Airport Startup Faces Lawsuit

July 5, 2013,

business2.jpgA California car rental startup currently faces a lawsuit, and the outcome could have significant implications for business startups across the state. According to a recent article in the San Mateo County Times, FlightCar, a Santa Clara car rental startup, has caused quite a stir at the San Francisco International Airport. And this is just another example in "the latest series of battles within rule testing tech entrepreneurs and officials."

What is FlightCar, Inc.?

FlightCar refers to itself as "the Airbnb of car rentals at airports." It's the first company to create a marketplace in which vehicle owners who have parked their cars at the airport can rent them out to other airport travelers. In other words, the company hopes to allow frequent flyers to make some money while their cars remain at the airport. The self-proclaimed Harvard, Princeton, and MIT dropouts have deemed their company the "peer-to-peer alternative to the traditional airport car rental." The three founders are young--they were only 18 years old when they created FlightCar.

The company opened its first operation at the San Francisco International Airport earlier this year, and it made plans to expand to other major flight centers. According to a report in Tech Crunch, FlightCar raised a $5.5 million Series A round with "a number of high-profile investors, including General Catalyst, Softbank Capital, Airbnb founder and CEO Brian Chesky," and Seacrest Global Corp.

How does it work? A traveler drops her car off at a FlightCar lot. Then, incoming visitors can rent that car for less than the cost of a car rental at a traditional airport rental chain. If the owner's car is rented while she's traveling, she receives gas cards for $10 per day for each day that the car is rented. If the car geos unrented, the owner still gets free parking. With the high cost of airport parking, a vehicle owner could save up to $18 per day in certain long-term parking lots.

The vehicles also get a free wash when they're listed on the site, and owners can take advantage of a valet service to and from the airport when their cars are picked up or dropped off. And the service is supported by a $1 million insurance policy for owners and renters. There are a few requirements, of course. Vehicles must be 1999 or newer models, and they can't have more than 150,000 miles. The service seems like a great idea. So what's going on with the lawsuit?

FlightCar Faces Lawsuit

According to the San Francisco City Attorney Dennis Herrera, FlightCar dodged fees and undercut its competition at San Francisco International Airport. As a result, the city wants FlightCar to "give a cuts of its profits to SFO and follow a few rules or shut down." In the lawsuit filed in San Francisco Superior Court, Herrera also contends that the startup "has flouted car rental agency rules."

The city wants to shut down the startup until it starts to comply with certain regulations, according to a report in local ABC News. These rules include pick-ups and drop-offs in a specific area, paying 10 percent of gross profits to the airport, and paying $20 for each rental transaction.

FlightCar has since opened for business at Boston's Logan International Airport, and according to the Boston Business Journal, the startup has "grown from 600 drop-off rentals in mid-May to 1,000 a month later, with the number of rentals rising from 1,000 to 1,400 in the same time."

The FlightCar lawsuit raises many questions about the laws surrounding startups in California. If you have questions about startups in our area, an experienced business lawyer can answer your questions today. Don't hesitate to contact us.

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Even If You Do Everything Right, You Can Still Lose

June 25, 2013,

Purchasing real estate is a difficult process. Finding a place that you like, which fits your needs and is within your budget is not always easy. There is a lot of work to do to find the perfect piece of real estate, but it is important to remember that the work doesn't end when the property is chosen. Before purchasing property, it is the buyer's responsibility to make sure the property is acceptable for his or her uses, is generally safe and sound and overall a good purchase. Sometimes sellers are genuinely unaware of issue with the property or title, and in those situations the buyer is stuck with any problems he or she could have found, but did not. But what about those instances when the seller does something intentionally wrong? That depends on the situation. If you can prove the seller did something wrong intentionally, often the buyer will be allowed to cancel the contract or can adjust the selling price. In some cases, however, that is not enough.

Take for example, the California case of Utley v. Smith. In this case, Charles Utley ("Utley") is suing for specific performance to force the sale of a piece of property, which Utley believes he rightly owns. In this case, Jewell Smith ("Smith") owned a piece of property, which he offered sell to two buyers. Smith offered Utley the option to purchase the property and promised to keep the option open for a few weeks with a down payment. During the period of time that Utley had the option to purchase the property, Smith sold it to Lewis and Desch, who are also a part of this case. The option agreement was entered into before the purchase agreement occurred, however, Smith ended up executing the documents for both agreements on the same day. This is important because, when purchasing a property, it is the buyer, or his or her agent's, responsibility to check the physical property as well as the title in many jurisdictions. While Utley had a valid option agreement with Smith, both agreements were written up on the same day, therefore regardless of whether or not Lewis and Desch did their research there was no evidence that someone else had a claim to the property.

