Why Establishing Fraud in Addition to Misrepresentation in a CA Real Estate Litigation Matters

If you purchased a residential or commercial property, and you ended up getting something different than what you thought were getting – which can include anything from omissions regarding defects with the property to inflated or fake rent rolls on a commercial property – you most likely want out of the deal, pure and simple. The same goes for a seller who was misled by a buyer who pulls out of a deal on the eve of closing after it becomes clear he lied about the financing.

 

But, while the end result was that you were misled about a real estate deal, what remedies you receive in court or settlement over your dispute can vary greatly on whether your attorney can prove that there was not only a misrepresentation but also that you were defrauded by the other party.

Punitive Damages are Available in a California Real Estate Fraud Case

In short, the key difference for the plaintiff who can successfully prove a real estate fraud case is that the party can receive punitive damages in addition to the other remedies available in a more straightforward misrepresentation case, in which the plaintiff is generally limited to winning the benefit of the bargain (which can include invalidating and unwinding the deal) and associated costs.

 

Thus, it is important to work with an experienced real estate litigation attorney who has the experience and skills to bring and win a real estate fraud action.

The Elements of Winning a CA Real Estate Fraud Case

To win a fraud action against another party in a real estate deal in California, it will be necessary for your attorney to prove by a preponderance of the evidence (meaning it is more than likely true) that the other party:

  • Made a material (meaning significant) misrepresentation relating to the property, and this misrepresentation can come in the form of a false representation, a concealment of information, or a failure to disclose;
  • The other party knew that a representation was false, or that an important fact was concealed or not disclosed;
  • The other party intended to defraud you by making the false representation, concealment, or nondisclosure (meaning the other party intended that you would go forward with the deal via his wrongful action);
  • You as the complaining party justifiably relied on the misrepresentation (or concealment/nondisclosure) in going forward with the deal; and
  • You suffered damages as a result.

 

While the misrepresentation, your reliance, and your damages may be relatively straightforward in some cases (which, by themselves, can potentially form the basis of a successful breach of contract action), proving that the other party knew the representation was false and that they intended to defraud can be challenging.

 

An experienced real estate litigation attorney, however, will rely on sophisticated investigative and discovery methods to identify and locate evidence relating to such intent, and aggressively seek out the highest financial recovery possible on your behalf.

Contact the Real Estate Litigation Attorneys at Wagenseller Law Firm

At Wagenseller Law Firm in downtown Los Angeles, we provide full legal services to individuals and businesses in business and real estate litigation matters. Contact Wagenseller Law Firm today to schedule a consultation to discuss your real estate matter.

Building Men in Uganda 2018

I leave for Uganda on July 6. This is my 9th year going there to work with the vocational school students at Bringing Hope to the Family orphanage. What I love is the generation of leaders like Mugume Bright and William Tumusiime who have worked with me for the last 9 years who organize our projects and plan everything. They put in so much hard work and are incredible examples to the young men. And everything I do is because of everything they do. Bright has already sent me the names of the new students and William went out to visit them and sent me this photo. Together we are building men. Awesome!

Understanding When You Are Liable for a Partner’s Actions in a California Partnership

When you decide to go into business with another person in a California partnership, you are no doubt dreaming about the profits that you are going to make by working together. What you might not be thinking about, however, is the fact that you may become liable for that partner’s actions, even if those actions are taken unilaterally and without your specific approval.

 

The analogy that a business partnership is like a marriage in not true in all respects, but there is some connection in the sense that your partner’s debts and liabilities may well become your liabilities, if they are incurred in the course of the partnership. Confusion over who should pay for partnership liabilities is frequently a source of partnership litigation in California, and you are encouraged to consult with an experienced partnership litigation attorney regarding your rights and obligations should such a dispute arise.

When You May Be Liable For a Partner’s Liabilities

You can be liable for a partner’s debts – whether they arise out a commercial contract (e.g. an agreement to buy goods for a vendor every month), out of a tort judgement (e.g. a personal injury lawsuit or fraud claim), or other potential liabilities – so long as the liability arose when the other partner was: 1) acting in the ordinary course of business of the partnership; or 2) with the authority of the partnership.

