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October 16
1853 - Sarah Gifford, community leader and wife of Newhall's first railroad station agent, born in England [story]


Commentary by Carl Kanowsky, Esq.
| Friday, Jan 3, 2014
Carl Kanowsky, Esq.

Carl Kanowsky, Esq.

Areg Khachikian owned a 2000 Bentley but still owed the finance company, Los Angeles Federal Credit Union, a ton of money. (As you might know, buying a Bentley is a bit more of a commitment than purchasing a Honda Civic.)

Areg bought the luxury mobile in August 2008, with the credit union providing $136,000 in financing. Importantly, Areg got car insurance through Allstate but did not name the credit union as an insured, and the credit union never followed up to make sure it was added.

Who knows? Maybe Areg got a great deal on the car – or else he’s a poor driver – but shortly after buying the car, it needed repairs. Areg went to a body shop owned and operated by Edgar and Elvis Madatyan to get an estimate for repair. The Madatyans said there was $40,000 in damage.

Areg, being an enterprising man, sent the estimate to Allstate. Allstate confirmed the extent of the damage and agreed to pay the $40,000. Now, this is where it gets interesting.

Allstate sent Khachikian a check for that amount, naming Khachikian and the body shop as payees, but not the credit union.

Then, according to the Court of Appeal decision, “Khachikian took the insurance check to the body shop and asked Edgar to endorse it. Edgar went with Khachikian to Bank of America to obtain a signature guarantee of Edgar’s endorsement. Edgar endorsed the check on behalf of the body shop. Khachikian left the bank without cashing the check. Edgar did not know Khachikian before Khachikian brought his car to the body shop. Edgar did not know that the credit union had a lien on Khachikian’s car before he endorsed the check.”

Apparently after going to Bank of America, Edgar never saw Areg again, and the Madatyans never did any work on the car. The $40,000 check was cashed, however.

Areg stopped making the car payments. The credit union repossessed the Bentley and subsequently learned that the car actually needed $47,000 worth of repairs. Areg then declared bankruptcy.

The result? Areg got to use a $100,000-plus car for several months, apparently for free, and then pocketed $40,000 for repairs that never happened. And, I guess, even though the decision does not say this, Areg escaped paying anything on the car by filing bankruptcy.

What happened to the Madatyans? They got sued by the credit union for conversion of the insurance check. And, perhaps surprisingly, the trial court and the Court of Appeal both agreed that the Madatyans had to pay back the $40,000 to the credit union.

“The trial court found that by assisting Khachikian in negotiating the insurance check, defendants ‘interfered with the (credit union’s) right’ and therefore defendants were liable for conversion.”

I don’t know how you feel, but the result bugs me. From the description in the court’s opinion, it sounds like Areg committed insurance fraud but got away with it and even got bankruptcy protection.

Yes, the credit union got the shaft (no automotive pun intended) – but then, it should have made sure it had been named on the insurance policy. Its failure to do this led to Allstate not including the credit union on the check.

Certainly, Edgar never should have gone to BofA with Areg, but is the appropriate result that Edgar now owes the credit union $40,000? What do you think?

 

Carl Kanowsky of Kanowsky & Associates is an attorney in the Santa Clarita Valley. He may be reached by email at cjk@kanowskylaw.com. Nothing contained herein shall be or is intended to be construed as providing legal advice.

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3 Comments

  1. If they can’t get it from one, they’ll take it from the other payee. Both intended to defraud the insurance company, both are liable. Appropriate? Yes. But it is also “appropriate” both should go to jail for insurance fraud. Just because one gets away with something does not alleviate the other’s responsibility. And bankruptcy should not protect Areg from criminal prosecution. You will hear about Areg again because he got away with this, but it’ll be for something grander next time.

  2. What? He just did the same thing the big banks did.

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