When multiple buyers claim to have a right to one property, the order in which agreements occur becomes very important. Generally in these situations, it is not enough to be the first person to sign the paper work. If the information is readily available and you could have found that someone else has a claim to the property, such as an option contract, then you cannot legally purchase the property. In this case, the agreements occurred on the same day and the option contract was not record and filed for a week. Therefore there was no way for Lewis and Desch to find out about the option before purchasing the property. There was also no evidence that they were told and had any knowledge before signing the agreement of the option agreement. Therefore the court found that Lewis Desch were the rightful owners of the property.

At the end of the day, In Utley v. Smith, Smith behaved poorly when making a deal with two people for the same property without informing them of each other. While there is no way to guarantee that someone treats you fairly, an attorney can be helpful when making agreements. An attorney can review your agreements to help you decide if terms are i your best interest and can help you ask important questions that you may not think of on your own. If you are in the Sacramento area and need a real estate attorney, please contact our office.

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Actions Speak Louder than Words

June 17, 2013,

Contracts are agreements, written or oral, which bind people to complete a set of actions. It is expected that when you enter an agreement, you intend to follow through with it and complete what is asked of you. This, however, is not always the case. Breaches of contract happen, but how you deal with it will impact future decisions.

Take for the example of the California case of Whitney Investment Company v. Westview Development Company. In this case Whitney Investment Company (Whitney) is appealing a lawsuit where it previously sued Westview Development Company (Westview) for breach of contract. Whitney and Westview had an agreement where Westview hired Whitney as its broker to sell a parcel of land.

This was supposed to be an exclusive listing, so that regardless of who sold the property during the life of the agreement, Whitney would still receive a commission off of the sale. In return, Whitney agreed to pay monthly rentals on two existing highway advertising signs then leased by Westview, to operate a tract office located on the premises, to pay one hundred dollars a month rental to Westview for the tract office, to pay one-half the cost of bringing electricity to the tract office, to maintain an adequate sales force, and upon Westview's request to expend at least $2,000 for advertising.

Whitney is accusing Westview of breaching the agreement because during the life of the contract, Westview sold part of the land through a different broker and refused to pay Whitney a commission. Whitney,however, partially breached the agreement at the very beginning by failing to occupy the tract office and spend $2000 for advertising at Westview's request. Westview claims that due to Whitney's breach, there was no valid contract at the time it sold the property.

In the first case, the court agreed with Westview and found that because Whitney breached the contract first. Because of the breach and a number of other issues, the court found that Whitney was not entitled to the commission. The appeals court, however, disagreed. A breach does not terminate a contract as a matter of course but is a ground for termination at the option of the injured party. Therefore, a finding of termination cannot be implied from a finding of a breach, it must be stated clearly. In this case, despite the fact that Whitney did not complete its side of the agreement, Westview did not officially terminate its agreement with it until six months later, which was a date provided within the contract. Also, throughout that six month period, Westview worked with Whitney and met with potential buyers it found for the property. The appeals court found that although the evidence disclosed a partial breach by Whitney, there was also evidence from which the court could have found that Westview waived the breach. The appeals court decided it was unclear whether Westview waived Whitney's breach and that the issue was material to the case, and therefore reversed the previous court's findings.

Contract cases can be difficult because timing is everything. Enlisting the help of an attorney can enable you to make better decision for you and your business. If you are in the Sacramento area and are in need of legal please contact our office.

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The Importance of Following the Rules

June 11, 2013,

Contracts are usually governed by the laws of the state that it was created in. Parties to a contract may create a contract that go against some aspects applicable laws but there are limitations. Laws and regulations are created to protect people, therefore, if you plan to create an agreement that goes against a law it is important that it is clear that the party who loses protection from the law understands that they are losing a protection and agree to it. This often means that such a contract needs to be in writing and signed at least by the party waiving his or her rights.

Take for example the case of Phillippe v. Shapell Industries. In this case, David Phillippe (Phillippe) is a real estate broker licensed by the State of California and Shapell Industries, Inc. (Shapell) is a corporation engaged in the construction of residential housing tracts and periodically purchases land for such construction. Shapell is also a licensed California real estate broker. Shapell reached out to Phillippe for his help in finding suitable plots of land. They had an oral agreement that Shapell would pay him a broker's commission for any land submitted by Phillippe and purchased by Shapell and that this commission would be stated in any written offer made by Shapell to a seller. Phillippe found multiple plots of land that ultimately were not acquired by Shapell because they did not fit Shapell's needs. One piece of property,known as the Great Lakes property, was of interest to Shapell but due to the zoning restrictions Shapell could not use the property when it was shown to it by Phillippe. Later the property was rezoned and Shapell and the property's owner entered direct negotiations for the sale of the property. Shapell ultimately purchased the property but refused to pay Phillippe his commission and this led Phillippe to bring this suit against Shapell.