 

To put this into a simple example, let’s say you run a grocery delivery business with another partner. If that partner causes a car accident while delivering groceries for the partnership, this would be in the ordinary course of business, and you as a partner would potentially be liable for personal injury claims.

 

Let’s say, however, that the partner decides to go to the airport using a company car, which is outside the ordinary course of the business, but you give approval of this action. If a crash occurs on the way to the airport, you could be liable because the partnership as the partnership gave approval or “authority” for this trip.

 

On the other hand, if the partner causes an accident while drunk driving in a company car late on Friday night, and this was not in the ordinary course of business and without the partnership’s approval, there may not be liability for the partnership or you personally.

 

The above example involves a tort case, but the same would go for contracts entered into by one partner, and a relevant question regarding liability would be whether the contract was in the ordinary course of business of the partnership and/or whether it was approved by the partnership.

Understanding the Extent of Your Liability for CA Partnership Debts

While the liability of the partnership is one question, a further question is just how much liability an individual partner will face. This will depend on: 1) the type of partnership created; 2) the role of a given partner; and 3) when the partner joined the partnership with respect to the liability.

 

These are complex questions, but, with respect to the first issue, general partners can see their partnership assets at risk, and also be personally liable (meaning creditors can seek their personal assets outside of the partnership), while those in limited partnerships or LLCs may be shielded from having personal liability. With regard to the second question, a limited partner may also be able to shield his personal assets in a way that a general partner cannot (but the fact that you are merely a “dormant” general partner may not shield you). Finally, partners are generally only liable for debts and judgments that arise after they join the partnership.

 

Speak to an experienced partnership litigation attorney for further insight about your particular situation.

Work With an Experienced Los Angeles Partnership Dispute Attorney

At Wagenseller Law Firm in downtown Los Angeles, our attorneys have extensive experience in resolving all types of partnership litigation matters, including those related to fraud, contractual disputes, and alleged breaches of fiduciary duties. Contact Wagenseller Law Firm today to schedule a consultation to discuss your partnership dispute.

Distinguishing the Duty Not to Compete and Non-Compete Agreements in Your California Partnership

At the very heart of the concept of a business partnership is the idea that you and another party (or multiple parties) are working together, on the same side, in the pursuit of a common goal, and therefore not working adverse to one another. At the same time, however, entrepreneurs and investors often have multiple business interests beyond a single partnership, and often in similar spaces in the marketplace, thus the question of whether one partner is unfairly competing against another partner with a different venture can lead to disputes and even partnership litigation.

 

What can make this process confusing is the presence of two related but distinct concepts in California law: 1) the duty partners have not to compete with one another; and 2) non-compete agreements. To be clear, the first of these – the duty not to compete – is codified in California law, and applies to all partnerships. The second relates to a specific agreement that partners might reach outside of a partnership agreement, and these are often (but not always) deemed invalid and unenforceable by California courts.

The California Partnership Duty Not to Compete

Anytime two or more persons work together towards a common business goal in which they share profits, they can potentially be considered a partnership under California law, even if they have not formally drafted a partnership agreement. The important effect of this is that California partnership law will apply to their business dealings, giving each partner rights and obligations/duties with regard to one another.

 

One of these duties is spelled out in California Corporations Code section 16404(b)(3), which states that partners have a duty to “refrain from competing with the partnership in the conduct of the partnership business before the dissolution of the partnership.” A key aspect of determining whether a breach of this duty has occurred is determining whether the alleged competitive conductive actually competes with the partnership business as the description of that business is spelled out in the partnership agreement.

Why Non-Compete Agreements Often Fail in California Courts

Thus, partners automatically have a duty not to compete with another based on California law, but issues and confusion can arise when partners additionally create a non-compete agreement outside of the partnership agreement further restricting their ability to compete with one another.

 

While such non-compete agreements may be common nationwide, California has long had a very hostile approach to non-compete agreements, often finding them unenforceable. Indeed, California Corporations Code section 16600 states that, Except as provided in this chapter, every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void.

 

What this means is that, outside of certain exceptions, a California court may be unlikely to enforce a non-compete agreement between partners, although the court may be willing to provide equitable relief (e.g. an award for unjust enrichment) where there is egregious behavior by one partner or an otherwise compelling reason.

