume 23, Number 8 • September 2010
The official publication of the
B A R
Real Estate
& Bankruptcy
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Contra Costa Lawyer
Volume 23, Number 8 • September 2010
B A R
A S S O C I A T I O N
CONTENTS
features
8
THE DEVIL COULD GET A DISCHARGE....IF HE WERE MARRIED TO SNOW WHITE!
Marlene G. Weinstein
11
CAN BANKRUPTCY BURST BUBBLE-ERA LIENS?
David Katzen
13
TAXATION OF SHORT SALES AND FORECLOSURES
Mark Ericsson
16
THE BANKRUPTCY COURT - A UNIQUE STRUCTURE
Alan E. Ramos
18
EMOTIONAL AND TECHNICAL CHALLENGES TO MEDIATING PARTITION ACTIONS
Malcolm Sher
departments
4
INSIDE
Marlene G. Weinstein
6
PRESIDENT'S MESSAGE
Ron Mullin
20
CCCBA RALLIES TO RAISE FUNDS FOR THE FOOD BANK
Ed Shaffer
21
LRIS SUCCESS!
A Conversation with Robert Lawrence
23
QUESTION MAN
HOW HAS BANKRUPTCY AND/ OR THE BURST OF THE REAL
ESTATE BUBBLE AFFECTED YOUR PRACTICE?
24
THE ETHICS CORNER
Carol M. Langford
26
LOCAL CIVIL JURY VERDICTS
Matthew P. Guichard
30
CLASSIFIEDS
inside
2010 BOARD of DIRECTORS
Ron Mullin President
Kathy Schofield President-Elect
Audrey Gee Secretary
Jay Chafetz Treasurer
Larry Cook Ex Officio
Kristen Thall Peters
Richard Alexander
Alan Ramos
Amanda Bevins
Ron Rives
Christopher Bowen
Dana Santos
Oliver Bray
Stephen Steinberg
Mike Brewer
Candice Stoddard
Leigh Johnson
CCCBA EXECUTIVE DIRECTOR
Lisa Reep: 925.288.2555 • [email protected]
CCCBA main office: 925.686.6900 • www.cccba.org
Jennifer Comages
Membership Coordinator
Kerstin Firmin
Communications Coordinator
Emily Day
Systems Administrator and
Fee Arbitration Coordinator
Barbara Tillson
LRIS Coordinator
Manny Gutierrez
Administrative Assistant
and Legal Interviewer
Michele Vasta
Section Liaison/Education
& Programs Coordinator
CONTRA COSTA LAWYER
EDITOR
Candice Stoddard
925.942.5100
CO-EDITOR
Nicole Mills
925.351.3171
BENCH LIAISON
Hon. Mary Ann O'Malley
925.646.4001
BOARD LIAISON
Candice Stoddard
925.942.5100
COURT LIAISON
Kiri Torre
925.957.5607
PRINTING
Steven's Printing
925.681.1774
PHOTOGRAPHER
Moya Fotografx
510.847.8523
EDITORIAL BOARD
Mark Ericsson
925.930.6000
Matthew P. Guichard
925.459.8440
Patricia Kelly
925.258.9300
Craig Nevin
925.930.6016
David Pearson
925.287.0051
Erika Portillo
925.459.8440
Andy Ross
925.296.6000
Dana Santos
925.901.0185
Kathy Schofield
925.253.7890
Audrey Smith
925.969.3561
Stephen C. Steinberg
925.385.0644
Marlene Weinstein
925.942.5100
The Contra Costa Lawyer (ISSN 1063-4444) is published 10 times
a year by the Contra Costa County Bar Association (CCCBA),
704 Main Street, Martinez, CA 94553. Annual subscription of
$25 is included in the membership dues. Second-class postage
paid at Martinez, CA. POSTMASTER: send address change to
the Contra Costa Lawyer, 704 Main Street, Martinez, CA 94553.
The Lawyer welcomes and encourages articles and letters
from readers. Please send them to: Kerstin Firmin, CCCBA, 704
Main Street, Martinez, CA 94553; or email to: [email protected].
The CCCBA reserves the right to edit articles and letters
sent in for publication. All editorial material, including editorial
comment, appearing herein represents the views of the respective authors and does not necessarily carry the endorsement of
the CCCBA or the Board of Directors. Likewise, the publication
of any advertisement is not to be construed as an endorsement
of the product or service offered unless it is specifically stated
in the ad that there is such approval or endorsement.
4
by Marlene G. Weinstein
In November 2007, I was the guest editor for the Contra Costa Lawyer issue dedicated
to “Debtors, Creditors and Bankruptcy”. At that time I wrote, “It took many years;
however, on April 20, 2005, the President signed the Bankruptcy Abuse Prevention and
Consumer Protection Act (referred to herein as “BAPCPA”). With few exceptions, the law
became effective October 17, 2005. There was a mad rush to file Chapter 7 bankruptcy
cases before the effective date. Many attorneys left the bankruptcy practice altogether.
People thought (and some continue to think), that filing a Chapter 7 bankruptcy case
would no longer be possible, and that a person would only be able to file a bankruptcy
case that proposed a payment plan to creditors. Although filing Chapter 7 for most consumers is generally more difficult and more expensive than pre-BAPCPA, it is still alive
and well. In fact, in some situations where people have substantial secured debts (such
as a hefty mortgage and car payment), BAPCPA has made it easier to file bankruptcy...”
That was 2007. Since then, there has been an economic downturn (recession) which started as a result of sub-prime mortgages and securitization, and which has snowballed due
to long-term unemployment. As a result, bankruptcy filings have increased as mentioned
in Alan Ramos’ article, “The Bankruptcy Court: A Unique Structure.”
The recession began, in large part, due to the banks having lent money to people who
were never able to afford the houses they were purchasing. The result was, and continues
to be, massive foreclosures, sometimes of entire neighborhoods. Although bankruptcy
attorneys and judges tried to impress upon Congress the benefit of giving bankruptcy
judges the discretion to modify loans secured by a debtor’s primary residence, Congress
chose instead defer to the banks to modify their loans in order to reduce the vast amount
of foreclosures which continue to occur. However, as set forth in “Can Bankruptcy Burst
Bubble-Era Liens?” written by David Katzen, bankruptcy can still be used to modify
loans secured by investment property and to eliminate loans altogether which are, in essence, unsecured due to the decrease in property values.
Due to the tax consequences that arise in connection with foreclosures, short sales and/or
deeds in lieu of foreclosure, a bankruptcy is often a client’s best option. For a discussion of
the capital gains and cancellation of indebtedness issues that arise based upon various scenarios, take a look at Mark Ericsson’s article, “Taxation of Short Sales and Foreclosures.”
Although not written from a bankruptcy perspective, Malcolm Sher’s article, “Emotional
and Technical Challenges to Mediating Partition Actions,” provides tools that can be used
by real estate, bankruptcy and other attorneys when faced with the not uncommon situation which arises due to various unrelated parties having purchased property together,
especially during the real estate boom.
The intersection of real estate and bankruptcy issues has never been greater. Because of
the increase in bankruptcy filings, as well as the decreased need for attorneys in other
areas of the law, many attorneys have either returned to bankruptcy or started up new
bankruptcy practices. The cases we are seeing include a minefield of related issues that
require cross-referral of cases between real estate, bankruptcy, tax and other attorneys to
competently advise our clients. We hope that the articles in this issue will provide answers
to some of your questions.
— Marlene Weinstein is a sole practitioner whose practice is devoted exclusively to bankruptcy law,
representing debtors, creditors, and Chapter 7 trustees.
September 2010
Contra Costa Lawyer
5
president’s message
by Ron Mullin
Can you believe summer is over?
The kids are back to school and already
memories fade about fun vacations with
family and friends.
Prior to the summer, the Executive
Board of the CCCBA met with Presiding Judge Mary Ann O’Malley, Assistant
Presiding Judge Diana Becton Smith,
Court Executive Officer Kiri Torre,
Court Operations Deputy Officer Mindy Morgado, Deputy Executive Officer
Lucy Fogarty, and the new IT Director
Barry Lynch for a Bench-Bar Committee meeting to discuss matters of interest to our members. One of the items
discussed was an “attorneys only” line in
the Martinez clerk’s office for unlimited
civil cases.
On July 22nd, we received a letter
from Mindy Morgado announcing that
the “attorneys only” line would open on
August 2nd. This should be a welcome
privilege for attorneys needing to file
documents in unlimited civil cases. As
most of you know, you could wait in line
for twenty minutes for a pro per litigant
to complete his or her dealings with a
clerk at the window.
This new service should be a real timesaver for our members! We would like to
thank Judge O’Malley, Kiri Torre and all
of the court staff for their consideration
and implementation of our request.
During the summer, we welcomed
Kerstin Firmin to our staff. Kerstin is
our first Communications Coordinator
6
and will be assuming many new responsibilities, including those previously handled by Nancy Young, an independent
contractor with CCCBA. We appreciate
Nancy’s many years of dedicated service
to CCCBA producing the Contra Costa
Lawyer magazine as well as the Directory and wish her well in all of her future
endeavors.
Kerstin has undertaken an audit of all
of our existing communication channels
and writings. She will be making suggestions and recommendations about
ways to increase the effectiveness of our
communications with our members and
the public. I am confident that you will
notice a bright, fresh look to our written
and electronic messages in the very near
future.
As a follow-up to the issues surrounding the closure of the Elder Law Clinic
at JFK University, I had a meeting with
the University president and the new
dean for the law school. In that meeting,
JFK agreed to allow CCCBA to use the
name of the “Elder Law Clinic” and to
transfer the phone number for the clinic
to a new entity that could carry on the
good works of the ELC. Over the course
of the summer a number of meetings
have been held with interested parties
and stakeholders of the ELC. Over time,
a tentative model has developed which
we are optimistic will provide the structure of a new ELC program under the
auspices of The Law Center.
In November, the Association will be
sponsoring an event to support the creation of the new Elder Law Center. The
event will be held at the Bedford Gallery
in Walnut Creek on November 4th and
will honor retired Contra Costa Judge
Norman Spellberg. We hope that you
will attend and support this most worth-
while program.