The issue in is case is whether a broker may be paid for services acquired under an unenforceable contract. In California, at the time of this case, most real estate agreement, including broker commission had to be in writing to be a valid, enforceable contract. The agreement between Shapell and Phillippe was orally agreed to and never memorialized in writing, therefore the court found the agreement to be unenforceable. Phillippe tried to argue that because he did work, finding the Great Lakes property, because of the oral agreement he should still be compensated the agreed amount for his services. The court, however, disagreed. The court decided that based on the current laws and past cases, that because Shapell and Phillippe were both brokers, there is an expectation that they are aware of laws that effect their profession. Commission contracts had long been required to be in writing. The court found Phillippe did nothing more than perform services pursuant to an invalid agreement. Phillippe's reliance on the oral contract was not reasonable, and he therefore suffered no injury or which he should be compensated.

Phillippe knew that the contract should have been written down but chose to continue with an oral agreement anyway and ultimately this decision cost him time and money. When making an agreement with others, a written agreement is usually best because it gives each person something to reference if things go wrong. If you have questions about the validity of a contract an attorney can review your circumstances and discuss your options with you. If you are in the Sacramento area, please contact our office.

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When Foreclosure Does not End Liability

June 3, 2013,

Commercial real estate transactions can differ from residential real estate transactions in a variety of ways. For example, commercial lease tend to last longer than residential leases and multiple months of rent is often paid months in advance. While there are benefits to this method, this can also lead to complications later if a company were to go out of business or need to move before the lease has terminated. One way to alleviate this issue is to allow the party leasing to sublease or assign the contract to another party, giving the space and related responsibilities to someone else in a position to afford and maintain the property. This allows a tenant to be flexible in the case of a business change during the term of the lease. However, this option can complicate future issues because multiple subleases and assignments can run together.

Take for example, the California case of Vallely Investments v. BancAmerica Commercial Corporation. In this case, Vallely Investments (Vallely) sued for a declaration that BancAmerica Commercial Corporation (BACC), the assignee, was bound by the lease. Vallely owned a parcel of property, which it leased to Balboa Landing L.P. (Balboa). The lease allowed Balboa to transfer or assign its interest freely, or to get a mortgage. Any assignment had to be in writing, with notice to the Vallely. The person taking over contract was required to expressly accept and assume all of the terms and covenants of the lease. Balboa got a loan from BA Mortgage to develop the property using the deed of trust on the lease with Vallely as collateral, and then it defaulted on the loan. To avoid liability and to make sure the property was properly maintained, the lease was assigned to BACC, a wholly owned Bank of America subsidiary which would manage the property pending a nonjudicial foreclosure. BACC's goal was to hold the property only for the short period before the foreclosure sale. At the foreclosure sale, BA Mortgage was the successful bidder and it managed the property until selling the lease to Edgewater Place, Incorporated (Edgewater). Eventually, the contract with Edgewater was terminated early because it failed to pay the rent. Vallely then sued BACC for the rent because BACC took the lease over from Balboa.

The main issue in this case is whether foreclosure of a leasehold mortgage extinguishes the duties owed to the lessor, in this case Vallely, by an assignee, BACC, who assumes the lease. While BACC intended to be liable for the property only until the foreclosure, the contract that it signed did not make that specification. When it took over the lease, BACC also assumed the obligations of the prime lease, with the consent of the landlord, and came into privity of contract with the landlord, which allowed Vallely to enforce the assumption agreement as a third party beneficiary. This means that while foreclosure extinguished BACC's assignment, it did not have any impact on Vallely's rights. Vallely's right to enforce BACC's assumption agreement, as a third party beneficiary, occurred due to the foreclosure. Thus, the foreclosure terminated the privity of estate and privity of contract between BACC and Balboa, but it did not reach the privity of contract between BACC and Vallely. BACC assumed the lease obligations without qualification, and those contractual duties did not end with the foreclosure. It could have structured the transaction so that it shed all liability with the foreclosure, by taking the assignment without assuming the lease. But that is not what occurred in this instance. Therefore, the court found that BACC was liable for the rent on the remainder of the lease.

Real estate transactions vary in complexity, but having an attorney review your contracts can always help. If you have a real estate issue or question and are in the Sacramento area, please contact our office.

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Is Your Contract Enforceable?

May 28, 2013,

A real estate contract is like any other contract and must follow certain rules for it to be valid and enforceable. Contracts do not have to be very detailed but they do have certain requirements. For a contract to be valid there must have been an offer, an acceptance of that offer and consideration. Consideration is usually the payment of money, but it does not have to be, it just has to be the promise of something of value. The consideration, however, must be defined for a contract to be enforced by a court.

Take for example the case of Alaimo v. Tsunoda. In this case Carl Alaimo (Alaimo) was a real estate broker who had an exclusive agreement with Frank Tsunoda (Tsunoda) to sell a property. After Alaimo found a buyer, however, Tsunoda rejected the offer and ultimately chose not to sell the property. Alaimo is suing Tsunoda for breach of contract.