 

The moral of this story, thus, is that partners who wish to prevent other partners from competing against the partnership itself should take care to make sure the partnership agreement itself reflects this and not to rely on additional non-compete agreement which may run into problems of enforceability in at least some cases

Work With an Experienced Los Angeles Partnership Dispute Attorney

At Wagenseller Law Firm in downtown Los Angeles, our attorneys have extensive experience in resolving all types of partnership litigation matters, including those related to fraud, contractual disputes, and alleged breaches of fiduciary duties. Contact Wagenseller Law Firm today to schedule a consultation to discuss your partnership dispute.

3 Reasons Minority Shareholders Sue Majority Shareholders

As fellow shareholders in a corporation, minority and majority shareholders are hypothetically “on the same team” with respect to their ultimate interests being aligned, at least with respect to share value. But, of course, as with any type of institution made up of individual voices and wills, disputes can erupt over any number of issues relating to power, control, direction, and a host of other concerns related to a corporation’s fortunes.

 

Tension between shareholders can be especially acute where there is a majority shareholder who, by definition, owns more than 50% of the shares of the corporation and, in most cases, has the ability to control the vote for officers and other large decisions affecting the corporation. When there is perceived abuse of minority shareholder rights, one or more minority shareholders may decide to bring a lawsuit to enforce those rights. Here are three common reasons this occurs.

Refusal to Allow Access to Corporate Books and Records

Minority shareholders do have the right to review corporate books and records relating to accounting, corporate meetings, and other significant issues affecting the corporation. If a majority shareholder takes actions which prevent other shareholders from accessing the records in order to understand the corporation’s finances and other innerworkings, they may sue to gain access.

Breach of Fiduciary Duties

Similar to the officers and directors of a corporation, majority shareholders have fiduciary duties to the other shareholders in the corporation, namely the duty to put the interests of the corporation above their own in how they conduct business affecting the corporation.

 

Generally, this means they must act in good faith and exercise the same type of duty of care in acting as a majority shareholder on behalf of the corporation, taking action which benefits all shareholders proportionally, not just themselves. For example, if the majority shareholder votes to approve a sale of the company’s assets, there should be evidence that the price is fair, and that there is not an outside benefit motivating the sale which is not shared with other shareholders.

 

Similarly, there is also a duty not to compete with the corporation or to usurp business opportunities that should have gone to the corporation. Thus, a situation in which a majority shareholder acts to avoid engaging in a business opportunity which then goes to another business owned by the majority shareholder could invite a breach of fiduciary claim by the minority shareholders.

Refusal to Allow Access to the List of Shareholders

Knowing who the other shareholders in a corporation can be key to working together to leverage control in a corporation, and it is the right of certain qualified shareholders to demand access to a list of the shareholders of the corporation, including contact information. Refusal to provide access can result in legal action.

Experienced Representation in Your Shareholder Litigation Matter

The business litigation attorneys at Wagenseller Law Firm in downtown Los Angeles have extensive experience in representing businesses, corporations, directors, officers, and shareholders in shareholder disputes. We have worked with businesses and individuals throughout Southern California across a wide range of industries, including financial service entities, manufacturers, importers, retail stores, restaurants, entertainment entities, law firms, and more. Contact us today to discuss your breach of fiduciary duty matter.

Do Commercial Tenants Lose Their Rights When the Building Is Sold?

The sale of a commercial building or common property to new owners can raise significant uncertainty for business tenants whose livelihood may be tied to a familiar relationship with a landlord/owner, especially where there is goodwill and other capital associated with this specific location, such as foot traffic or a dedicated client base in the area. Certainly, a new owner can mean a very different way of conducting business and relating to the current tenants, but, in most cases, current commercial clients will retain the rights afforded to them by their presently enforceable lease.

Your Current Lease Should Control, Absent Special Provisions

A lease is, of course, a contract between the tenant and the landlord, and, as is generally the case with contracts, the fact that a third party (in the form of the new purchaser of the property) has assumed the obligations and rights of the lease by means of purchasing the property means that the third party must also fulfill those obligations of the lease to the same extent as the initial landlord. Thus, if you have a 24-month lease with the previous landlord, the new owner must abide by that obligation to provide you the space on the same terms as the previous landlord.

 

That said, the landlord with whom you conducted business may have inserted an early termination clause which does allow for a third party to terminate the lease in the case of a sale, as giving potential buyers the flexibility to terminate leases does raise the potential value of the property. Thus, working with a real estate litigation attorney to understand the terms of the lease is helpful to planning for both landlords and investors alike.

A New Landlord May Take a More Aggressive Approach to the Lease

Assuming no early termination clause exists, the commercial tenant can use the promises of the lease to remain in place on the same terms as before. But, even though the same lease is in place, this does not mean that the new landlord will necessarily operate in the same manner as the previous landlord with regard to what constitutes a breach of the lease which could lead to potential eviction proceedings.

 

For example, if the lease prohibits onsite food preparation for sale, or employees of businesses parking in certain spots, but the previous landlord never bothered to complain when tenants took such actions in violation of the lease, that is no guarantee that the new landlord won’t make a legal issue out of the violations, and prior custom may not be a valid defense to such actions.

 

Furthermore, it should go without saying that a failure to pay rent to the new landlord will in many cases give the new owner the ability to take legal action against the tenant terminating the lease.

The Landlord Is Not Necessarily Entitled to Renew the Lease Terms

Finally, it should be noted that a new owner will not be entitled to renew the terms of the lease at the expiration of the lease period, even if the previous landlord had gone month-to-month with the lease or never attempted to renegotiate the terms of the lease in a significant manner.

Contact the Real Estate Litigation Attorneys at Wagenseller Law Firm

At Wagenseller Law Firm in downtown Los Angeles, we provide full legal services to individuals and businesses in business and real estate litigation matters. We provide counsel and representation to landlords, developers, commercial tenants, and investors alike. Contact Wagenseller Law Firm today to schedule a consultation to discuss your real estate matter.

Three Common Sources of California Common Area Maintenance Litigation

When running a business, especially a new business or startup, “common area maintenance” is likely not at the top of an entrepreneur’s or CFO’s list of financial concerns. But common area maintenance, or “CAM,” can often be akin to car problems or health issues: an unexpected high bill that seems to come out of the blue, and which may not have been budgeted for. As such, one of the most common – yet often least expected – real estate litigation disputes that arise for business owners in commercial leases relate to CAM charges.

 

After all, if you have been paying $1,000 a month for CAM charges on top of your already expensive California business rent, getting a $3,000 bill for maintenance charges that you were not prepared for, or which seem like they should be the responsibility of the landlord, or which may seem to benefit other tenants and not you can definitely be a call to arms to fight the bill, in court if need be. Here are three common sources of California CAM litigation that landlords and commercial tenants should be aware of alike.

Ambiguously Defined Common Areas and Provisions

Some components of CAM fees may be obvious and clear as benefitting all tenants as a whole. For example, in a commercial office building, there will be charges related to shared elevators, main entrances and hallways, parking structures, and security and cleaning services. But how about areas of the building that are not accessible to all tenants, e.g. corridors that may only be available to building management or units which are unrented? Or “common areas” which simply were not ever understood as being part of the property, like outdoor areas?

 

Of course, the commercial lease will be the defining document which should explain what the common areas and what provisions are being made available to all tenants, but ambiguities in the meaning of terms and scope of maintenance may cause disputes.

Inclusion of Unexpected Charges and Fees

It should come as no surprise that the basic bargaining posture between a landlord and tenant with respect to CAM charges is for the landlord to include as much as possible of its expenses within the CAM fees, while the tenant is doing what it can to minimize its liability in this area.

 

Generally, a landlord has a longer term connection and investment in the property itself, while a tenant is typically a temporary resident, or at least only under contract to lease the property for a matter of years or less. Thus, tenants can become concerned about the inclusion of CAM charges that seem to benefit the property (and hence its owners) itself for the long term – a la a complete renovation of a shopping mall – when a tenant only plans to stay for a few years.

 

Similarly, tenants may also raise concerns about unexpected charges and fees which seem to duplicate the services already paid for, e.g. a “maintenance fee” on top of all of the fees that are already presumably related to maintenance.