Over the summer, another worthy
program received recognition. CCCBA
nominated the Deer Valley High School
Law Academy (DVLA) for the State Bar
of California’s 2010 Education Pipeline
Award. At the end of July, we were notified that the DVLA won the award, to
be presented at the State Bar Annual
Conference in Monterey. The CCCBAsponsored program, which launched in
2009, engages high school students who
are interested in the legal profession
through a variety of avenues, including
a comprehensive legal oriented curriculum, work-based learning opportunities,
field trips, guest speakers, mentoring,
and mock trial programs.
Students from diverse backgrounds
are encouraged to enter the pipeline
towards successful, rewarding careers
in the law, according to Past President
Richard Frankel who currently chairs
the Law Academy Advisory Board. Congratulations are well deserved for Dick,
former CCCBA board member Teri Cannon, Advisory Board member Judge Lois
Haight, retired CC Superior Court Commissioner Jim Libbey and retired CC
Superior Court CEO Ken Torre for their
unwavering support and commitment to
this successful program.
As always, we recognize that you have
chosen to be a part of the CCCBA and
we appreciate your support! 
— Ron Mullin, a lawyer in this county for over
30 years, dedicates his practice to estate planning,
wills and trusts, conservatorships/guardianships,
business and commercial law, real property, and
business formation. He also acts as mediator and
arbitrator for disputed cases.
September 2010
Gala ReceptiOn
in support of the Elder Law Center
Celebrating Judge Norm Spellberg (ret.)
for his lifelong contribution to the Contra Costa Legal Community
Thursday, NOvember 4, 2010
5:30-7:30pm
BedfOrd Gallery
Dean Lesher RegiOnal Center fOr the Arts
Walnut Creek
Master of Ceremonies | Bill Gagen
$50|$25 for CCCBA Barristers or Law Student members
SpOnsOrship OppOrtunities
PLATINUm
$5,000
10 Passes to Reception, Plus First Drink
Recognition in Press Releases and Event Publicity
Prominent Placement in all Event Materials
Recognition at Event
GOld
Silver
$2,500
5 Passes to Reception, Plus First Drink
Recognition in Event Publicity
Prominent Placement in all Event Materials
Recognition at Event
$1,000
2 Passes to Reception, Plus First Drink
Recognition in Event Publicity
Placement in all Event Materials
Recognition at Event
We welcOme SpOnsOrships & Pledges
To register or to take advantage of sponsorship and pledge opportunities,
please contact Michele Vasta at [email protected] or 925.370.2548
Please make checks payable to “The Bar Fund - ELC”
Contra Costa Lawyer
7
The
Devil
Could get
a Discharge...
If he were married
to Snow White!
by Marlene G. Weinstein
In this day of Ponzi schemes and real estate fraud, creditors need to be aware of the “community property
discharge” provided to debtors who file for protection under the Bankruptcy Code, as well as their spouses,
regardless of whether or not the wrong-doing spouse files bankruptcy.
Consider the following scenario:
Joe and Julie live high on the hog in a
3,000 square-foot house in one of the
nicest neighborhoods in the area. Their
two children attend private school. Julie
doesn’t work and so she shops, lunches
with her friends and works out at the
country club. Joe is an investment advisor and got himself in a little bit of
trouble. He started out honestly enough
when money was flowing and everyone
was making money. Unfortunately, over
time, his investments went sour (not uncommon). He needed money to support
the life style to which he and Julie had
become accustomed. He started using
the money that his clients were investing
with him to pay his other clients' interest. At some point, it all crashed and fell
down around him. His investors wanted
their money back, and when they found
out it no longer existed, they started suing Joe in state court for fraud, conversion, breach of his fiduciary duty and
various other claims that could survive
8
notwithstanding if Joe filed a bankruptcy to discharge his debts ... as long
as the creditors took action against Joe
in his bankruptcy case by filing a complaint either excepting their specific debt
from discharge under 11 U.S.C. §5231,
or objecting to Joe receiving a discharge
of any of his debts under §727. But instead of Joe filing bankruptcy, Julie does.
Julie never did anything wrong, and so
when she files her bankruptcy case, none
of Joe’s creditors file complaints against
her or against Joe under either §523 or
§727, and her bankruptcy case proceeds
smoothly with Julie receiving a discharge
of all of her debts.
Notwithstanding Julie’s bankruptcy,
Joe’s creditors continue to litigate in
state court and get judgments against
Joe. However, when they seek to enforce
their judgments by garnishing Joe’s
wages (he now has a high-earning job),
levying Joe and Julie’s bank accounts,
or filing an abstract of judgment against
Joe and Julie’s home to which title has
always been held in community property, they are thwarted. Since Joe and Julie
are still married, Julie files a motion to
reopen her bankruptcy case in order to
file motions against Joe’s creditors for
violating the discharge injunction.
Enter §524(a)(3) and the community
property discharge which, with certain
limitations, permanently enjoins any
action to collect a pre-petition debt for
which the community property would
otherwise be liable from the community
property acquired by either the debtor or
his/her spouse subsequent to the debtor
receiving a discharge. “... According to
Section 524(a)(3), after-acquired community property is protected by injunctions against collection efforts by those
creditors who held allowable community claims at the time of filing. This is
so even if the creditor claim is against
only the nonbankruptcy spouse; ...” In
re Kimmel, 378 B.R. 630, 636 (9th Cir.
BAP 2007), citing Burman v. Homan (In
re Homan), 112 B.R. 356, 360 (9th Cir.
September 2010
BAP 1989).
It all comes down to the fact that at
the time of Julie’s bankruptcy filing,
Joe’s creditors were “creditors” who held
“community claims” under the Bankruptcy Code. A “creditor” as defined by
§101(10) means, “(A) entity that has a
claim against the debtor that arose at the
time of or before the order for relief concerning the debtor; ... or (C) entity that
has a community claim.” A “community
claim,” for bankruptcy purposes, is a
pre-petition claim for which the community property of the debtor and the
debtor’s spouse is liable, whether or not
such claim has proceeded to judgment
or is otherwise liquidated as of the filing of the bankruptcy case, and whether
or not there is any such property at the
time the bankruptcy case is filed. See §§
101(7) and 541(a)(2).
Since virtually all property acquired
by a married person during the marriage
is community property (see California
Family Code §7602), and since F.C. §910
generally provides that all community
property is liable for debts incurred before or during marriage by either spouse,
all of the community property belonging
to both Julie and Joe was included in Julie’s bankruptcy estate and subject to the
administration of the Bankruptcy Court.
See Section 541(a)(2).
In order for Joe’s creditors to be able
to enforce their judgments against Joe
against the community property acquired by either Joe and/or Julie following Julie’s receipt of her Chapter 7
discharge, including but not limited to
Joe’s wages, they would have had to
have filed a lawsuit against Joe in Julie’s
bankruptcy case.3
If a debt on a community claim
would be excepted from discharge in a
bankruptcy case filed by the nondebtor
spouse, a nondischargeability action or
an objection to discharge action directed
at the nondebtor spouse can be initiated
to establish an exception to the allowable
community claims that are discharged.
In addition, if the court would not grant
the nondebtor spouse a discharge in a
hypothetical case filed by the nondebtor
Contra Costa Lawyer
spouse, or if the nondebtor spouse has
been denied a discharge within the preceding six years of the date of filing of
the debtor’s bankruptcy case, the community property discharge does not apply. See §§523(a), 524(a)(3) and 524(b).
“The net result is that §§524(a)(3)
and 524(b)(2) combine to prevent a
wrongdoer from hiding behind an innocent spouse’s discharge, ... These provisions for nondischargeability and objection-to-discharge actions directed at the
nondebtor spouse are, however, subject
to a diligent creditor requirement. The
failure by creditors to raise nondischargeability and discharge objection issues in a timely manner in the case of the
debtor spouse will allow the community
property discharge to be effected.” In re
Kimmel, supra, at p. 637.
The strict time deadlines generally
provide that a complaint filed pursuant to §§523(c) and/or 727(a) must be
filed no later than sixty (60) days following the first date set for the meeting
of creditors. See Federal Rules of Bankruptcy Procedure 4007(c) and 4004(a)4.
Of course this presumes that Joe’s creditors were aware of Julie’s bankruptcy filing.
In the event Joe’s creditors had no
knowledge of Julie’s bankruptcy filing
in time to file a complaint with 60 days
following the meeting of creditors, they
would have the right to file a motion to
reopen Julie’s bankruptcy case in order
to file a lawsuit against Joe and/or Julie
based upon §§523(a)(3) and/or 727(d)
(1). However, §523(a)(3) would not be
applicable if “such creditor had notice
or actual knowledge of the case in time”
to file a complaint pursuant to §523(a),
and §727(d)(1) is available to a creditor only if the creditor “did not know
of such fraud until after the granting of
the discharge.” But creditors beware. A
creditor does not have to be listed by the
debtor in the bankruptcy case, and it is
not necessary for the creditor to receive
written notice of the bankruptcy filing.
Any notice that gives the creditor time
to take action in the bankruptcy case
within the time limits provided by the
Bankruptcy Code is sufficient. As an example, the author of this article (Weinstein) won an exception to discharge
case filed on behalf of a creditor under
§§523(a)(3) and 523(a)(2) when the
Judge asked the debtor-defendant during trial, “When you ran into the plaintiff at the Safeway, did you tell him that
“you had” filed bankruptcy, or that “you
were going to” file bankruptcy?” When
the debtor answered, “that I was going
to file bankruptcy,” Weinstein knew she
had won. Her client had never received
actual notice of the bankruptcy filing.
But all is not lost. The community
property discharge injunction does not
eliminate (or discharge) Joe’s personal
liability for his debts to his creditors.
His creditors are free to enforce their
judgments against Joe against his separate property (if he should have any).
Although it is likely that Joe will make
sure that everything he acquires during
Candice E. Stoddard
Personal Injury
Real Estate Litigation
Trust and Estate Disputes
Mediation
Law Offices of
Candice E. Stoddard
1111 Civic Drive, Suite 380
Walnut Creek, CA 94596
n
925.942.5100 • fax 925.933.3801
[email protected]
Practicing law in the East Bay for over 25 years
9
his marriage is community property so
that it is protected from his creditors, in
the event Joe and Julie should ever divorce, any and all property acquired by
Joe in the divorce, as well as all income
and assets acquired subsequent to his
separation from Julie, would be his separate property and therefore, subject to
enforcement by his creditors. All property would also become Joe’s separate
property in the event of Julie’s death.