The parties agreement give Alaimo the exclusive right to sell the property which included a payment of five percent of the selling price. There was, however, no sale price set. The agreement listed the price to be determined at time of sale. The court looked to previous court cases regarding sales contracts without a listed price in making its decision. The court found in this case that the price of the property the matter of price was just as uncertain as it was in previous, settled cases. The price was left open for future settlement. The court found that all the parties did in this case, with relation to the sale of the property, was to agree to agree upon sale price in the future, and as previously decided in California, an agreement to agree in the future is invalid.

In some instances a court can use its judgment to fill in undefined sections of a contract to make it valid. Alaimo tried to claim that the court may determine that the purchase price intended by the agreement is the market value of the land, and that that can easily be ascertained. The court disagreed, however, because the agreement nowhere expressed the market value as the criterion by which the sale price was to be determined. The seller, Tsunoda, had the right to determine at which price to sell the property. Many owners of real property demand more for their property than its market value and will not sell for that value. Alaimo conceded that under the agreement Tsunoda could have fixed an exorbitant price, one which no buyer would pay, and that in such event he would have no right to complain. This illustrates the problem of the contract. Therefore the out ultimately decided against Alaimo and found that Tsunoda did not breach the contract and therefore did not owe Alaimo any money.

Contracts can be tricky. One word can alter its meaning therefore its important to have clear understanding of the terms before agreeing to the contract. Having an attorney review the contract with you before signing can help make sure you are clear on the terms before you are bound by them. If you are in the Sacramento area and in need of an attorney please contact our office.

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The Type of Contract You Have Dictates Your Options

May 19, 2013,

Real estate contracts generally fall into one if two categories. They are usually either land contracts or service contracts. This can be important if you need to go to court over a contract because the type of contract you have can limit the relief you may seek in court. For example, land contracts have strict requirements with very few exceptions. If your contract does not land within the requirements it may case regardless if who is at fault. Contracts that fall under the category of service contracts, however, have much more leeway.

Take for example, the case of Cochran v. Ellsworth. In this case, James Cochran (Cochran) is suing Earle Ellsworth (Ellsworth) for breach of contract because Ellsworth did not pay Cochran his commission for selling Ellsworth's property. Ellsworth was selling property located in Arizona but used real estate brokers located in California. Cochran learned about the property for sale and located a buyer for the property with Ellsworth's permission. Cochran found a buyer for the property, Dr. Fitzgerald, and with some negotiation, escrow instructions were written up. Ellsworth also had his attorney write up his agreement with Cochran which stated that Cochran would receive his commission in two parts upon the consummation of the sale of the property.

The parties concede that the escrow instructions constituted a binding contract of purchase and sale of the property. Dr. Fitzgerald deposited in the escrow a deed to his Long Beach home, ten thousand dollars in cash and his promissory note secured by a deed of trust on the Arizona property. He also paid the sum of four thousand dollars in cash outside of escrow for the stock of goods in the store located on the property. For this he received a bill of sale from Ellsworth. Dr. Fitzgerald took possession of the Arizona property, then, at some time undisclosed by the record, Ellsworth met all conditions required of him by the escrow.

The escrow was never closed because Dr. Fitzgerald served a notice of rescission upon Ellsworth, claiming fraudulent misrepresentations concerning the property had been made to him. Dr. Fitzgerald and Ellsworth handled their disagreement in a separate matter, ultimately settling. Cochran, however, was never paid his commission, which caused him to bring this case.

The main question the court had to answer is, under the given evidence, was the sale of the real property involved "consummated," so as to entitle the broker to his commission under a contract which called for payment of commission upon "consummation" of sale. Generally, a broker who has rendered all required services is not to be denied compensation due to the whims of a defaulting vendor or purchaser who arbitrarily refuses to perform under a sales contract. But Ellsworth and Cochran's agreement was not a standard agreement. Their agreement, specially prepared after negotiation, provided "in the event of consummation of the sale" a commission was to be paid, the first payment to be "at the close of escrow." Therefore two events had to occur before payment could be completed.

The first requirement, the close of escrow, did not occur because Dr. Fitzgerald chose to end the contract before escrow closed. Therefore, Cochran is not owed the first payment. Regarding the second requirement, previous California cases clearly hold that "consummation of the sale" means completion of the transaction, and where real property is involved, payment of the purchase price and conveyance of title. Where a broker has seen fit to allow payment of his compensation to be based on the performance of a contract between parties other than himself, he cannot complain if, through the nonperformance of that contract, his own rights are lost.

The sale could have been completed only upon payment of the purchase price, delivery of deeds conveying title and close of escrow. Those events did not transpire and therefore the sale was not consummated within the provisions of the agreement. Therefore Cochran had no right to commission payment and lost this case.

Having an attorney to review contracts with you before you sign them can be helpful. An attorney can let you know your options under the contract and alternatives in case you would like to negotiate the terms. If you have a contract or real este issue in the Sacramento area, please contact our office.

