Chandler, the Santa Rosa bankruptcy attorney hired by Madjlessi, is now trying to stop the foreclosure of the remaining six buildings based on the agreement made with Sonoma Valley Bank's president.
Eight days before the bank was seized by regulators, Cutting agreed to waive the bank's right to foreclose on the Petaluma apartments if Madjlessi's companies were able to repay $4.32 million of the still outstanding $11.2 million loan, according to documents filed in the bankruptcy case.
As part of their agreement, the bank promised not to pursue personal loan guarantees it had received from Greg Smith, Madjlessi's accountant; Martel Cooper, Smith's business partner; and Farr Hariri, Madjlessi's brother-in-law. All three were partners with Madjlessi in the various limited liability companies that received $11.2 million in loans from Sonoma Valley Bank.
They have found an outside buyer who is willing to pay nearly twice the current market value of the apartment buildings, Lonich said. If accepted by Westamerica Bank, the deal would erase the three partners' personal guarantees, he said. He declined to identify the potential buyer.
The arrangement between Cutting and Madjlessi, called a forbearance agreement, is now at the center of the lawsuit against Westamerica Bank.
The contract stated that Madjlessi's companies had until Dec. 31 to arrange the repayment - a deadline the companies did not meet.
However, Chandler filed a lawsuit in U.S. Bankruptcy Court on May 5 arguing the exact deadline was unenforceable, and his clients actually had "a reasonable time to pay the amount."
"There can be certain circumstances where it is reasonable to pay at a future date," Chandler said. "That's just the law."
UPDATED: Please read and follow our commenting policy: