San Francisco Attorney Michael Papuc represents Debtors and Creditors in Bankruptcy Proceedings seeking Denial of Discharge for False Statements under oath

by Michael Papuc

Attorney at Law

44 Montgomery St., Suite 2405

San Francisco, CA 94104

415-773-1755

 

San Francisco Attorney Michael Papuc has been practicing law in California since 1987.  Michael Papuc represents debtors and creditors in bankruptcy matters, including adversarial proceedings seeking denial of discharge for false statements under oath

The statutory authority which would support an adversarial proceeding seeking denial of discharge in bankruptcy is 11 U.S.C., sec.1127 (a)(4), which provides in pertinent part as follows:

(a) The court shall grant the debtor a discharge, unless—
…

(4) the debtor knowingly and fraudulently, in or in connection with the case—
(A) made a false oath or account;
(B) presented or used a false claim;
(C) gave, offered, received, or attempted to obtain money, property, or advantage, or a promise of money, property, or advantage, for acting or forbearing to act; or
(D) withheld from an officer of the estate entitled to possession under this title, any recorded information, including books, documents, records, and papers, relating to the debtor’s property or financial affairs; ….

The term “in connection with the case” is very broad.  Any false statement in the bankruptcy papers, at the meeting of creditors, in deposition, qualifies as being in connection with the case.

In order to deny a debtor’s discharge under section 1127 (a)(4), the plaintiff must prove by a preponderance of the evidence that the debtor made a false statement under penalty of perjury, that it was made knowingly and fraudulently, and that it was with respect to a material fact. Materiality is broadly interpreted under this statute:

“A false statement is material if it bears a relationship to the debtor’s business transactions or estate, or concerns the discovery of assets, business dealings, or the existence and disposition of the debtor’s property.” (In re Wills, 243 B.R. 58, 62 (9th Cir. BAP 1999).)

The statute is intended to insure that “the trustee and creditors have accurate information without having to conduct costly investigations.” (Cusano v. Klein, 264 F.3d 936, 946 (9th Cir. 2001).) The focus of the inquiry is not upon the value of the assets that are the subject of an omission or misrepresentation, but whether the false statement interferes with the trustee’s or creditors’ ability to fully investigate the debtor’s pre-bankruptcy financial condition or otherwise adversely affects the administration of the estate. (In re Wills, supra at 63.)

Although discharge provisions must be liberally construed in favor of the debtor and against the complaining party, that does not alter the preponderance of the evidence standard. “Rather, it has been held to mean that actual, rather than constructive, intent is required.” (In re Khalil, CC-07-1164, 2007 WL 4302728, at *6 (9th Cir. BAP Nov. 28, 2007)  For purposes of this statute, a debtor acts knowingly if he acts “deliberately and consciously.” (Khalil, at *7.)  A statement or omission is made fraudulently if the debtor knew it was false at the time it was made and he made the statement “with the intention and purpose of deceiving the creditors.” (In re Roberts, 331 B.R. 876, 884 (9th Cir. BAP 2005), aff’d, 2007 WL 2089041 (9th Cir. 2007).)  As is true of fraud in other contexts, “intent usually must be proven by circumstantial evidence or inferences drawn from the debtor’s course of conduct.” (Khalil, at *9.) Although a pattern of recklessness alone will not suffice to establish fraud, recklessness combined with other circumstances (such as the “badges of fraud”) can support an inference that the debtor acted knowingly and fraudulently. (Khalil, at *12.)

A discharge in bankruptcy is not a right.  It is something which provides a debtor relief from debilitating debt, and provides the debtor with a fresh   Fraud in the bankruptcy case will subject the debtor to denial of discharge, and very often criminal prosecution.  The debtor must be very astute and careful with regard to every statement made in the bankruptcy papers, and all testimony provided.  If the debtor does not know the answer to questions, he or she should say so, and undertake to find the best information possible to respond truthfully and accurately.

Insurer cannot Subrogate against Tenant who pays premiums for Landlord’s insurance policy

by Michael Papuc

Attorney at Law

44 Montgomery Street

Suite 2405

San Francisco, California 94104

415-773-1755

San Francisco Attorney Michael Papuc represents policy holders in lawsuits against insurance companies.

Very often, a landlord will require in a lease that the tenant will pay insurance premiums for the Landlord to purchase insurance for the property the tenant occupies.  When the tenant does this, the tenant becomes an implied co-insured with the landlord under the insurance policy.  If a loss occurs to the property negligently caused by the tenant, the landlord’s insurer will pay for the loss.  Typically the insurer would be entitled to subrogate against the person responsible for the loss.  However, the landlord’s insurer will not be able to subrogate against the tenant, who paid the premiums on the policy, through payments required in the lease.

“No right of subrogation can arise in favor of an insurer against its own insured since, by definition, subrogation exists only with respect to rights of the insurer against third persons to whom the insurer owes no duty.” (St. Paul Fire & Marine Ins. Co. v. Murray Plumbing & Heating Corp. (1976) 65 Cal.App.3d 66, 75.)

Where a loss is caused by the tenant’s activities, no subrogation right exists against the tenant because the tenant be is treated as an implied in law co-insured.   (Liberty Mutual Fire Ins. Co. v. Auto Spring Supply Co. (1976) 59 Cal.App.3d 860, 865.)

Even if not named in the policy, the tenant is treated as an implied in law coinsured: “It is quite obvious … that the parties to the lease … all intended that the proceeds of … the fire insurance policy, maintained at [tenant’s] expense, were to constitute the protection of all parties to the lease document … It would also be inequitable to allow [insurance company] to transfer the risk wholly to [tenant]–the entity which paid [insurance company’s] premiums … to avoid this very risk.” (Liberty Mut. Fire Ins. Co. v. Auto Spring Supply Co., supra, 59 CA3d at 865.)

Evictions of Section 8 Tenants in San Francisco for Nuisance

by Michael Papuc

Attorney at Law

44 Montgomery Street, Suite 2405

San Francisco, CA 94104

415-773-1755

 

Michael Papuc represents landlords and tenants in San Francisco eviction proceedings.

Landlords in San Francisco who enter agreements with the San Francisco Housing Authority to provide a tenancy to low income tenants have to go through specified procedures to evict the tenant for nuisance. 

The landlord must serve a three day notice to quit, specifying the reasons for the eviction, provide a copy to the San Francisco Rent Control Board, and a copy to the San Francisco Housing Authority. 

After the three day period following service, the Landlord must bring an unlawful detainer action against the tenant, and again serve the tenant with the lawsuit.  The tenant has 5 days to respond to the Complaint.  If tenant fails to timely respond, the landlord can obtain a default judgment for possession, and begin eviction proceedings with the Sheriff.   If the tenant timely responds to the complaint, the landlord must submit a memorandum to set the case for trial, and trial is set within 20 days thereafter.  

It is often less expensive and less risky for the landlord and tenant to settle the case, providing the tenant a specified time to move out, with the landlord being able to enforce the settlement agreement as a judgment if the tenant does not leave pursuant to time-table agreed upon.

San Francisco Administrative Code, sec, 37.9(a)(3) states:

(a) A landlord shall not endeavor to recover possession of a rental unit unless:

(3) The tenant is committing or permitting to exist a nuisance in, or is causing substantial damage to, the rental unit, or is creating a substantial interference with the comfort, safety or enjoyment of the landlord or tenants in the building, and the nature of such nuisance, damage or interference is specifically stated by the landlord in the writing as required by Section 37.9(c).

These cases will need to be proven with testimony from other tenants, police reports, testimony from police officers, and anyone with knowledge of the conduct of the tenant causing the nuisance.  If the landlord cannot prove his or her case, the landlord can be subject to wrongful eviction proceedings under the San Francisco Rent Control Ordinance.

 

Constitutional Guarantee of Mechanics Lien

by Michael Papuc

Attorney at Law

44 Montgomery Street, Suite 2405

San Francisco, CA 94104

415-773-1755

        San Francisco Attorney Michael Papuc represents clients in mechanics lien, stop notice, notice of completion, notice of cessation, and similar matters.

The right to a mechanics lien is guaranteed by Cal. Const., art. XIV, sec. 3.  It provides that mechanics, persons furnishing materials, artisans, and laborers have a lien on property on which they bestowed labor or furnished materials.  The lien is for the value of the labor done and materials furnished.  (Cal. Const., art. XIV, sec. 3.)