Disputes Over Pro Rata Shares Between Tenants

Finally, one of the most common types of CAM disputes is when one tenant believes it is: 1) unfairly being charged more than its fair share of CAM charges, based on metrics such as square footage or total number of customers; or 2) that certain CAM charges – such as those that might relate only to restaurants or retail businesses – should be borne only by those tenants which actually benefit from them. Again, the lease agreement should control on such issues, but many leases do leave open the possibility of ambiguity which can lead to disputes.

Contact the Real Estate Litigation Attorneys at Wagenseller Law Firm

At Wagenseller Law Firm in downtown Los Angeles, we provide full legal services to individuals and businesses in business and real estate litigation matters. We provide counsel and representation to landlords, developers, commercial tenants, and investors alike. Contact Wagenseller Law Firm today to schedule a consultation to discuss your real estate matter.

Is a “Handshake” or Oral Agreement for Real Estate in California Enforceable?

Real estate is big business in California – and, for many individuals and families, the largest financial transactions of their lives – and so whether the agreements that people make with regard to real estate purchases and even commercial or residential leases can have huge financial implications for both sides. And while most parties expect to eventually get their agreements for a purchase or lease in writing, it is often the case that a buyer and seller (or a landlord and tenant) reach a “handshake” or oral agreement on the spot, with the plans to create a written document later. With real estate sales, this would come in the form of a purchase and sale agreement, and, with landlord/tenant agreements, a written lease.

 

But, in some cases, one party decides to back out before the purchase/sale agreement or lease is ever created, and, in more rare cases, one party moves in without there ever being a written agreement. When things go south, the question then becomes whether such handshake agreements are enforceable.

California’s Statute of Frauds and Real Estate Purchases and Leases

The “Statute of Frauds” may sound like an archaic law about, well, fraud, but it is actually the law which governs the types of contracts that must be in writing in order for a court to enforce them. The default rule is that handshake/oral agreements are indeed enforceable in court (although proving their existence creates a challenge for the party seeking enforcement), but the California Statute of Frauds requires that certain types of contracts be in writing for a court to enforce them, even if both parties agree that an oral agreement was made.

 

The two types of contracts listed in California’s Statute of Frauds that are relevant here are included at Cal. Civ. Code 1624(3), which states that “An agreement for the leasing for a longer period than one year, or for the sale of real property” is invalid unless made in writing.

 

Thus, any contract for the sale of a building or land must be in writing to be enforced. Likewise, a lease for more than one year must also be in writing to be enforceable, but oral agreements for leases that are a year or less do not have be in writing.

 

The writing itself should be signed by the party against whom enforcement of the contract is being sought (meaning the other party you are trying to hold to the contract) and should include basic facts about the contract, such as the address of the property in question.

 

Speak to a real estate litigation attorney for further insight and counsel with regard to your specific situation.

Contact the Real Estate Litigation Attorneys at Wagenseller Law Firm

At Wagenseller Law Firm in downtown Los Angeles, we provide full legal services to individuals and businesses in business and real estate litigation matters. Contact Wagenseller Law Firm today to schedule a consultation to discuss your real estate matter.

Suing a Business Partner in CA Over Competing With the Partnership

A business partnership in California is, of course, just that: a partnership in which two or more people come together to work towards a common business goal. It’s not uncommon to hear a business partnership compared to a marriage, and there is some truth to that, but working together as a business partnership brings with it a more legally enforceable duties towards one another than a marriage, which carries with it only a duty to financially support one another.

 

One of the duties that business partners have towards one another in California that is not quite analogous to a marriage is the duty of each partner not to compete with the partnership itself. While a spouse cannot sue the other spouse for cheating with a third party, a business partner can sue his or her partner for “cheating” on the partnership by competing against the business of the partnership or by usurping a business opportunity that should have properly been brought to the partnership.

The Duty of Loyalty in California

Both of these issues relate to the “duty of loyalty” which is set out by statute in California’s Corporate Code relating to business partnerships. Note that California does not require business formalities to create a general partnership such as filing articles of incorporation with the state or creating a partnership agreement, and so a general partnership can exist whenever two people are working together towards a common business purpose such that a potential lawsuit for breach of the duty of loyalty could be brought.

 

As with many issues of partnership law in California, the partners can work together to reach a formal agreement on what is and what is not considered a breach of the duty not to compete in the partnership agreement itself to avoid ambiguous situations and potential disputes.