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Not All Contract Cancellations are Breaches of Contracts

May 13, 2013,

A real estate contract is like any other contract and only binds those who agree to it. When a party to an agreement does act as required under the agreement, the other party, or parties, usually have a few ways to deal with the breach of contract. Sometimes parties are able to work it out among themselves but other times, litigation is required. Any type of breach of contract case can be tricky. What one party considers a breach may be a misunderstanding of the contract or an excusable breach which means the non-breaching party could end up losing the case.

Take for example, the California case of Charles B. Webster Real Estate v. Rickard. In this case, Charles B. Webster Real Estate (Webster) is suing H. E. Rickard (Rickard) for commission from a real estate sale. Originally, Dr. Moore and his wife agreed to an exclusive right to sell listing with Warde D. Watson Realty Co., lasting approximately eighteen months. About halfway through the agreement, Warde D. Watson Realty Co. transferred this agreement to Webster, with Dr. Moore's permission. During the contract under Webster, Dr. Moore died, leaving the property as part of his estate, which was controlled by Rickard. Under the agreement with Dr. Moore, Webster would receive a commission regardless of who sold the pretty as long as the property was sold before the contract ended. Rickard sold the property after Dr. Moore's death and before the contract ended, but refused to pay Webster the commission.

A real estate contract creates an agency between the broker and the owner of the property. This is important because a real estate agent has the power to make binding agreements for the owner, as long as it is within the terms of their agreement. Because of the power a real este agent has, California laws at the time of this case had already settled that an agency is terminated by the death of the principal, Dr. Moore, unless the agent, Webster, has an interest in the property. Webster admitted that he did not have an interest in the property. The court found that, under California law, once Dr. Moore died, and under the current circumstances, the contract between him and Webster no longer existed. If, for example, Webster was in the middle of making the sale at the time of Dr. Moore's death, the court notes, there would be a strong case to allow him to complete the deal and receive the commission. In this case, however, because Webster was had not found a buyer, at the time of Dr. Moore's their contract was terminates. Once terminated, Webster could not ask Rickard to abide by it.

In the above case, time and money may have been saved if Webster had discussed his case with an experienced attorney before going to court. While under some circumstances, the estate is required to pay out debts, an attorney would have been able to explain why in this situation he may not win. There are no guarantees in litigation but working with an experienced attorney can help you bring your best case forward. If you are in the Sacramento area and have business or real estate related legal questions please contact our office.

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Are You Working with the Right People?

May 5, 2013,

Real estate agreements are are like any other contract. However, it is one of the few types of contracts that are required to be in writing. Because of this, any oral agreements or modifications that have anything to do with real estate can be very difficult to enforce.

Take for example, the California case of Tamimi v. Bettencourt. Fred Tamimi (Tamimi) was a real estate broker who had obtained listings of Mrs. Bettencourt's property on several occasions prior to obtaining an exclusive listing. The exclusive listing provided that if the property were sold by the owners themselves or through any other agent during the listing period, Tamimi would be entitled to a commission of six percent. During the exclusive listing period, Mrs. Bettencourt and her husband sold the property but did not give Tamimi his six percent commission. Tamimi brought this suit to recover his commission.

The central issue to the case is whether or not the fact the husband did not sign off in this agreement should effect the validity of the agreement. The property that was sold was community property, meaning it belonged to both the husband and the wife. Tamimi tried to claim, essentially, that the husband was liable for his wife's debts by nature of being married, therefore he should be equally responsible regarding the payment of the commission. The court disagreed with claim, because under California law, an oral authorization is sufficient for any purpose, except that an authority to enter into a contract required by law to be in writing can only be given by an instrument in writing. Because contracts regarding real estate must be in writing, the husband cannot be held liable for the agreement without his signature on the agreement.

Mr. and Mrs. Bettencourt argue that since the property could not be sold without the husband's signature it must follow that the listing is also unenforceable without his signature. The court, however, disagreed. The agreement at the heart of this case is strictly regarding commission. The sale of the property itself was handled by both of the defendants. It is assumed that the sale was completed properly and is not at issue in this case. Therefore, while the exclusive listing agreement is treated as a real estate agreement in that it must be in writing, it is not treated to all the same strict requirements of real estate contracts. A stand alone commission contract does not need to be signed by all owners of the property, but only those who sign it must abide by it. In this case it means at Mr. Bettencourt is not liable but Mrs. is responsible for paying the entire six percent commission fee to Tamimi.

Utilizing an attorney either for contract negotiations or to help as a final review can help you see issues you may have missed. This could help you save time and energy later. If you have a real estate or contractual issue in the Sacramento area, please contact our office.

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Do You Know the Terms of Your Contract?