Since the legislature must provide for the speedy and efficient enforcement of such a lien (Cal. Const., art. XIV, sec. 3), the constitutional right to a mechanics lien is not self-executing and must be supplemented by legislative action.  (Spinney v. Griffith (1893) 98 Cal. 149, 151-152.)  The constitutional guarantee is a two way street: the Legislature must balance the interests of both the lien claimants to receive their money as soon as possible after supplying labor or for materials.  At the same time, it must arrange for property owners, whose interests must also be protected, to have their titles cleared as soon as possible so that they will have some marketability.  (Borchers Bros. V. Buckeye Incubator Co. (1963) 59 Cal.2d. 234, 239.)  The Legislature is empowered to adopt legislation that will relieve the owner of the burden of the lien while at the same time affording the lien claimant reasonable assurance that the claim, if valid, will be paid in full.  (Frank Curran Lumber Co. v. Eleven Co. (1969) 271 Cal.App.2d 175, 183-184 (constitutionality of release bonds freeing property subject to mechanics lien.)

A statute exempting certain property from legal process (i.e., Govt. Code, sec. 31452 (county employees’ retirement association’s property) may not be applied so as to interfere with the constitutional right to mechanics liens (Parsons Brinckerhoff Quade & Douglas, Inc. v. Kern County Employees Ret. Assn. (1992) 5 Cal.App.4th 1264, 1269-1270.)

Assignment of Future Payments as a tool to Enforce Judgments

by Michael Papuc

Attorney at Law

44 Montgomery Street, Suite 2405

San Francisco, California 94104

415-773-1755

 

San Francisco Attorney Michael Papuc represents clients in collection and bankruptcy matters.

Very often judgment debtors will do all they can to hide their assets, and prevent collection efforts.  A judgment creditor can take a debtor’s examination to find out the types of assets the debtor has, and if the debtor has money coming to him or her from any source, the court can issue an order assigning future payments owed the debtor to the judgment creditor.   This works well if the debtor owns rental property or has accounts receivables.

Code Civ. Proc. § 708.510 states that the court may order the judgment debtor to assign rights to payments due (Code Civ. Proc. § 708.510(a)).   Other provisions of the statutory scheme indicate the assignment may be ordered directly by the court. For example, the statutes contain language such as “order an assignment,” “right to payment may be assigned,” “assignment of payments,” “order assigning the right to payments” and “reassignment of the right to payments” (see Code Civ. Proc.§§ 708.510(c),(d),(e) & (f), 708.530, 708.540, 708.560(b)).

Inter-related Acts Exclusion in Directors and Officers Liability Insurance Policies

by Michael Papuc

Attorney at Law

44 Montgomery Street, Suite 2405

San Francisco, California 94104

415-773-1755

email: Michel.Papuc

San Francisco Attorney Michael Papuc represents policyholders on insurance claims.

Directors and Officers in corporations sometimes get sued for a series of acts which occur during a course of time.  These acts are often covered by Directors and Officers Liability Policies, issued to the corporation.  These policies are usually “Claims Made” policies, which would cover the inter-related acts within the policy period, usually one year.  Sometimes, the interrelated acts sued upon occur during several years, placing different carriers are on the risk depending on the language of the varius policies.  Th directors or officers being sued has an incentive to bring in as much insurance coverage from different carriers as possible.  The carriers, on the other hand, have an incentive to limit the insurance to a single carrier on the risk during a single policy period.

A typical insuring clause, would state:

“1.  Insurer shall pay on behalf of the Directors and Officers Loss resulting from any Claim first made against the Directors and Officers during the policy period.”

The D&O policy would likely define wrong ful acts as follows:

“9.  Wrongful Act means any actual or alleged error, omission, misleading statement, neglect, breach of duty to act by:

“a) any of the Directors and Officers, while acting in their capacity as:

“(i) a director, officer or employee of the Company or the functional equivalent to a director or officer of the Company in the event the Company is incorporated or domiciled outside the United States; …”

For an interrelated claim to be deemed made during a prior policy period, all interrelated claims must have been made to the insured during the same prior policy period. (Homestead Ins. Co. v. American Empire Surplus Lines Ins. Co. (1996) 44 Cal.App.4th 1297, 1306.)

\

The Homestead court stated:

“This policy definition of ‘claim’ remains subordinate to, and does not vary, the requirement in the insuring agreements that American Empire agrees to pay for loss which the insured shall become legally obligated to pay ‘from any claim made against the Insured during the Policy Period[.]’ To be covered by the policy, a claim-or a group or series of claims ‘treated as a single claim’-must still be made ‘during the Policy Period.’”(Id. at 1306; emphasis added.) 

Thus, even when there are different actions by directors during a course of time, during different insurance policy periods, each carrier on the risk during the separate policy period must pickup the liability claim and undertake its duty to defend the officer or director.

