Overview

Overview

Legal

The creditor contended that he submitted written objections to the deposition testimony but did not expressly assert the objections after the bankruptcy court indicated that the objections would likely be overruled. The district court held that supplementation of the record to include the objections was not warranted since the creditor waived his right to raise any issue concerning the admissibility of the deposition testimony by failing to request a ruling on the objections. The bankruptcy court did not consider and decide the objections, and the creditor thus failed to preserve the objections for appeal. Parties’ litigation attorney California appeal.

Outcome

The creditor’s motion to supplement the appellate record was denied.

Procedural Posture

In plaintiff bank’s state court action against defendant borrowers, the borrowers cross-claimed against their attorney and loan broker, alleging common law tort and California and New York statutory violations. The case was removed to the United States District Court for the Northern District of California, which dismissed the main action and denied the motion of the attorney and loan broker for summary judgment.

Overview

The court applied California law to the borrowers claim for breach of fiduciary duty. The court found there was an attorney-client relationship between the borrowers and the attorney, who should have told the company that he was not acting as its attorney. The attorney also violated several fiduciary obligations to the borrowers as former clients. The attorney learned in confidence of the borrowers’ weak financial condition and used this information to induce them into the loan transaction, which he knew would be detrimental to them. The attorney also breached his fiduciary obligation to his former clients with misrepresentations and material omissions about the loan transaction. Even though the borrowers did not read the loan agreement, the attorney’s conduct was the proximate cause of the borrowers’ injury. The court voided the loan agreement and ordered the broker to return the borrowers’ stock held by the broker plus any earnings from the stock. The court held the attorney and loan broker violated New York law and awarded the borrowers compensatory and punitive damages and attorney fees.

Outcome

The court entered judgment in favor of the borrowers, awarding them compensatory and punitive damages and attorney’s fees, voided the loan agreement, and imposed a constructive trust on the borrowers’ stock.