June 2022 - Gupta Evans and Ayres

GEA’s Demand Letter to Union Bank Secures Release of Erroneous Loan

June 10, 2022/in All Blog Posts/by John Ahn

Gupta Evans & Ayres was successfully able to secure a release of a bank loan that was erroneously accounted for as due when the bank had previously discharged the loan years prior. All it took was a simple and effective demand letter, saving our client time and money.

Our client obtained a $50,000 loan from Union Bank in early February 2006. A little over ten years later, Union Bank sent our client a notice of cancellation stating that the remaining balance on the loan had been discharged. Shortly thereafter and to fulfill IRS requirements, Union Bank sent our client a 1099-C Form titled “Combined Tax Statement for Year 2016” which stated and confirmed that the loan had indeed been discharged. Relying on this 1099-C Form, our client promptly paid the taxes on the discharged debt to the IRS.

Around mid-June of 2020, our client sought to secure a loan to purchase real estate and performed a title search. Much to our client’s surprise, the preliminary report included the 2006 loan for $50,000. To sort out this confusion, our client contacted Union Bank directly multiple times requesting access to our client’s bank records and any records of communications or correspondence between our client and Union Bank. However, and unsurprisingly, Union Bank’s representatives’ responses had largely been the same—that the Loan was still showing as due.

GEA stepped in and drafted a demand letter to Union Bank which included documents sent by Union Bank themselves telling our client that the 2006 loan had been discharged, and alluded to Union Bank’s potential violations of the Rosenthal Act given the inaccurate accounting on the loan and Union Bank’s inaction in investigating the errors. In response, Union Bank agreed to release and reconvey the deed of trust on the loan, fully clearing the 2006 loan from our client’s name. As a result, our client was able to freely secure the mortgage loan he was seeking and avoid potential litigation costs and expenses.

Gupta Evans and Ayres Confirms One of the First Contested Subchapter 5 Bankruptcies in the Southern District of California. In re: Eminent Cycles, LLC

June 10, 2022/in All Blog Posts/by The Gupta Evans & Ayres Team

On February 3, 2022, the Subchapter 5 plan for Eminent Cycles, LLC (Case #21-01006-CL11 filed in the Southern District of California) was confirmed over objection from the main secured creditor. The Debtor in this instance had financing ready but could not move forward because the secured creditor’s interest was substantially more than the value of the company.

In a highly contested Chapter 11, the Debtor’s plan effectuated a cramdown of the primary secured creditor allowing the company to continue operations as a going concern while forcing the creditors to restructure their liabilities. The valuation of the business was contested in addition to the plan, however, the Court ultimately held that the plan was proposed in good faith and was in the best interests of the creditors.

There are couple take aways from this process. First and foremost, despite the attempt to streamline the Subchapter 5 process, a Subchapter 5 is still very expensive. A contested Subchapter 5 bankruptcy is much more than a glorified Chapter 13 and debtor’s counsel should plan on a budget that respects the time that it will take to get a plan to completion.

Second, you can confirm a Subchapter 5 without a consenting class of creditors if the plan is fair and equitable. There are two major additions to the code that make a Subchapter 5 easier to confirm than a traditional Chapter 11. The abolition of the absolute priority rule for Subchapter 5 bankruptcies allows access to a restructuring under Chapter 11 that previously was not available to most small businesses. While we did not need that rule in our case, the other major addition which we were able leverage allows a plan to be confirmed without a consenting class of as long as the plan does not discriminate unfairly and is fair and equitable. (11 USC 1191(b))

We are not aware of any specific contested cases that were approved prior to ours, but the UST’s office said there may be another one out there. In any case, if you have any questions or concerns about your Subchapter 5 whether it is a creditor or a debtor matter, we’d be happy to look at it for you and get you some guidance.

Ajay Gupta and Chris S. Evans Obtain Six-Figure Jury Verdict For Client in Property Dispute

June 10, 2022/in All Blog Posts/by The Gupta Evans & Ayres Team

Gupta Evans and Ayres is proud to announce they were able to secure another resounding victory and six-figure verdict for their client after over four years of litigation and a hard-fought jury trial in San Diego County.

GEA represented a purchaser of a home in Oceanside that the purchaser later discovered to be littered with an assortment of undisclosed defects and faulty repairs. The Firm began representing the client in early 2017, which would begin what would become a marathon of litigation and include a litany of hotly contested issues, complete with extensive discovery and motion practice (and, of course, a global pandemic). Although the case concluded as a trial between a buyer and seller of residential real estate, the case began with three times the parties and several cross-complaints and competing defenses, all of which had to be resolved before trial.

Finally, after over four years of litigation, and a seven-day jury trial before Judge Blaine Bowman in the North County branch of San Diego Superior Court, the Firm established that the sellers of the home were liable to the client-buyer for breach of contract, fraud (intentional and negligent misrepresentation) and engaging in work as an unlicensed contractor. After establishing such liability, the jury returned a six-figure verdict in favor of the firm’s client.

As the prevailing party at trial, the Firm was then also able to succeed on a post-judgment motion for attorneys’ fees and costs incurred by their client throughout the course of the litigation, in part by successfully arguing the “intertwinement” of the tort and contract causes of action.

After resolving claims against parties other than the seller pre-trial, and upon the successful jury verdict and attorneys’ fees motion, the client was granted a total award of approximately $540,000, inclusive of punitive damages. Congratulations to trial counsel Ajay Gupta and Chris S. Evans for bringing this case across the finish line and obtaining a victory for the Firm’s client!