Archive for March, 2011

Coldwell Banker Mortgage Loses $21 mil Verdict Over Mishandling of Soldier’s Mortgage Payments

A Columbus, Georgia federal jury reached a verdict against PHH Mortgage Corp which does business as Coldwell Banker Mortgage. The jury awarded Staff Seargent David Brash over $21 million in damages consisting of $1 million in emotional distress damages and $20 million in punitive damages.

Brash bought a home 2007 with a mortgage loan from Coldwell Banker. His monthly mortgage payments were automatically withdrawn from his account each month with no problems. In 2009, he suddenly began receiving late notices from the mortgage company even though his payments were continually taken out of his account on time.

In something that has become all too familiar to consumers all over the country, Brash then embarked on an odessey of dealing with Coldwell Banker’s customer service department which outsourced most of its calls to India. Despite assurances by customer service representatives that the issue had been rectified, the mortgage servicer continued to treat the payments as being late.

Coldwell Banker eventually reported Brash as being late to the major credit reporting agencies. Brash alleged that he was then denied credit based on the negative reporting by his local bank.

Brash sued the mortgage servicer in a Georgia federal court for violations of the Real Estate Settlement and Procedures Act (RESPA), breach of contract and negligent loan servicing. The jury awarded him $1 million for the emotional distress that the servicer put him through, his attorneys’ fees and also ordered $20 million in punitive damages.

Brash’s lawyer told Georgia’s WTVM 9: “This soldier was never behind on his payments. They were taking his money and not crediting it properly. I think the jury and everybody has had this experience before with the call center and they’re fed up with it. They started to make his credit delinquent. They wrote him letters saying he was behind on his mortgage and it affected his credit. And by affecting his credit, he got turned down for credit cards and was worried he’d get in trouble with the Army.”

PHH Corporation issued a statement saying that it takes its responsibilities to borrowers seriously, but that it believes the verdict is not supported by the facts and that it intends to seek further judicial review of the case.

Brash’s case should be heeded as a warning to the mortgage servicing industry and for business owners in general. Business owners need to be aware that punitive damages are available in many different states where there has been intential and reckless conduct.

Attorney Andrew Garcia, Your SouthCoast Business Attorney

Attorney Andrew Garcia, your SouthCoast Business Attorney, is a principal of Phillips Garcia Law. He’s created a Business Legal Planning system that will walk you through the process of forming your Massachusetts corporation. Locally he has appeared live on WBSM-AM radio and nationally on NBC’s Today Show and Fox’s Fox & Friends program. If you are interested in learning more about his Business Legal Planning services, just contact him at agarcia@phillipsgarcia.com or by calling (508) 998-0800.

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My Business Partner Died, What Happens to My Business? A Buy Sell Agreement Will Help You Navigate Through These Troubled Times

I’ve seen it really happen. I was representing the seller of a successful contracting business. He was selling to two guys who’d been working in it for years. They were both in their forties and had families. They financed most of the purchase from the former owner and even signed mortgages on their houses to secure the promissory note.

They were excited and ready to take the business to the next level. I remember sitting at the conference room table and commenting to them, that they should get a buy-sell agreement in place. They responded that they would at some point. They just wanted to get the business growing and making more money.

A year later, I received a call from one of the young men. With sadness in his voice he told me that his partner had just died in his sleep from a massive heart attack. After consoling him for a few minutes, I asked if they’d ever gotten that buy sell agreement in place.  He said no, we never got around to it. Then he asked me, what was going to happen to his business.

Well, I couldn’t give him a lot of advice because I still represented the seller. But, I can say that over two years later, the surviving owner is still embroiled in litigation with the wife of his deceased partner and his business continues to struggle.

If you’re in business with a partner, what happens if one of you dies, becomes disabled, leaves the business or there is a dissolution?

Without a buy sell agreement, the remaining partner could be left with years of litigation with a surviving spouse or could be forced to sell out because he’s unable to raise the money to buy out a departing partner.

What is a buy-sell agreement?