Breaching the Duty of Loyalty By Competing and Usurping Business Opportunities

To explain more specifically what a breach of the duty of loyalty via competition with the partnership looks like, we start with the California Corporation Code itself, which states at Section 16404(b)(3) that a partner’s duty not to compete includes the obligation, “To refrain from competing with the partnership in the conduct of the partnership business before the dissolution of the partnership.

 

This could include one partner running a sole proprietorship in the same geographical area. For example, if a partnership provides IT services to startups in downtown Los Angeles, and one partner begins her own business providing the same service to startups in DTLA, this could be a violation of the duty not to compete.

 

In addition, other violations of the duty not to compete occur where one partner usurps the business opportunities of the partnership by soliciting business which would have otherwise been the type of opportunity that the partnership would have been interested in OR where one partners receives an opportunity in his or her capacity as a partner and takes the job for themselves.

 

Thus, using the same example above of a partnership offering IT services, if one partner is approached by a party interested in having the IT partnership do a job, but takes it for himself, OR if that same partner solicits business for himself that the partnership would have taken, this could potentially lead to a breach of duty claim by the other partners.

 

Speak to a partnership dispute attorney to learn more about your specific situation.

Work With an Experienced Los Angeles Partnership Dispute Attorney

At Wagenseller Law Firm in downtown Los Angeles, our attorneys have extensive experience in resolving all types of partnership litigation matters, including those related to fraud and alleged breaches of the duty of loyalty and duty of care. Contact Wagenseller Law Firm today to schedule a consultation to discuss your partnership dispute.

Self-Dealing in California Partnerships and the Potential for a Lawsuit

Some might say that the system of capitalism is built on the notion that we all act in self-interested ways, and thus, through competition and basic rules of fair play, we as a society can harness our natural self-interested motivations to create more prosperity for all. That is, of course, true to a certain extent, but acting in self-interested ways can come into direct conflict with other parties and the law when it is done at the expense of other partners with whom you have formed a partnership.

 

California partnership law specifically states that partners in a partnership have a duty “To refrain from dealing with the partnership in the conduct or winding up of the partnership business as or on behalf of a party having an interest adverse to the partnership.” What this means is that, whenever partners are carrying on business that affects the partnership itself, they should be acting in the interests of the partnership and not themselves.

 

Thus, when a partner enters into a transaction between himself and the partnership (or between the partnership and a party adverse to the partnership, such as a competitor), that partner risks breaching a fiduciary duty by engaging in self-dealing, which could lead to a partnership dispute with the other partners, resulting in litigation.

Potential Examples of Self-Dealing in a California Partnership

When thinking about self-dealing in a California partnership and why such rules even exist, it is important to remember that general partners in a partnership have the ability to act as agents for the partnership. Being an agent means the partner can enter into transactions on behalf of the partnership itself without necessarily having to bring it to the other partners for approval (unless a partnership agreement exists which specifically includes methods for approving transactions).

 

Thus, there is the potential for abuse through a partner acting to further his own interests at the expense of the partnership, and, by extension, the other partners by creating self-dealing transactions between the partnership and himself. Examples of this type of exploitative self-dealing by a partner include:

  • A partner selling the partnership any type of property (vehicles, equipement, financial holdings, etc.) or services for more than the property or services are worth
  • A partner buying property or services from the partnership for less than it is worth
  • A partner creating a contract between the partnership and himself (or another business interest) for goods or services
  • A partner creating a contract for employment by himself by the partnership

 

This does not necessarily mean any financial dealing with the partner and the partnership is illegitimate, but it does mean that there is the potential for a partnership dispute based on an alleged breach of the duty of loyalty (and specifically self-dealing) where a partner conducts business with the partnership which is not adequately approved and made fully transparent with the rest of the partnership (and in accord with any partnership agreement requirements).

 

Speak to a California partnership dispute attorney to learn more about your legal rights and obligations in your specific situation.

Work With an Experienced Los Angeles Partnership Dispute Attorney

At Wagenseller Law Firm in downtown Los Angeles, our attorneys have extensive experience in resolving all types of partnership litigation matters, including those related to fraud and alleged breaches of the duty of loyalty and duty of care. Contact Wagenseller Law Firm today to schedule a consultation to discuss your partnership dispute.