As the court stated in In re Kimmel,
supra, at p.637, “If creditors are not diligent, as one commentator has explained,
“the Devil himself could effectively receive a discharge in bankruptcy if he
were married to Snow White.” Alan Pedlar, Community Property and the Bankruptcy Act of 1978, 11 ST. MARY’S L.J
349, 382 (1979); cf. Gonzales v. Costanza (In re Costanza), 151 B.R. 588, 590
(Bankr.D.N.M. 1993) (“I would add: if
[the Devil] does not treat her better than
his creditors, [Snow White] will, by divorcing him, deny his discharge.”) 
— Marlene Weinstein’s practice in Walnut Creek
is devoted to Bankruptcy Law representing debtors, creditors and Chapter 7 trustees. She has
written articles and given lectures to professional
groups. She believes pre-bankruptcy planning is
important and that it can often be used as an
effective tool in negotiations between parties
involved in non-bankruptcy disputes. She often
works with clients in conjunction with their family law attorneys, tax professionals and other
non-bankruptcy lawyers.
1
Unless otherwise indicated, all references to
section numbers refer to sections of Title 11 of
the United States Code, commonly referred to
as “the Bankruptcy Code.
2
Hereinafter all references to the California
Family Code will be referred to as “F.C.”
3
Although the remainder of this article discusses the issues as they relate to Chapter 7,
similar rules apply in cases filed under Chapters, 11, 12 and 13 of the Bankruptcy Code.
4
Unless otherwise indicated, all references
to rule numbers refer to the Federal Rules of
Bankruptcy Procedure.
10
Elder Law is
The average survival rate is eight years after being
diagnosed with Alzheimer’s — some live as few as
three years after diagnosis, while others live as long
as 20. Most people with Alzheimer’s don’t die from
the disease itself, but from pneumonia, a urinary
tract infection or complications from a fall.
Until there’s a cure, people with the disease will
need caregiving and legal advice. According to the
Alzheimer’s Association, approximately one in ten
families has a relative with this disease. Of the
four million people living in the U.S. with
Alzheimer’s disease, the majority live at home
— often receiving care from family members.
If the diagnosis is Alzheimer’s,
call elder law attorney
Michael J. Young
Estate Planning, Disability, Medi-Cal,
Long-term Care & VA Planning
Protect your loved ones, home and independence.
Alzheimer’s
Planning
n
925.256.0298
www.YoungElderLaw.com
1931 San Miguel Drive, Suite 220
Walnut Creek, California 94596
September 2010
Can Bankruptcy
Burst Bubble-Era Liens?
by David Katzen
Suppose Don and Debbie Debtor own overencumbered realty they would like to keep—combined, the first and
second trust deeds on their triplex secure $1.3 million, but the property is only worth $975,000. Debt service
on the total is not feasible, but between their wages and rent from the two extra units, the Debtors could manage payments if the balance were limited to the asset’s realistic value.
Would bankruptcy help? Perhaps, but it probably won’t be easy.
EXCESS LIEN NOT VOID IN CHAPTER 7
On its face, Bankruptcy Code (“Code”)
§506 seems just the ticket. Under subsection (a), a claim secured by a lien on
estate property is generally considered a
secured claim only to the extent of the
“value of the creditor’s interest” in the
property, and any deficiency is an unsecured claim. With limited exceptions,
a lien is declared void under subsection
(d) insofar as the debt ostensibly secured isn’t an “allowed secured claim”
- so the surviving lien rights arguably
shouldn’t exceed the collateral’s worth.
Applying the facts above, it would seem
that the “allowed secured claim(s)” total $975,000, and that the remaining
$325,000 is an “unsecured claim”.
Yet at least in the Chapter 7 liquidation context (where bona fide liens
historically rode through bankruptcy
intact), the Supreme Court says debtors cannot invoke section 506(d) to free
property from mortgage burdens above
market value - even though a facially
secured claim would be bifurcated into
secured and unsecured components under subsection (a). Dewsnup v. Timm, 502
U.S. 410, 417-20 (1992). Thus, except
insofar as Code §522(f) permits individuals to “avoid” or strip off judgment liens
that impair allowed exemptions (e.g., a
recorded abstract could be confined to
equity beyond the homestead allowance),
Chapter 7 can’t deleverage property. Cf.
Contra Costa Lawyer
Concannon v. Imperial Capital Bank (In re
Concannon), 338 B.R. 90, 93-96 (Bankr.
9th Cir. 2006) (Dewsnup immunizes even
totally underwater, nonconsensual liens).
REORGANIZATION RESCUE . . .
Fortunately, section 506 can still truncate liens in Chapter 11 or 13, where a
court-confirmed “plan” redefines creditor rights. In general, confirmation revests a bankruptcy estate in the debtor
“free” of liens not preserved by the plan.
See Code §§1141(b)-(c), 1327(b)-(c). To
pass muster without consent, a plan normally must say a creditor retains the lien
securing its “allowed secured claim,” id.
§§1129(b)(2)(A)(i)(I), 1325(a)(5)(B)(i)
(I), but section 506(a) ordinarily would
limit the amount of that still-secured
claim to the collateral value. Cf. Wade
v. Bradford, 39 F.3d 1126, 1128-29
(10th Cir. 1994) (Dewsnup doesn’t bar
lien-stripping in Chapter 11); First Fed.
Bank v. Weinstein (In re Weinstein), 227
B.R. 284, 292 & n. 8 (Bankr. 9th Cir.
1998) (same). Also, a plan can change
payment terms if, as of its effective date,
the promised payments are worth at
least the amount of that same “allowed
secured claim.” See Code §§1129(b)
(2)(A)(i)(II), 1325(a)(5)(B)(ii). In other
words, the new payment program need
only yield collateral value plus market
interest. Cf. Till v. SCS Credit Corp., 541
U.S. 465, 478-80 (2004) (in Chapter 13,
interest to achieve present value of auto-
secured claim pegged at national prime
rate, adjusted for debtor-specific risks).
So Don & Debbie might use Chapter
11 or 13 to reduce the triplex mortgages
to $975,000, payable with 4.25% interest (current prime of 3.25% with, say, an
extra point for added default risk). Just
that simple, huh?
Well, no, not necessarily:
Eligibility: Though nearly everyone is
“eligible” for Chapter 11, that path is invariably more arduous than Chapter 13.
But Chapter 13 is reserved for humans,
so if D&D held the triplex in a partnership or LLC, the entity would need an
11. Even if our couple does have title,
they’d be ineligible for Chapter 13 unless their countable secured debt were
below $1,081,400 and their unsecured
beneath $360,475. Code §109(e). Luckily, the triplex liens aggregating $1.3
million likely don’t disqualify the Debtors, because the secured piece is probably
limited to collateral value - $975,000.
Scovis v. Henrichsen (In re Scovis), 249 F.3d
975, 983 (9th Cir. 2000). Of course, that
would put $325,000 in the “unsecured”
pile, so if Don & Debbie already had
$35,475 or more of credit card or other
such debt, they’d have too much unsecured debt for Chapter 13.
Confirmation: A strip-down
plan means nothing until it’s
confirmed - hardly a given. Assuming
11
opposition (and just scratching the surface), the Debtors would have to commit suitable future earnings to plan
payments and prove their program’s feasibility. See Code §§1123(a)(8), 1129(a)
(11) & (b)(2)(B)(ii), 1322(a)(1), 1325(a)
(6) & (b)(1)(B).
And - in Chapter 11 they’d need at least one class
of creditors to vote for the
plan, id. §1129(a)(10), so a bank’s hefty
unsecured deficiency claim could confer
de facto veto power. See Barakat v. Life
Ins. Co. (In re Barakat), 99 F.3d 1520,
1523-26 (9th Cir. 1996), cert. denied,
520 U.S. 1143 (1997).
Performance: Since 2005, a Chapter 13
plan can’t strip excess liens upon confirmation. Instead, the plan must say both
that the creditor retains its lien until the
full debt is paid or the debtor’s discharge
is granted - generally, only after all plan
payments are completed - and that, if
the case is dismissed or converted to another chapter, the lien continues as under nonbankruptcy law. Code§§1325(a)
(5)(B)(i), 1328(a). Interestingly, while a
natural person’s Chapter 11 discharge
now also normally awaits the last plan
payment, underwater liens apparently
can be stripped on confirmation, though
it’s conceivable a court could reject such
a plan for bad faith. See id. §§1129(a)(3)
& (b)(2)(A)(i), 1141(d)(5)(A).
table than Chapter 13 in other respects.
Not-So-Sweet Home: If a claim is secured only by a mortgage on the debtor’s principal residence, lender rights ordinarily can’t be modified - and, hence,
liens cannot be stripped down - in either
Chapter 11 or 13. Code §§1123(b)(5),
1322(b)(2); Nobelman v. American Sav.
Bank, 508 U.S. 324, 328-32 (1993).
(Congress has repeatedly tabled proposals to remove or suspend this odd constraint.) Since Don & Debbie occupy just
one unit in their triplex, the trust deeds
reach property beyond the principal residence, so the antimodification provisions
very likely wouldn’t apply. Scarborough v.
Chase Manhattan Mortg. Corp. (In re Scarborough), 461 F.3d 406, 410-11 (3d Cir.
2006). But even positing a single-family
home, if the senior lien exhausts all value
- in our case, suppose the first is $1 million, so the second is wholly unsecured
per Code §506(a) - the junior lien can
be stripped, because the creditor really
has no cognizable secured claim. Zimmer
v. PSB Lending Corp. (In re Zimmer), 313
F.3d 1220, 1222-27 (9th Cir. 2002). Finally, given an otherwise shielded mortgage, Chapter 13 (but not 11) nevertheless permits modification where the ori
ginal loan matures before the plan’s last
payment. Code §1322(c)(2); American
Gen. Fin., Inc. v. Paschen (In re Paschen),
296 F.3d 1203, 1207-08 (11th Cir.
2002).
