Category: Bankruptcy

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The Poisoned Foreclosure – Lawyers Beware of the Affirmative Duty to Search Records

A Sacramento bankruptcy judge issued a hard hitting judgment against Bank of America for the way it handled a single residential foreclosure in Lincoln, California.  Referring to the famous novelist whose works evoke oppressive and nightmarish characteristics, Judge Klein wrote: “Franz Kafka lives… [and] he works at Bank of America.”  This ruling has been widely … Continue Reading

Nevada Lenders Beware! Mechanic’s Liens Not Easily Avoided

Following the market crash in 2008-09, the $2.8 billion Fontainebleau development in Las Vegas was halted with 70 percent of the construction completed. Naturally, numerous mechanic’s liens were filed by contractors, subcontractors, professionals and suppliers ("claimants"). In the bankruptcy proceeding, the lenders asserted novel and potentially legally destabilizing theories against the claimants’ rights: a.) the … Continue Reading

California Appellate Court Affirms That Mechanic’s Lien Foreclosure Period Is Tolled During Bankruptcy Proceeding

In Pioneer Construction, Inc. v. Global Investment Corp. (Dec. 21, 2011, No. B225685), Cal.App.4th [2011 WL 6382113], the Second District Court of Appeal recently affirmed a timely topic in this depressed construction market:  lien claimants must protect their rights, and buyers of property out of bankruptcy must verify the validity of lingering lien claims. In … Continue Reading

Owner/Developer Insolvencies and the Risks to Contractors

Developer insolvencies are unfortunately becoming more and more common in our current economic climate and often result in partially completed projects being stopped. The consequences to contractors can be significant. A number of recent resort projects illustrate what the contractors and subs can typically expect. First, the obvious, immediate problem is nonpayment, which in turn requires the … Continue Reading

Bankruptcy as an Event of Default – Unenforceable Contract Provisions

Contract provisions stating that either the owner or the contractor’s bankruptcy will constitute an event of default are common. A corresponding provision typically sets out the nonbreaching party’s rights in the event of default, one being the right to terminate the contract. For all practical purposes, these provisions are meaningless and unenforceable. Section 365 of the Bankruptcy … Continue Reading

Owner/Developer Bankruptcies – What the Contractor Can Expect

What should a contractor expect when the owner files for bankruptcy? That’s a difficult question to answer briefly. Our best advice is to see a bankruptcy attorney quickly. Bankruptcy is a highly technical area of law that few attorneys understand. It’s wholly unreasonable to expect that a nonattorney could navigate his or her way through the system.  We emphasize … Continue Reading