April 28, 2013,

When entering any contract it is important know the terms of the contracts. When dealing with real estate contracts, it also important to make sure that the property is capable of being used for your intended purposes. A seller is not responsible if you ultimately cannot use the space for your intended purposes as long as he or she did not lie to you or misrepresent the property in some way.

Take for example the case of Hong v. Somerset Associates. In this case, Thomas Hong and his partners, (Buyers) sued Somerset Associates (Sellers) for fraud and an unreasonable liquidation clause. The Buyers intended to purchase the property as a commercial investment and rent out residential units. It was learned after the paperwork was signed that the Sellers had withheld information regarding the possibility of a rent control ordinance being enacted in the area. The Buyers wanted the contract rescinded, which cancel the contract as if it were never created. This would also cancel the liquidation clause which requires any party which breaches the contract to pay the other person twenty five thousand dollars in damages.

In the first part of the case the court decided that there was no fraud. While this is information that could effect the desire to purchase the building, it does not make renting out residential units impossible. Therefore, the sale of the building for the intended purpose was still proper and the Buyers could still use it. Ultimately, the court found that the Seller did not actually do anything fraudulent.

In the second part of the case the Buyers focused on the liquidation clause, claiming that it was unreasonable and therefore should be invalidated. Historically in California, liquidation clauses were disliked and therefore severely limited when tested in court. However, California laws have been updated with basic requirements for liquidation clauses in different types of contracts. Therefore, at the time of this case, as long as the clause met the statutory requirements it would most likely stand. The law required things such having the liquidation clause at a certain size so that it was noticeable within a contract and requiring all parties or their representative to initial by the clause as proof that they read it. The purpose of the additional law was to make sure all parties are aware of the clause and its consequences. In this case the contract met all statutory requirements, therefore without a valid reason to break the contract, the Buyer was required to pay the Seller damages for choosing the break the contract.

Real estate contracts can be especially difficult to navigate because there is always a possibility, however small, that changes in the area could effect your business. Market changes will always effect your business, whether it is worth picking up and moving your business is really up to you. An attorney can review your contract with you and help you choose your best options. An attorney can also be a great resource before signing a contract to help you decide if the terms of your agreement. If you are the Sacramento area and in need of a real estate attorney, please contact our office.

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What to do if your California Company is Suspended or Forfeited

April 21, 2013,

In California, a company can be suspended or forfeited by the Secretary of State (SOS) or the the Franchise Tax Board (FTB). The SOS usually suspends a corporation for improper filing. This usually occurs due to the failure to file the required Statement of Information and, when applicable, the required Statement by Common Interest Development Association. Under California law, a business is required to file a Statement of Information ever every year, or every other year. For your convenience, the business is usually sends a reminder post card about three month prior to the due date. You are also usually sent a delinquency letter if you miss the deadline, giving you and additional sixty days to get the statement filed, before your business is suspended. While the state does attempt to remind you of your filing date, it is still your responsibility as the business owner to submit your paperwork on time, and whether or not you have received the reminders has no bearing on this responsibility.

The FTB usually suspends a business either because the business failed to file one or more tax returns or the business failed to pay its balance. This balance can include the penalty incurred by not not filing your Statement of Information in a timely manner. This means a SOS suspension can also cause an FTB. Your business may be suspended by either the SOS, the FTB or both. It is your responsibility to check with both agencies when you try to revive your business.

If your business is suspended, it is important to revive it as soon as possible. You lose a lot of rights while suspended which can negatively effect your ability to both revive your business and run your business once revived. During suspension, the business loses its rights, powers, and privileges to conduct business in California. The business also loses the right to use its business name in California. This means that another business could register with the suspended or forfeited business' name, and the name would then belong to the other business. This would require the original business owner to register a new business name before it can revive its business. The business cannot initiate lawsuits, defend itself against lawsuits, or enforce its legal contracts. But other parties can enforce their terms in these contracts. Also, if the business enters contracts while suspended or forfeited, it can never enforce those contracts unless it obtains relief of contract voidability.

There are three ways to revive your business, determined by your type of suspension. If your suspension is by the SOS only, your business can be revived by filing a current Statement of Information with this office. A common interest development corporation must also submit a Statement by Common Interest Development Association together with the Statement of Information. If your business is suspend by the FTB only, you must contact the Board directly to determine how to revive it. Of you are suspended by both the SOS and FTB, you should first file a current Statement of Information with the Secretary of State and obtain a letter of proposed relief from suspension or forfeiture. Once you receive the letter from the Secretary of State, the business entity should complete an Application for Certificate of Revivor and submit the application along with a copy of the proposed relief letter to the Franchise Tax Board. The business entity will remain suspended by the Secretary of State until both the Secretary of State and Franchise Tax Board revivor requirements have been met. Information regarding the type of suspension can be obtained by ordering a status report.

Reviving a company after suspension can become time consuming and expensive. If your company has been suspended, call our experienced attorney to help you navigate the process.

