Glass & Goldberg

Bringing California Law Into Focus

AUGUST 2011

Marshall Goldberg  Hope you are staying cool this Summer!

 

   Things are sweltering outside....and not just from the high summer temperatures. The stock market and financial markets are volatile.  And, the Court and legislative discussions are heating up as these legal entities deal with the financial challenges facing our nation.  As a result, important new guidelines are emerging for creditors, including some that deal with short sales and documents of transfer between financial institutions.  This newsletter notes several new provisions governing California litigation and transactions which we hope will be of interest to you and your business.

 

   As the Fall arrives, G & G is very proud to be celebrating 25 years in the legal business!  Throughout these years, it has been our aim to provide each of our clients the highest quality legal work and business support, in a cost-effective manner.  We believe that our many years of legal practice and legal experience translate into great benefit for our clients...and we look forward to helping you in this same professional manner far into the future!   

 

  As always, we invite your suggestions on how we can improve on our service to you, and we welcome submissions and/or suggestions on content material for this e-newsletter.

 

Warmest regards,
Marshall Goldberg

 

New Short Sale Protections Impact Junior Lienholders. 

 

   On July 15, 2011, California Governor Jerry Brown signed into law SB 458, an amendment to California Code of Civil Procedure Section 580e, which goes into effect immediately. The original law stated that once the holder of a first deed of trust or mortgage on a dwelling of 1 to 4 units gave its approval to a short sale, receipt of the sale proceeds by that lien holder constituted payment of the debt in full, and no deficiency was allowed. The original law only applied to holders of first deeds of trust or mortgages. Frequently, under this original provision, our clients holding junior liens would agree to reconvey their interest in the property for an insubstantial amount rather than receive nothing from a foreclosure, while preserving their right to sue for a deficiency.  SB 458 amends Section 580e to provide that junior lien holders who grant their approval to a short sale and receive sales proceeds are also prohibited from pursuing a deficiency.  This law provides that a waiver of this new provision is unenforceable as contrary to public policy. The section does not apply if the trustor or mortgagor is a corporation, limited liability company, limited partnership, or political subdivision of the state 

 
 

Assignment of Trust Deed Was Deemed Not Properly Authenticated By Assignee's Employee Who Could Not Give Adequate Information To Satisfy The Business Records Exception To The Hearsay Rule.  

 

  

   In Herrera v. Deutsche Bank Nat. Trust Company 196 Cal. App. 4th 1366 (5/31/11, mod 6/28/11, certified for partial publication), the court set aside a completed non-judicial foreclosure of a homeowner's property, ruling in part that the bank and reconveyance company failed to establish that an assignment of the recorded deed of trust was admissible under the business records exception to the hearsay rule via a declaration filed by an employee of the trustee. The court concluded that there was an evidentiary gap caused by the purported assignments from one bank to the next, and that the bank was unable to show it was the beneficiary under the deed of trust, even though the lower court took judicial notice of the recorded document. 

 

   This case highlights the challenge of establishing to a court the chain of title or authenticity of documents acquired as part of a portfolio acquisition or bank takeover.  To avoid this problem, banks need to obtain an original assignment of the documents as part of the completion of the portfolio purchase or corporate acquisition.  

 

   Authenticating documents for these claims is very challenging! Some time ago, a judge sitting in Writs and Receivers in downtown Los Angeles said in jest that he would tattoo a Scarlet E (for Evidence) on the heads of attorneys who came into his courtroom and failed to secure judgments or orders because they did not adequately prove that the holder of the note was its owner or that the documents were authentic!!!

 

   Point taken:  establishing the chain of title was important years ago...and still is critical! 

 

 

LA Superior Court Judge in Writs and Receivers Department Adds Additional Documentation Requirement. 

 

   Recently, there has been considerable debate over the question of what proof is required for a lender, seeking the appointment of a receiver, to substantiate that all parties with an interest in property subject to a receivership application have been given proper notice. There has been speculation that a full preliminary title report or litigation guaranty is required, which can be quite expensive.

 

   As a consequence, a new standing order was recently issued by the department that hears all receivership applications in the Central District Courthouse in Los Angeles requiring a declaration which states that the parties made a "good faith search" of all recorded interests in the particular property at issue, and that notice was given to all of them. Therefore, it appears that in most cases a Data Quick Property Finder or comparable search would be sufficient. However, if there is reason to question the results of this quick property search, it is preferable to get a full title report.

 

 

Although a Forum Selection Clause May Establish the Proper Location for an Action, If Worded Incorrectly It May Not Confer Personal Jurisdiction Over a Defendant. 

 

 

   In Global Packaging, Inc. v. Superior Court196 Cal. App.4th 1623 (2011), the court held that a forum selection clause alone--without an express written consent to personal jurisdiction--was insufficient to establish jurisdiction in California. 

 

   The court ruled that in the forum-selection-clause context, forum and jurisdiction are distinct concepts with different legal implications and consenting to a location in and of itself does not carry with it consent to personal jurisdiction. 

 

   This court's conclusion was rather surprising, given the plethora of cases that say a court should not exalt form over substance.  While the parties did not use the specific words "consent to jurisdiction," it appears they intended to determine jurisdiction in the contract.  After all, why would they agree that the action should be conducted in California if they were not agreeing to personal jurisdiction in this state?  This case is an important reminder that contractual language should be as clear and direct as possible, and in regards specifically to the issue of jurisdiction, contracts should not just say that any action shall be held in California nor that California is the proper court to hear the matter, but also that the parties consent to jurisdiction here. 

 

 

 

Costs of Sale Cannot Be Considered in Lien-Stripping Motions

 

   In situations where junior creditors are refusing to agree to short sales, many obligors are choosing to file bankruptcy and then bring motions under 11 U.S.C. Section 522 to avoid liens up to the point where there is no equity left in the property.  Without a bankruptcy, debtors are unable to strip liens of junior lien creditors or judgment creditors.  Recently, the court in In Re:Anderson, 68 BR 313, concluded that hypothetical sales costs should not be allowed as a deduction when calculating the amount of equity in a debtor's exempt property.  Therefore, the exemption is limited to any senior liens, plus, in the case of a judgment lien, the homestead exemption.  

 


  Happy Silver Anniversary... 
Glass & Goldberg
celebrates 
25 years of legal practice!
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 Forbes magazine to honor
G & G in December 2011!

 

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Glass & Goldberg and Marshall  Goldberg will be featured in Forbes magazine as the exclusive firm honored for outstanding work in creditor's rights and creditor bankruptcy law...check out the December 2011 So Cal edition!
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 Super Lawyer

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Marshall F. Goldberg is once again honored as a Super Lawyer!  He was listed as a 2011 honoree in Los Angeles Magazine The New York Times (Los Angeles and

Orange County editions), and in the Southern 

California Super Lawyers magazine.  Super Lawyers is a listing of outstanding lawyers-- limited to no more than 5 percent of the lawyers in the state and chosen  through a rigorous,multi-phase process-- who have attained a  high degree of peer recognition and professional achievement.

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Since its inception in 1986,
 Glass & Goldberg has earned an unparalleled reputation in the areas of creditors' rights, commercial and business transactions and litigation, and bankruptcy and restructuring. 

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what we can do for you.
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 Glass & Goldberg
21700 Oxnard St., #430 Woodland Hills, CA 91367   
Phone: (818) 888-2220
 Fax: (818) 479-9940

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