 

　

 

 

 

 

 

Insurer cannot Subrogate against its own insured

by Michael Papuc

Attorney at Law

44 Montgomery Street

Suite 2405

San Francisco, California 94104

415-773-1755

Fax: 415-723-9703

email:

Subrogation is an insurance company’s right to go after a person or entity responsible for a loss that the insurance company paid to its insured.  For example, when an insured is involved in a car accident, the insurance company pays for the damage to the insured’s car.  Under the insurance policy, the insurance company is entitled to stand in the shoes of its insured to attempt to recover the amount the insurance company paid to the insured against the person responsible for the accident.

Sometimes Homeowner Associations (“HOA”) vote to require the owners of the various condominiums to purchase liability insurance to cover property damage losses to the common areas of the complex, which are covered by the insurance policy issued to the HOA, which the owner/members pay a premium for through HOA dues, and who are beneficiaries under the policy.  The request or requirement by the HOA in such a case provides duplicative coverage, which is unnecessary, because the HOA policy will usually cover the property damage loss, and the insurer who issues the policy to the HOA cannot subrogate against the homeowners who are its own insureds.  

An insurer who has also issued liability insurance to the person responsible for causing an insured loss cannot enforce subrogation rights against its own insured: “For the insurer to recover from its insured for an insured loss or liability would undermine the insured’s coverage and would be inequitable.” (Truck Ins. Exch. v. County of Los Angeles (2002) 95 Cal.App.4th 13, 21; see McKinley v. XL Specialty Ins. Co. (2005) 131 Cal.App.4th 1572, 1575.)

Where an insurance policy expressly covers more than one insured, the insurer cannot subrogate against any insured covered by the policy: “No right of subrogation can arise in favor of an insurer against its own insured since, by definition, subrogation exists only with respect to rights of the insurer against third persons to whom the insurer owes no duty.” (St. Paul Fire & Marine Ins. Co. v. Murray Plumbing & Heating Corp. (1976) 65 Cal.App.3d 66, 75.)

The paradigm case is where Tenant, named as an additional insured under Landlord’s property insurance policy, negligently causes the property to burn down. The insurer paying the fire loss acquires no right of subrogation against Tenant because Tenant is insured under the policy.

To allow subrogation in such cases would permit the insurer to pass on the loss from itself to its own insured, and thus avoid the coverage which the insured purchased. (St. Paul Fire & Marine Ins. Co. v. Murray Plumbing & Heating Corp., supra, 65 Cal.App.3d at 76)

Lessons learned from the Oakland Hills Fire Storm

Lessons learned from the Oakland Hills Fire Storm

Changes in Guaranteed Replacement Cost Policies

Things Policy Holders need to Consider

by Michael Papuc

Attorney at Law

44 Montgomery Street

Suite 2405

San Francisco, CA 94104

In October, 1990, the Oakland Hills fire storm destroyed over 2000 homes.  Most insurers provided guaranteed replacement cost policies to the homeowners, with replacement cost coverage for personal property based on a percentage of the homeowners limits.  Insurance Commissioner John Garamendi pressured insurers to re-write policies in place at the time of the fire-storm to provide guaranteed replacement cost coverage.

The guaranteed replacement cost policies guaranteed enough insurance to replace the home, regardless of the property damage limits in the policy.  The limits were for the most part set by the insurer, after an inspection of the home, to make certain enough premiums were generated to cover the losses.

This practice was based on the assumption that only one or a few homes would be destroyed at a time.   The cost to replace would be based on available market data for material and labor at the time of issuance of the policy.  Many policies would have inflation guard, which would increase policy limits based on rate of inflation each year..

What the insurance carriers and homeowners did not anticipate was that in a firestorm destroying 2000 + homes, the demand for materials and labor will by far out-strip supply, and the cost to rebuild will be delayed, and increase substantially, often more than 100% of what the carrier anticipated to be the cost of the loss.  There are only so many contractors, lumber yards, tool rental establishments,  and hardware stores in a given area.

After the Oakland Hills fire, carriers began issuing new policies providing limits on coverage, and sometimes increasing the limits by as much as 50%.

Often, the insurance agents, who were looking at the potential loss of business, would represent to the policyholder to not worry about the change, because the insurer inspects the home and determines the amount it will cost to rebuild.  This gives the insured the false impression that no matter what happens, there is enough policy limits to replace the home.

Another issue to be of concern is that the Additional Living Expense coverage is limited to one year, meaning that the house must be rebuilt within one year, or the insured is on the hook for additional costs of substitute housing beyond that time, while at the same time paying a mortgage on their home.  When there is a shortage of labor and materials as a result of a fire-storm, there is a likelihood of exceeding the one year period for Additional Living Expense Coverage.

Attorney Michael Papuc represents Students in Actions against School Districts

 

San Francisco Attorney Michael Papuc represents students in injury cases against School Districts.

Attorney Michael Papuc represented a first grade special education student who was digitally molested in the school yard of a public school, by a student in her special education class, and was held back by other students in her class.  The molestation occurred in the school yard during lunch, in an area away from the general population of students, under an outside stair case.  Mr. Papuc claimed the school district was at fault for failure to monitor the area where the molestation occurred, and failure to provide a safe learning environment.  Before the molestation incident, the girl who was harmed had been the subject of choking and other physical harm in the special education classroom.  There were also kissing incidents in the classroom, discussions of sex in the classroom, attempts by boys in the class to force the girl into a bathroom stall, an incident in the class where a boy took out his penis to show the girl who was molested.

The case settled after the girl underwent an examination by a psychiatrist chosen by the school district.  The school district attempted to place blame on molestation on an adult in the girl’s family.  The school district’s child psychiatrist admitted that the type of molestation the girl was subjected to was child-on-child.

In these types of cases, police need to be notified as soon as the incident occurs, the child needs to be examined by CASARC (Child and Adolescent Sexual Abuse Resource Center) or similar agency, the child’s attorney will need to get as many witness statements as possible.  The school nurse’s records are also very important.  The attorney will need to retain appropriate experts, including school district standard of care expert, psychiatrist, neuro psychologist and pyschologist, to conduct appropriate testing of the child, and damages expert.

Attorney Michael Papuc represents policy holders in claims to have their policies re-witten to reflect the mutual intention of the parties. Insurance Contracts can be re-written (reformed) to include representations of coverage by captive agents of the carrier

by Michael Papuc

Attorney at Law

44 Montgomery St., Suite 2405

San Francisco, CA 94104

415-773-1755

 

San Francisco Attorney Michael Papuc has been practicing Insurance litigation in California since 1987.  Attorney  Michael Papuc represents policy holders (“insureds”) in lawsuits against their insurance companies for bad faith claims handling. 

When a claim is presented to an insurance carrier, the carrier will always rely on the terms of the written insurance contract.  Some carriers have captive agents, who work only for a single insurance company, such as State Farm or Allstate.  Often when the carrier undertakes to change policy language, resulting in reduction in homeowners coverage, the captive agent undertakes sales spin, promising that this is not a big deal because the insurer has its own people inspect the home, to make sure there are enough policy limits to cover the home int he event of total loss, even though the written insurance policy will say otherwise.  Keep in mind that the captive agent is the agent of the insurance carrier, and not the gent of the policy holder insured.  The representations of the captive agent will often bind the insurance carrier, and are subject to the insurance company’s duties to the insured.

This is where the law of reformation comes in.  Reformation is an equitable remedy that allows a court to alter or rewrite a written agreement which fails to conform to the parties’ oral or other prior agreement as the result of fraud or mistake.  Civil Code, sec, 3399 states as follows:

“When, through fraud or a mutual mistake of the parties . . . a written contract does not truly express the intention of the parties, it may be revised on the application of a party aggrieved, so as to express that intention….”

The California Supreme Court described the purpose of reformation as follows:

“The purpose of reformation is to correct a written instrument in order to effectuate a common intention of both parties which was incorrectly reduced to writing.”  (LeMoge Electric v. San Mateo County, 46 Cal.2d 659, 663 (1956).)

See also American Home Ins. Co. v. Travelers Indem. Co. 122 Cal.App.3d 951, 963 (1981) (purpose of reformation is “to make a written contract truly express the intention of the parties.”) (Emphasis added.)

Civil Code, sec. 3401 provide as follows:

“In revising a written instrument, the court may inquire what the instrument was intended to mean, and what were intended to be its legal consequences, and is not confined to the inquiry what the language of the instrument was intended to be.”

The representations of the captive agent, which are binding on the carrier can be construed to be part and parcel of the insurance policy, making the insurer liable for breach of contract, if it denies or withholds benefits of a claim the captive agent said would be fully covered, and liable for bad faith if it can be shown that the carrier unreasonabley withheld insurance policy benefits.