Bottom Line: Chapter 11
or 13 might enable Don &
Debbie to pare the triplex
mortgages back, but sound advice would
require more facts and analysis. Odds
are, though, the bubble’s hangover
means headaches even for those willing
to take their bankruptcy medicine. 
— David Katzen practices with the Walnut
Creek firm of Katzen & Schuricht. He is Board
Certified in Business Bankruptcy Law by the
American Board of Certification, and is also
recognized by the State Bar’s Board of Legal
Specialization as a Certified Specialist in Bankruptcy Law.
Duration: Another constraint on Chapter 13 lien-stripping is that the plan
can’t exceed five years. Code §1322(d).
Although long-term debts can be cured
and reinstated, id. §1322(b)(5), a debtor
cannot both modify the secured creditor’s rights by stripping the lien to its
economic value and call for payments
beyond five years. Enewally v. Washington Mut. Bank (In re Enewally), 368 F.3d
1165, 1171-72 (9th Cir.), cert. denied,
543 U.S. 1021 (2004). Payoff of the allowed secured claim within five years
would likely require a balloon funded
by sale or refinance, adding feasibility
concerns. There’s no five-year cutoff in
Chapter 11, but it’s usually less hospi-
12
September 2010
TAXATION
OF SHORT SALES
AND FORECLOSURES
by Mark Ericsson
In the following schedules, I will present the tax consequences of a divestiture of property through a short sale
(in which the lender agrees to take less than the loan balance), foreclosure, or deed in lieu of foreclosure in four
different settings. In each case, the property is “underwater.”
The first schedule (see following pages)
describes the situation in which the homeowners have held the principal residence for a long time and their cost (basis) is currently far less than their loan
balance. In the second schedule, the
house was bought at the top of the market and the homeowners’ cost exceeds
the home’s worth as well as the current loan balance. The third and fourth
schedules retrace the first and second in
the case of investment properties.
The focus of any inquiry into the tax
consequences of short sales and foreclosures is how much gain and how much
cancellation of indebtedness is recognized in the transaction. Gain is the
amount one realizes over the amount
that one has invested, or how much the
value increased. Income is realized to the
extent that one’s net worth increases, unless the income can be excluded by statute or case law. In the case of cancellation of indebtedness income, if the bank
agrees to compromise a $20,000 debt to
$10,000, one’s net worth has increased
by $10,000 which is considered to be income. As one studies the four schedules,
two factors come into play. First, gain
is taxed federally at a maximum rate of
15% (20% next year) while cancellation of indebtedness income is taxed at
a maximum rate of 35% (39.6% next
Contra Costa Lawyer
year). Therefore, any comparison must
start with how much tax is generated at
the two different rates.
Secondly, both gain and ordinary income can be excluded. There is one exclusion for gain on principal residences
and there are five exclusions for cancellation of indebtedness income. Therefore,
one must determine if one of the exclusions applies and if there is any detriment caused by applying the exclusion.
The applicable exclusion for gain is
the $250,000/ $500,000 section 121 exclusion for homeowners who have owned
and occupied the home for two out of
the last five year prior to sale. There are
five ways to exclude income from cancellation of indebtedness income which are
found in IRC §108. They are the insolvency exclusion (taxpayer may exclude
an amount of COD Income equal to
the excess of the COD Income over the
net worth of the taxpayer immediately
after the sale), the bankruptcy exclusion
(where personal liability has been eliminated by a bankruptcy before or within
the bankruptcy), the election to exclude
acquisition indebtedness under IRC
§108(a)(1)(E), and two that rarely apply
to personal residences or rentals (farms
and property used in a trade or business).
If either of the first two exclusions
under §108(a)(1) are relied upon, the
taxpayer’s tax attributes must be reduced by the amount excluded, effective
the first day on the year following the
exclusion. Tax attributes are the results
of events that allow the taxpayer future
tax reduction such as the net operating
loss carry forward. For example, if the
taxpayer has a $100,000 net operating
loss and excludes $50,000 of cancellation of indebtedness income in a bankruptcy, he or she can only carry forward
$50,000 of the net operating loss. The
reduction of the taxpayer’s attributes
include these attributes in the following order: net operating loss carryovers,
business credit carry forwards, minimum
tax credit carry forward, capital loss carry forwards, the taxpayer’s basis in his
or her assets, passive loss carry forwards
and foreign tax credit carry forwards.
Since the attributes are reduced on the
first day of the year following the exclusion, it is generally advantageous for the
taxpayer to realize any such gains in the
year of exclusion.
There is an open question on the IRC
§108(a)(1)(E) election. IRC 108(h)(1)
states that the taxpayer must lower the
basis in his or her principal residence
by the amount excluded. The attached
schedules assume that this means that
the basis of the home foreclosed or sold
13
Principal Residence|Low Basis
Loan Balance
$1,000,000
Fair Market Value
$600,000
Basis
$300,000
2
Short Sale
Foreclosure
Form
1099-C
1099-A
Non-recourse Loan/Non-judicial Foreclosure
COD ordinary Inc $400,000
$0
Exclusion
As available1 $0
Gain
$300,000
$700,000
Exclusion1
-$300,000
-$500,000
Net Gain
$0
$200,000
Net Ord Inc.
Depends
$0
Recourse Loan/Judicial Foreclosure
COD ordinary Inc $400,000
$400,000
Exclusion
As available1 As available1
Gain
$300,000
$300,000
Exclusion*
-$300,000
-$300,000
Net Gain
$0
$0
Net Ord Inc.
Depends
Depends
Acquisition Indebtedness
(Elected under IRC §108(a)(1)(E))
COD ordinary Inc $400,000
$0
Exclusion
-$400,000
$0
Gain
$600,000
$700,000
Exclusion1
-$500,000
-$500,000
Net Gain
$100,000
$200,000
Net Ord Inc.
$0
$0
Principal Residence|High Basis
Basis
$1,200,000
Loan Balance
$1,000,000
Fair Market Value
$600,000
Short Sale2
Foreclosure
Form
1099-C
1099-A
Non-recourse Loan/Non-judicial Foreclosure
COD ordinary Inc $400,000
$0
Exclusion
As available1 $0
Loss
-$600,000
-$200,000
Deductable
$0
$0
Net Gain
$0
$0
Net Ord Inc.
Depends
$0
Recourse Loan
COD ordinary Inc $400,000
$400,000
Exclusion
As available1 As available1
Loss
-$600,000
-$600,000
Deductable
$0
$0
Net Gain
$0
$0
Net Ord Inc.
Depends
Depends
Acquisition Indebtedness
(Elected under IRC §108(a)(1)(E))
COD ordinary Inc $400,000
$0
Exclusion
-$400,000
$0
Loss
-$200,000
-$200,000
Deductable
$0
$0
Net Gain
$0
$0
Net Ord Inc.
$0
$0
14
must be reduced, but there is no guidance as to whether this reduction of basis should be retroactively applied to
a home that the taxpayer no longer
owns. California has passed a similar
statute, but with an $800,000 limitation on the amount of acquisition debt
applicable rather than the $2,000,000
allowable under federal law.
In the first schedule (Principal Residence – Low Basis), the loan balance
is $1,000,000, the fair market value
of the property is $600,000, and the
owners paid $300,000 for the property. There are two columns, one illustrating the tax consequences of a short
sale and the other illustrating the tax
consequences of a foreclosure. The tax
consequences of tendering a deed in
lieu of foreclosure are the same as those
of a short sale with the fair market value substituting for the sale price.
Following the first column, we first
look at the ramifications of a short sale.
In a short sale, where the bank forgives
the balance of the loan, the sale is traditionally treated as a sale and cancellation of the balance of the loan. There
will be $400,000 in cancellation of indebtedness income (the difference between the loan balance and the sales
price). This may be excludable under
one of the five exclusions referenced
above. There will also be $300,000
in gain which will be excludable if the
owners are a couple who have lived in
the house two out of the last five years.
Following the second column (Foreclosure), it will not make a difference
whether the loan is recourse or nonrecourse, but whether the foreclosure
was judicial or non-judicial. The Internal Revenue analysis of the tax
consequences generally begins with
a determination of whether the loan
is a recourse or non-recourse loan. If
the loan is non-recourse, the property
is treated as sold for the outstanding
loan balance. If the loan is recourse,
the property is treated as sold for its
fair market value (the price at which
it sells at the foreclosure sale) and the
balance of the recourse loan is treated
as cancelled debt (the same treatment
as a short sale or deed in lieu of foreclosure transaction). However, one might
ask in the case of a non-judicial foreclosure, during which the bank essentially converts a recourse loan to a nonrecourse loan, whether the loan should
be treated as recourse or nonrecourse?
The bank will invariably report it that
the debtor was “personally liable” on
the Form 1099-A. IRC §7434 provides a remedy for misreporting by a
bank which is a fairly common occurrence.
The Court in Chilingirian v. Comm,
66 AFTR 2d 90-5901 (6th Cir. 1980)
found that, in the case of a non-judicial foreclosure, it made no difference
whether the loan is recourse or nonrecourse. The Court pointed out that
under IRC §1001, gain is determined
by the excess of cash and property received over the basis in the property.
Essentially, the debtor is exchanging
the deed to the property for the canceled note. Therefore, the value of the
canceled note is property received by
the taxpayer and the result is the same
as the treatment of a non-recourse
loan. See also Robert C. Wicker, 1993
RIA TC Memo ¶93-431. The inquiry
is focused on whether the cancellation
of personal liability was part of the
sale. One might wonder if this is true
in a short sale, although the short sale
can be distinguished in that the buyer
in a short sale is not the lender cancelling the debt. Keep in mind that the issue remains open in the Ninth Circuit
Court of Appeals and that the Internal
Revenue could pursue the “recourse,
non-recourse” line of reasoning.
Under the Chilingirian reasoning in
the non-judicial foreclosure, which I
would argue any day, the property is
deemed to be sold at the loan balance
and no cancellation of indebtedness
income is generated. The taxpayers’
gain is $700,000 of which $500,000
September 2010
can be excluded by a couple. The
schedule follows the Chilingirian reasoning. If the Chilingirian reasoning
is followed, the return should include
an explanation since the 1099-A will
suggest a different treatment. This is
one of those delicious conundrums in
which you could report the transaction
consistent with IRS thinking and are
not likely to be questioned.
In the case of a non-judicial foreclosure, the gain will be $300,000 which
is excludable gain, and the deficiency
will become cancellation of indebtedness income if it is forgiven. Often,
particularly in the case of a second
loan which remains an unsecured liability following the foreclosure, personal liability will be discharged in a
bankruptcy following the foreclosure
or short sale, and the cancellation of
indebtedness income will be excluded.
Going back to the non-recourse loan
in the short sale column, the reasoning
of Chilingirian would certainly suggest that if the debt is forgiven as part
of the short sale, the result should be
the same as in the foreclosure case (no
cancellation of indebtedness income
and $700,000 in gain). Here again,
one may have one’s choice of outcomes
with relative impunity.
In analyzing the case of a low basis residence, a short sale might make
sense if the COD income can be excluded. If a second loan was used to
procure the residence, it is treated as
acquisition indebtedness. Since the
second becomes an unsecured promissory note when a first forecloses, a
short sale may allow the homeowner
to negotiation a resolution of the second. A deed in lieu of foreclosure produces the same results as a short sale
and might be advantageous because
there may be more room for negotiation on the fair market value and the
credit implications are slightly less severe. However, in most cases, the non
judicial foreclosure route provides the
preferable tax result.
The results shift when analyzing
commercial or rental property. This is
in part because while a loss on a personal rental is not deductable, a loss in
the case of an income producing property is deductable under IRC §1231
against ordinary income. Therefore, a
short sale or deed in lieu transaction
can lock in an ordinary loss if the COD
income is excludable and produce a
desirable result.
Investment Property
Low Basis Rental
Loan Balance
$1,000,000
Fair Market Value
$600,000
Basis
$300,000
Short Sale2
1099-C
Form
Foreclosure
1099-A
Non-recourse Loan/Non-judicial Foreclosure
COD ordinary Inc
Exclusion
Gain
Exclusion1
Net Gain
Net Ord Inc.
$400,000
As available1
$300,000
-$300,000
$0
Depends
$0
$0
$700,000
-$500,000
$200,000
$0
Recourse Loan/Judicial Foreclosure
COD ordinary Inc
Exclusion
Gain
Exclusion*
Net Gain
Net Ord Inc.
— Mark Ericsson practices tax, business
and estate planning with the Walnut Creek
firm of Youngman, Ericsson & Low, LLP.
Mark has served as President of the Bar
Association and has chaired numerous committees including the joint IRS-Practitioner
Liaison committee, state Tax Litigation and
Procedure committee, and county tax section.
Mark has written over fifty articles on
taxation and speaks frequently on tax issues.
$400,000
As available1
$300,000
-$300,000
$0
Depends
$400,000
As available1
$300,000
-$300,000
$0
Depends
Investment Property
High Basis Rental
Basis
$1,200,000
Loan Balance
$1,000,000
Fair Market Value
$600,000
Form
Short Sale2
1099-C
Foreclosure
1099-A
Non-recourse Loan/Non-judicial Foreclosure
Youngman, Ericsson & Low, LLP
COD ordinary Inc
Exclusion
Ordinary Loss
Net Ord Inc.
1981 North Broadway • Suite 300
Walnut Creek, CA 94596
$400,000
As available1
-$600,000
Depends
$0
$0
-$200,000
-$200,000
$400,000
As available1
-$600,000
Depends
$400,000
As available1
-$600,000
Depends
Recourse Loan
Tax Lawyers.
COD ordinary Inc
Exclusion
Ordinary Loss
Net Ord Inc.
(925) 930-6000
Contra Costa Lawyer
15
The Bankruptcy Court
A unique Structure
by Alan E. Ramos, Esq.
For non-bankruptcy practitioners, the
subject of bankruptcy and the structure
of the court often cause confusion and
consternation. (Is the Bankruptcy Act
the controlling law? Are cases heard by
a “judge” or a “referee”? What is “BAPCPA” and did it work?) The quick answers are: The controlling law is the
Bankruptcy Code, 11 U.S.C., which was
enacted in 1979 replacing the Bankruptcy Act of 1898. Bankruptcy judges
are Article I judges, who serve fourteenyear terms, in contrast to District Court
judges who are Article III judges with
life-time appointments. “BAPCPA” is
the Bankruptcy Abuse Prevention and
Consumer Protection Act of 2005 which
was signed into law April 20, 2005, and
took effect October 17, 2005. The primary objective of BAPCPA was reduce
the number of filings, to make filing
Chapter 7 more difficult, and to encourage people to file Chapter 13. Although
BAPCPA has generally made it more
expensive to file consumer bankruptcy
cases, the following statistics indicate
that bankruptcies are on the rise. In
the 12-month period ending 3/31/10,
1,531,997 cases were filed (1,100,032
Chapter 7s and 415,966 Chapter 13s)
compared to the 12-month period ending 3/31/09 in which 1,202,503 cases
were filed (819,362 Chapter 7s and
370,875 - Chapter 13s).
The structure of the bankruptcy court
system is unique in American law. Pursuant to 28 U.S.C. §§1334(a) & 157(a),
U.S. District Courts have original and
exclusive jurisdiction of all bankruptcy
cases and “may” refer those cases to
the Bankruptcy Courts. In the Northern District of California all bankruptcy
cases are referred to the Bankruptcy
Court pursuant to U.S. District Court
16
General Order No. 24: Order Referring Bankruptcy Cases and Proceedings
to Bankruptcy Judges and Authorizing
Bankruptcy Appeals to be Decided by
the Ninth Circuit Bankruptcy Appellate
Panel.
The U.S. Bankruptcy Court for the
Northern District of California has four
divisions - Santa Rosa, San Francisco,
Oakland (which includes Contra Costa
County) and San Francisco. There are
nine judges who sit in the Northern District, three of whom are in the Oakland
Bankruptcy Court. The judges that sit
in the Oakland Bankruptcy Court are
the Honorable Randall J. Newsome,
who will be leaving the bench at the
end of the year, the Honorable Edward
D. Jellen and the Honorable Roger L.
Efremsky, who was transferred from the
San Jose Bankruptcy Court when the
Honorable Leslie Tchaikovsky retired on
August 31, 2010. The Honorable Alan
Jaroslovsky, who sits in the Santa Rosa
Bankruptcy Court, is the Chief Judge
of the Northern District Bankruptcy
Courts.
In all courts, attorneys need to be
aware of the rules, particularly the local rules (and the local, local rules). For
bankruptcy practitioners, the applicable
rules are: the Federal Rules of Civil Procedure; the Federal Rules of Bankruptcy
Procedure; the Northern District Bankruptcy Local Rules; and the Northern
District Civil Local Rules. In addition,
each division - as well as many of the
individual bankruptcy judges - has rules
and procedural requirements that are
posted on the court’s website at www.
canb.uscourts.gov. Heads up to practitioners - the bankruptcy courts are in
a time of turnover and rules and procedures are constantly changing.
One of the most unique features of
the structure of the bankruptcy court
is the appellate process. In bankruptcy, parties have two levels of appeals as
a matter of right. At the first level, a
bankruptcy court decision may be appealed to the Bankruptcy Appellate
Panel (a three-judge panel made up of
sitting bankruptcy judges, and commonly referred to as the “BAP”) or it
may be appealed to the District Court.
(See 28 U.S.C. §158(a) & (b)). The matter will be assigned to the BAP unless a separate writing is filed in which
an election is made to have the appeal
heard by the district court. (See F.R.B.P.
8001(e)). Some practitioners would say
that which court one chooses is based
on whether or not you want a District
Court judge who may not be well versed
in bankruptcy law to hear your case. At
the second level, a decision of the BAP
or the District Court may then be appealed to the Circuit Court of Appeals.
Parties may also request that the lower
court certify a direct appeal to the Court
of Appeals (28 U.S.C. §158(d)(2)(A) and
F.R.B.P. 8001(f)). However, the Court of
Appeals must grant permission before it
assumes jurisdiction over the appeal (see
Blausey v. U.S. Trustee, 552 F.3d 1124
(9th Cir.2009)).
So there you have it – the structure
of the bankruptcy court – in a nutshell.
Of course, there is quite a bit more to
it, but that is the subject for many other
articles. 
- Alan Ramos is a partner in the law firm of
Nevin, Ramos & Steele. He represents debtors
and creditors in corporate Chapter 7 and 11
matters and consumer debtor’s in Chapter 7 and
13. He is a member of the Bankruptcy Dispute
Resolution Panel in the Northern District of
California and acts as a neutral in mediation.
September 2010
AND
MEDIATION CENTER
Conservatorships
Medi-Cal Planning / Eligibility
Specializing in accountings for:
Trusts
Probates
Guardianships
Conservatorships
Estate Planning
Elder Law
Ron Mullin
Barbara Hasey
Willows Office Park  1355 Willow Way, Suite 110
Concord, California 94520
Telephone (925) 798-3413  Facsimile (925) 798-3118
Email [email protected]
1128 Daniel Lane  Concord, CA 94518
925.689.1943
[email protected]
Will & Trust Litigation
Elder Abuse Litigation
•
Conservatorships
BARR & BARR
ATTORNEYS
318-C Diablo Road • Danville, CA 94526-3443 • (925) 314-9999
Edward E. Barr (retired)
Loren L. Barr*
Joseph M. Morrill
Williem J. Bard
Janet M. Li
Christopher M. Moore
John Milgate, Of Counsel
Tracey McDonald, Paralegal
*Certified Specialist, Estate Planning, Trust and Probate Law, The State Bar of California Board of Legal Specialization
Contra Costa Lawyer
17
EMOTIONAL AND TECHNICAL CHALLENGES
TO MEDIATING
PARTITION ACTIONS
by Malcolm Sher
Partition actions come in many shapes
and sizes and can be successfully mediated if the goals of the parties become
part of the resolution strategy and technical issues are addressed.
Partition is the physical division or
sale of real property held by two or more
co-owners. The equitable remedy is
governed by CCP §§872.010-874.240.
Courts have discretion to “fashion” a fair
result, but because partition is a matter
of right, they have no discretion to deny
partition, absent a preexisting agreement between co-owners not to partition, or conduct amounting to waiver or
estoppel.
Partition may be necessary where two
families purchased a vacation home together. Their children have grown so
one family no longer wants the property. One of two individuals who bought
a duplex for investment wants to trade
up to a more sophisticated investment
whereas the other remains content to
own the duplex. There may be no real
“falling out”. Their needs and interests
are simply no longer aligned.
A more contentious scenario might
involve partners who developed, own
and operate commercial property. One
accuses the other of neglecting the property, not accounting for business expens-
18
es, concealing business opportunities or
making deals that conflict with their
business. The relationship has soured.
The partnership may be readily dissolved, but the fate of the real property
remains.
Nowadays unmarried, cohabiting or
same-sex couples buy property together.
Some may later marry, others not. When
the relationship falls apart, recrimination
may give rise to a flood of emotion not
dissimilar to a true marital dissolution.
Perhaps one who sold his or her home
may have nowhere to return. Add to any
“nontraditional” relationship the entry
of a new “partner” and complications
abound! Whilst the Family Code considers as community any property acquired
during marriage, these scenarios are not
governed by the Family Code and will
be subject to division or sale under the
partition statute.
Family trust disputes often result in
partition actions. Consider four adult
siblings, all beneficiaries under their
deceased parents’ trust, which includes
the former family home or other property. Three accuse the eldest, a successor
trustee, of mismanagement, self-dealing,
comingling her own funds with trust
funds and making gifts to non-beneficiaries. They demand sale of the real prop-
erty and an accounting, seek to “surcharge” their sister’s interest with the
alleged losses and claim attorney’s fees
for prosecuting the partition/accounting
action.
Given the procedural requirements
and attendant expenses of partition actions, parties and their advisors should
consider the alternative of mediation
to explore voluntary partition by sale,
physical division or appraisal and buyout.
Many partition disputes require at
least two mediation sessions. The first
may involve the circumstances surrounding when, why and how the relationship was established and needs to
be terminated. In this session, personal
attacks and recriminations, typical in
marital dissolutions or will contests,
may predominate. Emotional parties
may cast blame for the current situation,
without realizing such tactics are not
conducive to reaching what must usually
be a “business judgment” decision. The
mediator may encourage some venting
but should soon move to reality checking with parties, reminding them that
the court could impose a forced sale if
they can’t or won’t negotiate a fair and
practical solution.
Potential pitfalls are best raised in
September 2010
pre-mediation telephone calls with the
mediator where an efficient and costeffective process is discussed. Liens and
encumbrances on title will affect an
owner’s ability to negotiate a sale, physical division or a buy-out. Although an
existing mortgage does not automatically bar partition, the lender may object and has the right to intervene in the
partition lawsuit to request the court to
adjust its rights and obligations vis-à-vis
all co-owners. Lenders will not generally
permit one or more co-owners without
strong financial statements to take over
the loan while releasing others. Prepayment penalties may hamper negotiations. To be productive, lenders and
other lien holders should participate in
mediation, which may necessitate several
“mini mediations” with them.
Not surprisingly, co-owners do not always think through many of these issues
when property is first acquired, since
the prospect of future disputes may be
far from the parties’ minds. When they
arise, these issues can cause friction and
are often addressed by a court-appointed
referee whose fees are paid from the sale
proceeds of the property or by the parties. Such added expense may be minimized by using a mediator with substantive knowledge in real estate and secured
transactions as well as the skill to wade
through these complex issues.
Other questions explored in an initial mediation will include tax considerations, including IRC §1031 exchanges
and how the timing of a sale can benefit from market conditions. Escrow fees
and commissions must be considered.
Will the property be auctioned or sold
through private contract? Can the parties agree upon the listing price , will an
experienced broker’s opinion suffice or is
a formal appraisal essential? Absent an
early acceptable offer, will the parties
defer to the listing broker to decide the
timing and size of price reductions? How
can the property be readied for sale and
will the parties split the cost or shall it be
born in the same percentages as ownership interests are held?
Consideration must be given to the
Contra Costa Lawyer
impact of the Subdivision Map Act
(Govt. C §§66410- 66499.37) if the
property is to be physically divided since
even a court-ordered physical division is
subject to compliance with the act, with
zoning and local ordinances and whatever general plan exists. It cannot be
overstressed that counsel who represents
parties in partition actions should be
prepared to confront these issues at mediation and, if necessary, obtain specialized advice before even embarking on a
partition action or scheduling mediation.
When one party contemplates buying
out the other’s interest, an appraisal
may be necessary to determine value. In
a court action for partition, the courtappointed referee will likely choose an
appraiser to appraise the property, the
parties’ interests in it and report to the
court. This can be costly and time-consuming. Where the parties have already
agreed on a buy-out, but can’t agree
on value, the mediator’s role might expand to suggesting the appointment of
two appraisers whose median or average is accepted or who appoints a third
appraiser whose valuation is used. The
mediator’s personal knowledge of the
appraisers and their reputations as well
as a familiarity with the art and science
of appraisal is often instrumental when
impasse occurs.
In one buy-out, one strategy discussed
by the authors of California CEB Real
Property Remedies and Damages is to
ask the parties to commit to a particular dollar value amount for which they
would be equally willing to buy and
sell. Thus, with two equal owners, each
should be asked to designate a price at
which they would be willing to both buy
the other’s interest and also sell their
own interest. Parties unwilling to buy for
the same price they expect to sell may
have difficulty justifying their position in
mediation.
After the first session, a second one is
often necessary to deal with ancillary accounting issues. Here too, parties sometimes get wrapped up in minutia, insisting that every penny be accounted for, a
process that can take up more time and
cost more to sort out than the value of
disputed amounts.
Sometimes one co-owner may have
contributed the down payment and closing costs whereas another made some or
all of the mortgage payments. This will
impact who enjoys the mortgage interest or other deductions. Utilities and
maintenance expenses and contribution
of “sweat equity” become important.
Often, written agreements, receipts for
materials and records of time spent are
usually non-existent. The amounts involved may not warrant the retention of
CPAs, yet neither side will give up what
each claims as legitimate out-of-pocket
expenditures requiring reimbursement.
Division of money can lead to heated
arguments, threats to scuttle the mediation and potential impasse.
A technically knowledgeable and flexible mediator who patiently employs
facilitative and evaluative techniques to
shifting dynamics can bring value to the
partition process, by creating a roadmap,
exploring settlement options and accomplishing the parties’ goals. Although the
mediation may not end with a “group
hug”, parties who feel heard, their feelings, needs and interests validated are
more willing to compromise.
— Malcolm Sher, based in Walnut Creek, is a
full time mediator who specializes in resolving
real property and business cases involving significant emotional issues. In many of his cases,
the disputants are from diverse cultural and
ethnic backgrounds. He can be contacted through
his web site at www.sher4mediatedsolutions.com.
—
WANTED —
Conservatorships
think
Matt Toth
as in
Pedder, Hesseltine,
Walker & Toth, LLP
oldest partnership in Contra Costa County
(since 1955)
p 925.283-6816 • f 925.283-3683
3445 Golden Gate Way, P.O. Box 479
Lafayette, CA 94549-0479
AV Martindale-Hubbell
19
Contra Costa County Bar Association
Rallies to Raise Funds
for the Food Bank
by Ed Shaffer of Archer Norris, Chair of the Food From The Bar Committee
The Contra Costa County Bar Association is pleased to announce results of the 2010
Food From The Bar fundraiser for the Food Bank of Contra Costa and Solano. In May,
43 local law offices with more than 800 employees donated $72,000 and collected
2,800 pounds of food.
The Food Bank and Bar Association are especially pleased by this year’s totals given
current economic conditions. In these difficult times, more than 100,000 individuals
rely on the services of the Food Bank every month. As each dollar contributed can
buy enough food for three nutritious meals, the contributions from the annual Food
from the Bar drive will provide sustenance to thousands of struggling individuals and
families.
This marks the 18th annual Food From The Bar fundraiser. Over the years, county
attorneys and their staff have donated $820,000 and 53 tons of food, making the Bar
Association one of the Food Bank’s largest supporters.
Firms used many creative fundraising efforts: Attorneys auctioned or raffled goods
and services that had been donated by vendors, restaurants and other businesses .
Past activities have included head shaving, cream puff eating, and contests in the style
of “Fear Factor”. In mid-May you may have noticed a parade of people in matching
blue shirts during a 5K walk-a-thon around downtown Walnut Creek – an event that
raised thousands of dollars in pledges!
THE WINNERS FOR 2010 ARE
WEST COUNTY
Lyon & Quintero
1-10 EMPLOYEES
Law Offices of Suzanne Boucher
11-20 EMPLOYEES
Bramson, Plutzik, Mahler &
Birkhaeuser
21-50 EMPLOYEES
Morgan Miller Blair
51+ EMPLOYEES
Archer Norris
To foster competition and fuel
contributions, the Bar declares
winners in five categories based on the
highest per capita contribution.
MEMBERS OF THE 2010
FOOD FROM THE BAR COMMITTEE
Renee Baptiste
Food Bank of Contra Costa & Solano
Joshua Bevitz, Newmeyer & Dillion LLP
Dan Birkhaeuser
Bramson, Plutzik, Mahler & Birkhaeuser
Suzanne Boucher
Law Office of Suzanne Boucher
Chad Gallagher, Miller Starr Regalia
Barbara Jewell
Gagen, McCoy, McMahon, Koss, Markowitz
& Raines
Michelle Moore, Morrison & Foerster
Adriana Quintero, Lyon & Quintero
Lisa Reep, CCCBA
Lisa Roberts
McNamara, Dodge, Ney, Beatty, Slattery,
Pfalzer, Borges & Brothers
Ed Shaffer, Archer Norris (Chair)
Monica Sloboda, Morgan Miller Blair
Geoffrey Steele, Nevin, Ramos & Steele
20
September 2010
LRIS SUCCESS!
A CONVERSATION WITH ROBERT LAWRENCE
Robert Lawrence, a Bay Area attorney for over 30 years, recently settled a sizeable case referred to him through
the Lawyer Referral and Information Service (LRIS). CCCBA sat down with Bob and spoke with him about his
experience and success with the LRIS.