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All Dreamers Welcome In Downtown Sacramento

April 19, 2013,

Dreaming of Opening A Business In Downtown Sacramento

Downtown Sacramento is the spot for entrepreneurs who bring innovation and development to the Sacramento area. Numerous unique and successful small businesses form the foundation of a vibrant and active downtown. The scope and breadth of small businesses in Downtown Sacramento truly enrich this vibrant downtown area and make Sacramento a wonderful place to live and work. Downtown Sacramento is filled with theater, art, culture, fashion and history. Kristina Reed recalls that "Being an active part of the innovation and growth of Downtown Sacramento was important to me when I selected Downtown Sacramento as the location to launch the Law Office of Kristina M. Reed in 2008. My passion is to provide entrepreneurs with quality legal services at rates that their emerging businesses can afford - helping someone's dream become a reality and grow into a successful business is the most rewarding service that I can provide to my community. "
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The Law Office of Kristina M. Reed is proud and excited to take part in the latest opportunity for small business growth in Downtown Sacramento by providing legal services to the winner of the Dreamers. Welcome. Competition. "Helping entrepreneurs achieve their dreams by providing an innovative small business the foundation needed for success is the exact reason that I opened the Law Office of Kristina M. Reed" says Kristina Reed. Winners of this Competition receive a prize package worth $125,000 to open their businesses in Downtown Sacramento.

For more information on the Competition: Dreamers. Welcome. Competition.



Rules of Professional Organizations Can Protect You

April 14, 2013,

Most people are aware that there are laws and statutes in place to keep order in society. There are, however, many types of rules and regulations in place to protect the public. For example, there are regulations and cases which expand upon the law, adding information so it is clear when certain laws are applicable. There are also rules in place for specific professions, such as doctors and lawyers. These rules are also in place to protect the public.

Take for example the case of Nelson v. The Department of Real Estate. In this case, Allen Nelson (Nelson) was attempting to appeal a decision by the Department of Real Estate (DRE) which resulted in his real estate license becoming temporarily suspended. In the original case, the DRE filed an accusation against California Consolidated Financial Services, Inc. (CCFS) and Nelson, the president of the company. CCFS was a licensed real estate broker through Nelson Andrew of its business was finding borrowers and helping them find loans. CCFS charged an advanced fee for its services as well as a finding fee if it succeeded in securing a loan for the customer. Under the DRE's Business and Professions Code, a real estate agent or licensee is required to place advanced payments in trust accounts, and may only be accessed as it is earned. Breaking this rule is subject to license suspicion. Nelson, tried to claim that the demanded fees were not advanced fees. The fees were listed in the contracts as preparation fees, made with the purpose of providing payment to CCFS for the act of searching for loans and negotiating terms. For this reason, Nelson claimed the fees were not advanced fees.

In deciding the case, the court looked to not only the DRE rules, but also the actions and intentions of the parties. The court found that although the fees were titled as preparation fees, in effect they were actually advanced fees. Part of the reason for this finding is because of evidence from at least two CCFS clients where one client asked for a small loan and had straightforward collateral and the other needed a larger loan and the collateral was made up of multiple properties, yet the preparation fee was the exact same price. Once the court decided that the fee in question was in fact an advance fee, the next issue was whether the money was handled correctly. One of the DRE's rules regarding advanced fees requires an accounting for advanced fees be provided to a client. This account must explain when the money was used and for which services. The is to allow the client to understand what his or her money is being used for and to keep the real estate licensee honest. Due to the lack of information provide to clients, the court held that Nelson and CCFS improperly held advanced funds making the suspension of Nelson's real estate license proper.

Sometimes people you decide to work with do not give you all the information you are entitled to, causing you to waste time and money. There are many rules and regulations out there with the intent to protect you but you may not know where to look. This is where an experienced lawyer can be a great asset. If you are looking for an attorney in the Sacramento area, please contact our Sacramento real estate attorney.


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Business Formation Matters

When Does the Lease End?

April 7, 2013,

Commercial lease can be difficult to negotiate. Residential leases are usually for one year or less, while commercial leases are often created for longer intervals. A longer lease is important in a commercial setting for many reasons. While individuals can buy a home, many businesses are never in a position to purchase all the space they need for the business. There are costs and benefits for both sides to consider when signing a multiyear lease.

The owner has the benefit of consistent rent for the duration of the lease and less often has to worry about the costs associated with finding new tenants. The building owner is also protect if the local real estate prices drop during the lease because the rent will not change. However, the owner may also lose money if local prices increase, because he will be unable to capitalize on it. The same issue, of course, applies to the renters as well. Also, having the ability to rent for multiyear terms, allows a business owner to make better decisions. The length of the lease may be a deciding factor regarding design decisions because at the end the lease you often have to revert the space to condition in which you received it. Some changes are just easier to remove than others.