A buy sell agreement defines what happens when one of the “four Ds” triggering events happens: death, disability, departure or dissolution. The agreement spells out an agreed-upon formula for what happens, what value is received on all sides and how that value is received. It generally calls for the survivors to buy — and their heirs to sell — the deceased owner’s share in the business.

When a business partner dies, the business is usually left in turmoil. With a properly drafted buy sell agreement, the surviving partner and the surviving heirs of the deceased partner will be left with one less struggle with which to deal.

Attorney Andrew Garcia, Your SouthCoast Business Attorney

Attorney Andrew Garcia, your SouthCoast Business Attorney, is a principal of Phillips Garcia Law. He’s created a Business Legal Planning system that will walk you through the process of forming your Massachusetts corporation. Locally he has appeared live on WBSM-AM radio and nationally on NBC’s Today Show and Fox’s Fox & Friends program. If you are interested in learning more about his Business Legal Planning services, just contact him at agarcia@phillipsgarcia.com or by calling (508) 998-0800.

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Buy-Sell Agreements: Why does your business need one NOW?

Without having a Buy Sell Agreement in place, your business could be in jeopardy.

Do you have a business partner? If so, would you have ever married your partner’s spouse? Well, by not having a buy-sell agreement in place, you could be engaged to him or her right now without even knowing it.

Starting a business with a partner is like getting married. It’s magical and exciting. You have all the best intentions when you go into it. And, like a marriage, sometimes all goes well and it works out for years, but other times it ends up in divorce.

That’s where a buy-sell agreement comes in.

A buy-sell agreement to a business is like a prenuptial agreement to a marriage; it defines the division of the interests in the business when some triggering event occurs. Common triggers are the death, disability or retirement of an owner; and, even when one owner just wants to leave the business.

Experience has shown that owner disputes that arise when one of these triggering events happen can drag on for years and cost the business and owners thousands of dollars in expenses and fees that they could have otherwise avoided. And, business disputes, like divorce disputes, are emotionally draining. With a buy-sell agreement most owner disputes can be avoided.

A buy-sell agreement is a binding contract between the owners. A well drafted buy-sell defines the triggering events, sets out who can buy the departing owner’s interest and how that value is established. It will also layout the terms of any buyout.

The buy-sell also helps preserve the continuity of ownership and ensures that everyone, the company, the departing owner and those continuing on in the business, is treated fairly. For example, when an owner dies unexpectedly a business is usually left in turmoil while it recovers from the sudden loss of one of its principals. There are usually gaping holes that the company must overcome while the responsibilities of the deceased owner are covered by other partners or employees. The owner’s family is also in turmoil over the loss of their loved-one and perhaps the “bread winner” of the family. A buy-sell agreement, though, will clearly outline how the surviving owners will buy-out the heirs of the deceased owner so that the business can continue to function more smoothly during these troubled times and avoid a long, drawn out dispute.

Buy-sells can be in the form of a cross-purchase plan (where the other owners buy the interest of the departing owner) or a repurchase/stock redemption plan (where the business actually buys the interest). It can even be funded with life insurance or can establish flexible payment terms. The agreement can provide for a down payment on the buy-out price with an installment payment plan at a reasonable interest rate.

Buy-sells are a significant benefit for a business owned by multiple owners. While the buy-sell does cost the business some money up front in the form of legal fees and insurance premiums (if funded with life insurance), the cost is worth it because it’s an insurance policy against trouble.

Attorney Andrew Garcia, Your SouthCoast Business Attorney

Attorney Andrew Garcia, your SouthCoast Business Attorney, is a principal of Phillips Garcia Law. He’s created a Business Legal Planning system that will walk you through the process of forming your Massachusetts corporation. Locally he has appeared live on WBSM-AM radio and nationally on NBC’s Today Show and Fox’s Fox & Friends program. If you are interested in learning more about his Business Legal Planning services, just contact him at agarcia@phillipsgarcia.com or by calling (508) 998-0800.

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