How long have you been a member
of our Lawyer Referral & Information
Sevice (LRIS)?
About 5 years. I’ve been a lawyer for 32
years now but until five years ago my
offices were in Oakland or San Francisco. So, when I moved my practice out
here, one of the first things I did was
join the LRIS. Professionally, I wanted
to get more involved here in this community, in this Bar Association. It was
important to me to join the LRIS - and
I’ve been really pleased with it.
In your experience, what are
the benefits of joining the LRIS?
I get to meet potential clients that I
would never meet otherwise. That’s the
fundamental thing, but I also think it’s
a great program - I really do - so I like
participating in it.
All my dealings with your office are
completely positive. My dealings with
the people you send me are all completely positive as well. They’re always
well-prepared and serious, which, I
believe, is a reflection of the screening
that happens at your office.
That’s good to know –
the LRIS screeners are doing a
pretty good job?
I think they’re doing a really good job.
The people at your office - Manny, Emily, Barbara, and Jenny - seem quite
personable and helpful, but, most of
all, they must be asking the right questions!
They always know all the salient facts.
The fact is, I never get calls that aren’t
a good fit for me. I also never get calls
for cases that are stale, where the statute of limitations has run.
For attorneys who are just starting
out in this area, would you say that,
joining the LRIS is a good way to build
their practice?
Contra Costa Lawyer
Absolutely – no doubt about it. I cannot think of a single reason why you
wouldn’t join the LRIS program. Some
might say that it means lost hours. For
instance, I spend at least an hour with
most people, sometimes longer. So,
when I say, “thank you, I don’t think
I can help you”, some people may look
at that and say, “well, that was a waste
of an hour.”
Some people may think that’s a reason
not to join – I don’t think that at all.
In fact, there have been people I wasn’t
able to help who later referred friends
or collegues to me.
That’s true. People are much more
comfortable calling a lawyer who was
referred to them by someone they
know and trust.
Yes, that’s true. So, again, I would
never tell someone not to join the LRIS
program. It’s not the only way to build
a practice, but it’s a nice adjunct.
I also like the idea that we can, together with your organization, really
help people who would otherwise not
have access to a lawyer. Everybody who
comes here to meet with me has some
kind of problem.Something bad has
happened to them and they need advice
and counsel.
It’s very rewarding to spend that kind
of time with people.
You recently resolved a sizable Personal Injury case that was referred to
you through our LRIS. Was this your
best experience or biggest success
using the LRIS?
That was the biggest settlement and
consequently the biggest fee because it
was a contingent fee case.
What can you share about this case
and the result you achieved for your

client?
21
It involved a 17-year old girl who was
hit by a hit-and-run driver, who left
her in the gutter, basically. People came
along and found her later and she was
very badly hurt. She spent months in
hospitals. Eventually, the driver was
caught but the DA didn’t want to prosecute. The girl’s mother was really upset
and called the LRIS. The case then came
to me and we spent a lot of time talking
about how to get some kind of compensation for the daughter’s injuries, present and future. One thing led to another
and we identified an insurance policy
that could cover it and started building
a case and ended up settling the case
without having to file suit.
It was a good result. I was really pleased
with the opportunity to work for her and
her mom and it didn’t take all that long.
Within a year, we had her case fully investigated, evaluated, and settled. All
because the mother acted quickly. She
called the LRIS right away, they called
me right away, and we got on it right
away. Normally these kinds of things
take a couple of years.
As a member of more than one Bar
Association, is there any advice or
feedback you would you like to give
us?
One important thing is to make sure
that the public knows of all the great
services you offer,including the LRIS. I
keep your coaster right by my phone.
I’m on a number of lists that aren’t particularly well-screened, so I get a lot of
calls that aren’t a good fit for my practice. So when it’s not something I can
do, I will simply pick up that coaster
and say, “call these guys – here’s the
number!”
Finally, out of sheer curiosity: What
makes you a ‘Northern California
Super Lawyer’?
My cape and my tights.
Well, that about wraps it up. Thank
you, Bob! We wish you many more
LRIS successes! 
— Robert K. Lawrence, Principal, Bjork Lawrence in Walnut Creek, has been a civil litigator
and a trial attorney for more than 30 years. He
specializes in health care, professional liability,
elder abuse, employment, product liability, and
personal injury.
Why YOU
should make
referrals to
CCCBA’s
LRIS
• Our LRIS is the only
State Bar certified &
ABA approved lawyer referral service in our county
• Our LRIS has been providing quality referrals as
a public service since
1978 • LRIS panel attorneys are required to meet
specific experience requirements as a prerequisite to
joining the service • Every
LRIS attorney is required
to carry malpractice insurance • Our LRIS has an
experienced, friendly
and knowledgeable staff
to assist you!
For more information,
call LRIS Coordinator
Barbara Tillson
at 925.370.2542
22
September 2010
Question man
How has bankruptcy and/ or
the burst of the Real Estate bubble
affected your practice?
As a full-time mediator, I see more
disputes involving
breaches of purchase
contracts, partition
actions and defaulted-on private second deeds of trust. People in financial
distress often obtain cash advances on
credit cards resulting in more mediation of debt collection cases. In many
of these, threatening bankruptcy is a
common "negotiation tool".
It has definitely affected my practice in a
major way. Many new
clients are seeking advice about or defense
of lender claims on personal guaranties
which are being called now since deficiencies after foreclosure sales have been
created due to property value declines. It
turns out that there are a lot of creative
defenses available and often the amount
involved is really worth fighting over.
Malcolm Sher
William H.G. Norman
malcolm sher 4 mediated solutions
I moved to California in
1987 to work for a law
firm that represented
lenders. The real estate market had turned
south in the early 1980's, and a number
of real estate borrowers were defaulting. My first assignment was to work on
two judicial foreclosures on loans that
had gone bad. Over the next 20 years,
I hardly even touched a foreclosure matter. These days, I find myself constantly
doing foreclosure work. It looks like I've
ended up back where I began.
Bob Jacobs
Law Office of Robert B. Jacobs
Contra Costa Lawyer
Cooper, White & Cooper LLP
Now people are suing each other over
their real estate losses instead of suing each other over their
real estate profits….
David Roth
Real Estate Offices of David L. Roth
It’s F*ed us up a lot.
Instead of having equity with which to horsetrade in dissolutions,
we’re fighting over
who takes the debts. Instead of bearing
with clients when they need to make
payments, we are cutting clients loose
regularly rather than allowing any sizeable balance to accumulate. Ethics and
morals have changed. There used to be
a stigma to not paying your bills. Now,
every time you turn on your TV or radio,
there’s someone telling you how to avoid
paying your debts. So many people are
taking this advice that the stigma and
embarrassment no longer exists. Instead
it seems to be a mark of honor to beat
someone out of something.
Merritt Weisinger
Walnut Creek Family Law Center
I rarely have a week
go by without someone calling regarding
a "short sale of real estate", a term of which
I was unaware before the bubble burst.
I have had short sellers concerned about
the potential tax effects of their sales,
and also, recently, buyers distressed at
the undue time and complexity of completing a purchase of a short sale property.
Paul E. Nord
Law Office of Paul E. Nord
It has made my
practice much busier.
Kevin Eikenberry
Law Office of
Kevin S. Eikenberry
23
The Ethics Corner
by Carol M. Langford
Legal malpractice suits have surged in
recent months. A quick search on WestLaw yielded 37 malpractice suits that
went to the California Court of Appeals
in the past year alone. The statute of
limitations can be a complicated issue in
legal malpractice claims.
For plaintiffs, the statute is the first
hurdle to overcome. The applicable statute of limitations for legal malpractice
claims is Cal. Civ. Code Ann. section
340.6. It states that the statute begins
to run either when the plaintiff discovers or should have discovered the facts
constituting the wrongful act, or four
years from the date of the wrongful act
or omission, whichever occurs first.
There is no bright line rule to help determine when actual injury has occurred.
Instead, this issue requires case-by-case
examination of the particular facts surrounding the alleged wrongful act or
omission. In Truong v. Glasser, 181 Cal.
App. 4th 102 (Cal. 4th Dist. 2009), the
court held that actual injury was triggered when the plaintiff first suffered
a loss of right. In this case, the client
sued the defendant attorney for malpractice, alleging that the attorney was
negligent by not properly advising him
on the signing of a commercial lease addendum. His lawyer argued that the client sustained actual injury when he was
required to obtain and pay new counsel
to file a lawsuit seeking to escape the
consequences of signing the lease adden24
dum. The plaintiff contended he did not
suffer actual injury until the conclusion
of that suit.
The Appellate court ruled in favor
of the defendant attorney, holding that
when malpractice results in the loss of a
“right, remedy, or interest . . . there has
been actual injury regardless of whether
future events may affect the permanency
of the injury or the amount of monetary
damages eventually incurred.” Id. at
112, (quoting Foxborough v. Van Atta, 26
Cal. App. 4th 217, 226 (Cal. 1st Dist.
1994)).
Even in cases where the client has discovered the facts of the attorney’s problematic conduct, Section 340.6 allows
tolling of the statute under a few circumstances. For example, if the attorney continues to represent the client in the specific subject matter related to the alleged
wrongful act or omission, the statute
will not begin to run until the attorney
ceases to represent the client in connection with that subject matter. In Truong,
the court applied an objective standard
to evaluate when representation ceased.
The court looked at evidence of an ongoing mutual relationship and of activities
in furtherance of the relationship. Id. at
116 (quoting Worthington v. Rusconi, 29
Cal. App. 4th 1488, 1498 (Cal. 6th Dist.
1994)).
The attorney’s representation concludes when the parties agree and does
not depend on a formal termination. In
fact, the failure to formally withdraw
alone will not toll the statute. In Truong,
attorney Glasser never formally withdrew. But the court did not find evidence
that Glasser gave Truong any advice or
services with respect to the lease addendum after Truong hired a new attorney.
Therefore, there was no evidence to support a suspension of the limitations.
In cases where an attorney provides
continuous representation to the client
by continuing to represent him or her
in an action after a judgment becomes
final, the court will hold that the statute is tolled. In Jocer Enter., Inc. v. Price,
183 Cal. App. 4th 559 (Cal. 2nd Dist.
2010), Jocer filed a legal malpractice suit
against his attorney. The attorney had
assisted the client with matters related
to the first action past the final judgment of the action, thus extending the
statute.
Another interesting and new case on
legal malpractice is Landmark Screens,
LLC v. Morgan, 183 Cal. App. 4th
238(Cal. 6th Dist. 2010). There, the
Court of Appeals ruled that federal
courts have subject matter jurisdiction
in legal malpractice causes of action involving patent issues. In that case, the
attorney represented the client on a patent application action. The attorney filed
an incomplete application, resulting in a
dismissal of the patent application. The
client initiated action in superior court,
alleging legal malpractice, negligence,
and breach of fiduciary duty. The attorney raised subject matter jurisdiction as
an affirmative defense. The court held
for the attorney based on the notion
that issues of legal malpractice in this
instance could not be decided without
addressing a substantial question of federal patent law. In particular causation,
one of the four elements of tort liability,
was an element requiring the parties to
present substantial patent law questions
that federal court was better equipped to
address.
What can we learn from these cases?
Attorneys should not rush to file suit
against a client for fees. Instead, ensure
that the statute has run first. Clients, on
the other hand, need to make sure to file
in the right court. 
— Carol M. Langford is an attorney specializing in attorney conduct, State Bar defense and
legal malpractice matters. She is also an adjunct
professor of professional responsibility at U.S.
Hastings College of the Law.
September 2010
MARK V. MURPHY
Personal Injury
Referrals Requested
Over 25 years experience
representing injury victims.
Practice dedicated solely to
Personal Injury.
Each client given prompt,
courteous attention.
Antioch and
San Ramon Offices
925.552.9900
'JOBODJBM1MBOOJOH]5SVTUBOE&TUBUF4FSWJDFT]1SJWBUF#BOLJOH]*OWFTUNFOU.BOBHFNFOU
It’s more than a matter of trust. It’s a matter of getting the job done when
your client needs trust and investment management services. Our team has
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focused on serving you and your clients. And after more than 100 years, people trust
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Northern California
Mediator / Arbitrator
CONFERENCE ROOMS FOR RENT
• Standard Conference Room,
with small adjacent waiting area
and exit, seats 10-12: $150/ full
day, $75/ half day • Full Mobile
Room seats 20-30: $200/ full day,
$100/ half day • Subdivided Mobile Room seats 10: $75/ full day,
$40/ half day • Package Deal
- Both Rooms: $250/ full day,
$150/ half day • Hourly Rate $20
14 years as Mediator
23 years as Arbitrator
31 years in Civil Practice
Roger F. Allen
510.832-7770
Ericksen, Arbuthnot
155 Grand Avenue, Suite 1050
Oakland, CA 94612
[email protected]
For more information,
call Manny Gutierrez
at 925.370.2549
Contra Costa Lawyer
• Training includes Mediation Course at
Pepperdine University 1995
• Serving on Kaiser Medical Malpractice
Neutral Arbitrators Panel
• Settlement Commissioner, Alameda and
Contra Costa Counties
• Pro Tem Judge, Small Claims, Alameda County
• Experienced in all areas of Tort Litigation,
including injury, property damage, fire loss,
malpractice, construction defect
25
l ocal civil jury verdicts
by Matthew P. Guichard
On a recent stroll around the third floor
of our classic courthouse, I noted jurors
waiting outside each of the five civil
courtrooms. Civil jury trials are taking
place in our Superior Court with regularity. Why, then, do we get so few reports
on our local jury verdicts? It remains a
puzzle.
Lawyers on the losing end of a verdict seldom wish to report the result.
However, reporting verdicts either way
lets readers know you’re a willing trial
lawyer. I was on the losing end of a
$19,000,000 trial in San Francisco one
year, and it actually helped my reputation. At least that is what my mother
told me.
In addition, out-of-town lawyers seldom report their local verdicts to me.
However, if I know the name of a case,
I can read about it in other trial reports
and report in our magazine. I am attempting to enlist the help of local court
staff to give me a heads up when a case
goes to verdict in our civil courtrooms.
In spite of the recent dearth of local civil jury reports, I still plan to plod
along with the “Local Civil Jury Verdicts” column until my pen runs out
of ink. Although we no longer get the
trial statistics from the Courts, we are
still reporting on individual cases. And,
of course, we will write about interesting settlements, out-of-county verdicts,
court trial results, arbitration awards,
baseball scores and swim meet successes.
26
Let’s start our case reporting with Ceballas v. Mt. Diablo Unified School District,
et al., Case No. MSC06 02315. The case
was heard before the Honorable Barbara Zuniga. Patrice R. Labell of Walnut
Creek represented the Plaintiffs. Timothy Murphy of Pleasant Hill and Margot
Rosenberg of Oakland represented different groups of Defendants.
The case involved claims of race discrimination, national origin discrimination and race-based harassment. The
Plaintiffs, a husband and wife, worked
at Westwood Elementary School in Concord. Plaintiff Edgar Ceballas worked as
a night custodian. The Ceballas’ were
dissatisfied with their respective work
performance evaluations. Edgar Ceballas became ill and medically retired
from the District. His wife was involuntarily transferred to another elementary
school, where she held the same position
at a higher rate of pay. Both Plaintiffs
claimed severe emotional distress as a result of the mistreatment.
At trial, the Plaintiffs requested an
award of $2.5 million in special damages, and $25 million for their emotional distress. Based on their civil rights
claims, they also asserted a right to recover attorney’s fees.
A year before trial, the Plaintiffs had
demanded $200,000 in full and final
settlement of their claims. Just prior
to trial, the Plaintiffs offered to accept
$2.58 million. The Defendants offered
$10,000, with an indication of $25,000
should the matter resolve prior to actual
commencement of trial. That offer was
not accepted.
The jury returned a complete defense
verdict.
The case of Godoy v. Wadsworth et al.
was tried in U.S. District Court, Case
No. C05 2913 NJV. U.S. Magistrate
Judge Nandor J. Vadas presided at the
jury trial. Herman Franck of Sacramento
represented the Plaintiff. Timothy Mur-
phy and Lori Donohoe of Pleasant Hill
represented the Defendants (16 employees of the California Department of Corrections).
The Plaintiff, a prison inmate at Pelican Bay State Prison, claimed civil rights
violations, excessive force violations,
denial of due process and deliberate indifference. Specifically, he protested a
search of his cell while he was in the dining hall. A fight ensued during his protest, involving numerous inmates and
corrections officers. The Plaintiff suffered serious injuries in the fight, including the loss of an eye.
No meaningful settlement discussions
occurred prior to the trial. At trial, the
Plaintiff requested $1,000,000 to compensate him for his physical injuries and
the loss of his eye.
The jury returned a defense verdict.
Occasionally, we get an interesting
report on a matter involving a “Contest
of Wills.” Usually that report comes
from Stan Pedder of Pedder, Hesseltine,
Walker & Toth of Lafayette. This latest matter reported went to trial before
the Honorable Charles Burch. The case
was entitled Estate of Schmidt. The Pedder firm represented the proponent of a
2001 Will (P). M. Minger of Oakland
represented the proponent of a 2007
Will (L). P contended that the 2001 Will
should be allowed into probate because
the 2007 Will was a forgery. P presented
evidence that the Decedent would not
have executed the 2007 Will because of
an array of personal grievances against L.
In a battle of handwriting experts, P’s
expert stated the 2007 Will was a forgery, and as one might expect, L’s expert
stated the 2007 Will was absolutely
signed by the Decedent (hopefully before he died).
Early in the case, P made a settlement
offer, which was rejected. After a three
day trial with 11 witnesses, the case was
submitted for decision. Just before the
September 2010
case was submitted, Judge Burch commented to the attorneys that it was a
close case. After submission, but prior
to the decision, the attorneys asked the
Judge to postpone his decision while
they pondered settlement. And guess
what? The case settled. Justice prevailed,
as it should.
Thomas v. Global Vision Products was
tried in Alameda County before the
Honorable Robert Freedman. Plaintiff’s trial counsel were Scott A. Bursor
of New York and Timothy Fisher of the
Bramson firm in Walnut Creek.
The case involved a class action on
behalf of California consumers who purchased Avacor, a hair loss remedy. Plaintiffs contended Avacor’s marketing was
misleading. The jury returned a verdict
of $50,024,611.
In an earlier trial involving the
same case, a jury returned a verdict of
$36,979,373 against certain other Defendants. Messrs. Bursor and Fisher also
represented Plaintiffs in that trial. In
that case, the Court also found for the
Plaintiff Class on certain claims tried to
the bench and awarded $40,000,000 in
restitution.
Tanner et al. v. Colonial Healthcare Inc.,
et al., Sacramento Superior Case No.
06AS04261, was tried before the Honorable Roland L. Candee. Jay P. Renneisen
of Walnut Creek represented Plaintiffs.
Michael J. LeVangie, Eric S. Emanuels,
and Kim M. Wells of Sacramento represented the Defendants.
The case involved allegations of
wrongful death and elder abuse at a nursing home. The Plaintiffs’ last settlement
demand prior to trial was $650,000,
while theDefendants’ final pre-trial offer
was $30,000.
The jury awarded $1,100,000 in compensatory damages, plus $28,000,000 in
punitive damages. Statutory attorneys’
fees were also awarded. 
— Mathew P. Guichard is a principal in Guichard, Teng & Portello, APC. Please send case
information to: 1800 Sutter Street, Suite 730,
Concord, CA 94520 or contact him at
925.459.8440 or [email protected]
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Van de Poel, Levy & Allen, LLP
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The Congress of Neutrals
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Littler Mendelson, P.C.
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Kuvara Law Firm
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McNamara, Ney, Beatty, Slattery et al
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Carroll, Burdick & McDonough, LLP | Casper, Meadows, Schwartz & Cook | Cooper, White & Cooper, LLP |
Archer Norris | McNamara, Dodge, Ney, Beatty, Slattery, Pfalzer, Borges & Brothers, LLP | Miller Starr Regalia |
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September 2010
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