Another factor that should be considered in a commercial lease is the possibility of the building owner selling the building. This can be an issue for the renter because depending on your lease and the goals of the new owner you could be kicked out sooner than expected which could harm your business. Take for example, the California case of Principal Mutual Life Ins. Co. v. Vars, Pave, McCord & Freedman. In this case, Vars, Pave, McCord & Freedman (VPMF) signed a five year lease for office space (the lease) in an office building owned by 16030 Associates (the landlord). She the end of the lease, VPMF chose to renew it for another five years. During the second lease, the landlord sold the building to Principal Mutual Life Insurance Company (Principal), the defendants. Within a year after the building was sold, VPMF decided to leave the office space. The issue in the case is whether there is a valid lease between VPMF and Principal.

In the lease signed by VPMF, there was an attornment clause. Attornment is the act of a tenant by which he agrees to become the tenant of the property's new owner. When a lease obligates a tenant to attorn to a new landlord in the event of a foreclosure, the terms of the attornment provision will govern how that is to occur and its effect on the existing lease. This case is complicated because even though the firm agreed to enter a new lease with a new landlord, the firm and the original landlord also agreed that the firm's lease would be automatically subordinated to any future encumbrances, which, by operation of law, end the lease in the event of foreclosure.

The court found that Principal was a third party beneficiary to VPMF's contract with the first landlord. A third party may qualify as a contract beneficiary where the contracting parties must have intended to benefit that individual, an intent which must appear in the terms of the agreement. The purpose of the attornment clause was to benefit any future owner, which in this case is Principal. A third party beneficiary may enforce a contract at any time before it is rescinded. If rescission has not occurred according to the statutory procedures, but the contract is instead terminated for some other reason, a third party beneficiary may still enforce the agreement. In this case the lease was never rescinded. It ended by operation of law, but the attornment clause was specifically designed to take effect upon the lease's end by foreclosure. Therefore, VPMF was required to sign a new lease with Principal as long as it was for the same terms as the original lease.

Before signing a contract, it is important to review it carefully. All agreements are a delicate balance between what you need and how much you are willing to pay for it. A business attorney can help you find the terms most beneficial to you. If you need a business lawyer in the Sacramento area, please call our Sacramento business attorney.

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Restrictive Agreements

March 30, 2013,

Building a business is not easy. It takes a lot of time, energy and money. But if you are lucky, you end up with a successful brand that stands for quality. At some point, you may want to sell your company, allowing it to live on and grow with someone else. If you do plan to sell your business, there are a lot of things to consider.

Take for example the old California case of Mahlstedt v. Fugit. In this case, C. A. Fugit sold his orchard heating business to J. F. Mahlstedt. For five thousand dollars, Mahlstedt received all salable goods used in the business, all machinery used in the business, patents for e heater and items used in advertising. Mahlstedt also received current customer information and promised to keep prices similar. Fugit also promised to refrain from entering into the orchard heater business as a manufacturer or owner in whole or in part, for a least ten years or to act as a salesman or representative of any orchard heater company. This case focuses on the last promise.

About four years after selling his business, Fugit partnered with Mr. Fabrey, who also manufactures orchard heaters in the same area as Mahlstedt's orchard. The created the Fugit-Fabry Company and advertised that the company was prepared to furnish replacement parts for orchard heating systems already installed or new systems. This use of the Fugit's name to sell heaters, prompted Mahlstedt to sue Fugit for failing to comply with the sales contract.

Fugit claimed that the ten year restriction in the agreement was invalid because it did not contain a location restriction. Most states do not like restrictive agreements, therefore they are held to strict requirements to make sure they are fair for all involved parties. Restrictive agreements require a reasonable time frame, locale and area of expertise. In this agreement the tries agreed to the time, ten years, and the area of expertise, manufacturing orchard heaters but not the local. The court decided at since the company sold was based in Los Angeles county, the contract to be limited to that territory, making the contract valid.

The next issue to be decided was whether Fugit was allowed to let Fabry use his name to sell in their new business. The court already concluded that Fugit sold his goodwill in his store to Mahlstedt because, in California, when a person sells the contents of a store and agrees not to engage in the same business in the same city as long as the purchaser continues in business, the contract is construed as carrying with it the good will of the business. Good will is essentially the reputation of the business. When a person transfers good will they may also transfer with it, the right of using the name under which the business is conducted. These, however, are two separate things. Therefore while the transfer of good will may be assumed, to transfer a name you must explicitly state it. In this case, the transfer of the name was not a part of the sales agreement. Accordingly, the court found that Fugit was allowed to use his name in business with Fabry as long as he does not solicit business on behalf of he company and is not in any way connected to the part of the business manufacturing and distributing heaters.

Restrictive terms in contract can be difficult to properly. Court do not like them and are wary of anything that may seem unfair. A business attorney can help you write a clear contract. If you need a business lawyer in the Sacramento area, please call our Sacramento business attorney.