WHAT are friends for? Friends, of course, like to help each other. But to what extent and what favors can you ask from a friend? The client’s friend wanted to set up a restaurant. The friend was a chef who had just graduated from culinary school. His idea was to serve street food from his home country in a nice setting here in Southern California. That seems like a good idea. The friend chose a restaurant that had closed down and renovate it. The landlord agreed to lease the friend the premises if he could get another person to guarantee the lease of $20,000 a month because the friend’s creditworthiness was not good enough.
The client and friend had grown up together in their home country and went to the same high school together. They were not the best of friends, but let’s just say that they were good friends. The client migrated to Los Angeles first about five years ahead of the friend. Then the friend wrote to the client saying that he was going to attend culinary school in San Francisco. They met up with each other once in a while to catch up after the friend arrived. The Client brought the friend around Los Angeles, bringing him to Universal studios and Disneyland. The client also brought the friend to try many restaurants specializing in different cuisines. The client even brought the friend to very high-priced restaurants. He brought him to Mr. Chow in Malibu and paid $500 for dinner for two. Mr. Chow has excellent service — his purpose was to introduce high-class Chinese dining to the Brits, and he did it very successfully. Kudos to Mr. Chow. If you eat at Mr. Chow once a week, you will end up paying more than your mortgage payment every month. But it has a nice ambiance and the service is good.
So after Mr. Chow, the client then brings the friend to Nobu the next night. This is also in Malibu and owned by Robert De Niro who partnered with a Japanese chef. Let’s just say that if you have Mr. Chow for Chinese food, you have Nobu for Japanese food, you better be making at least $200,000 a year. The client was, in fact, well paid in his IT job. He does make close to $200,000 a year. He wanted to show his friend that he was doing well, and maybe the friend can get some ideas for his own restaurant from Mr. Chow and Nobu. The friend also comes from a wealthy family in their country of origin. So expensive dining is not a big deal for the friend.
Client guarantees friend’s restaurant commercial lease
The client agreed to personally guarantee the commercial lease for the friend’s restaurant at $20,000 a month for five years. The client did not have second thoughts about doing it for the friend thinking the friend would do the same for him in his time of need if that ever came about. The friend’s restaurant did well initially but after a couple of months, less and less customers showed up. Apparently, the friend’s cooking did not sell too well to the local taste. So after a year of operating the restaurant, the friend decided to call it quits. He tried to sell the restaurant but there were no takers.
The landlord sued the friend and eventually got a judgment against the friend for $400,000 on the unpaid lease of four years. Well, who in his right mind would pay $400K for the unpaid lease of a failed restaurant even if you come from a wealthy family abroad? The friend’s family is wealthy but not stupid. Not as stupid as the client who personally guaranteed the lease. Now here comes the landlord asking the client to pay the $400,000 because of his personal guarantee. Can the landlord collect from the client? Yes, of course, he can. Since the friend has not paid the $400,000 judgment, the client is now legally liable to pay the $400,000 based on his written personal guarantee. Written personal guarantees are completely legally enforceable. Verbal ones are not enforceable.
Obviously, the client doesn’t want to pay the $400,000 either. If he can qualify for Chapter 7, he needs a Chapter 7 discharge to get rid of the $400K liability so he can get a fresh start in life and be productive again. So watch out when somebody, a friend or relative, asks you to guarantee a lease or loan or whatever. Just say no, or forever regret your moment of weakness.
Son guarantees visiting father’s medical bills for stroke
The next client is only 30. His father came to visit him here in Los Angeles from their country of origin. The client did not have the foresight of getting father travelling medical insurance to cover any medical expenses that may arise during his visit. Unfortunately, the father had a stroke when the client brought him to see the Grand Canyon. The hospital bill to treat the father totaled $500,000. And with no insurance, the son had to sign for all of the $500,000. So if you have relatives coming to visit you, tell them or get them travel medical insurance. The son did not get his father this insurance so now he’s on the hook for $500,000. Chapter 7 will get him a fresh start by wiping out the $500,000 liability.
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DISCLAIMER: NONE OF THE FOREGOING IS CONSIDERED LEGAL ADVICE. EACH CASE IS DIFFERENT.
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Lawrence Bautista Yang specializes in Bankruptcy, Business, Real Estate and Civil Litigation and has successfully represented more than five thousand clients in California. Please call Angie, Barbara or Jess at (626) 284-1142 for an appointment at 20274 Carrey Road, Walnut, CA 91789 or 1000 S. Fremont Ave., Mailstop 58, Building A-10 South, Suite 10042, Alhambra, CA 91803.
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