i BOUGHT A BUSINESS IN 2005. i AM SUEING THE SELLERS, AND THE BROKERS FOR MISREPRESENTATION OF A MATERIAL FACT (THEY OVERSTATED THE BUSINESS INCOME). I RELIED ON MY BROKER TO PERFORM THE PROPER "DUE DELIGENCE" IN EXAMINING THE DOCUMENTS PRESENTED. THE FINANCIALS WERE DOCTORED TO REPRESENT MORE THAN $300,000 MORE THAN THE BUSINESS ACTUALLY DID. I BOUGHT THE BUSINESS BASED ON THOSE FICTITIOUS DOCUMENTS. THE SELLERS ALSO ASSIGNED THEIR LEASE FROM THE LANDLORD TO ME WHO WAS ACTUALLY THE PREVIOUS OWNER OF THE BUSINESS AND PARTICIPATED IN THE NEGOTIATIONS WITH THE BROKER FOR ME TO BUY THE BUSINESS. THE LEASE IS 35% OVER MARKET FOR THE AREA. I AM NOW IN CHAPTER 13 PROCEEDINGS AND MY LANDLORD HAS FILED AN UNLAWFUL DETAINER. (I STOPPED PAYING RENT BECAUSE THE BUSINESS INCOME CAN NOT SUPPORT THE RENT PAYMENTS) CAN I HAVE THE UNLAWFUL DETAINER STAYED IN BK UNTIL THE FRAUD LAW SUIT IS SETTLED IN STATE COURT. ALSO, CAN I HAVE THE RENT WHICH I CONTEND IS 35% OVER MARKET VALUE STAYED AS WELL FROM THE 13 PLAN?
2 Answers from Attorneys
If you are in Chapter 13 bankruptcy, then the landlord is already stayed from filing the unlawful detainer. If your business is a separate entity from you, and you are personally in the bankruptcy then your personal bankruptcy does not create a stay, unless you individually are a guarantor, or codebtor on the lease. Then you would have protection from the co-debtor stay. From the description you have a lot of issues to consider, such as statute of limitations. Depending on the type of bk, you may be able to reject the lease out right. You may also bring your action as an adversary proceeding in the bk, and get an injunction, even if the landlord has relief from stay. You need an attorney to get these details and propose a solution for this. The fact the landlord participated in the negotiations alone, does not sound like fraud. Usually in a sale of business the landlord has to participate to allow the assignment of the lease. You seem to suggest the landlord had a duty to disclose the financials of the business seller. So, again, you need to have an attorney knowledgeable in commercial transactions, and bankruptcy to review this matter.
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Daniel Bakondi, Esq.
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San Francisco CA 94102
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