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News & Press: Court Cases

Guaranties: LSREF 2 Clover Property LLC v. Festival Retail Fund 1

Tuesday, October 18, 2016  
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After a trustee's sale plaintiff lender filed an action against defendant guarantor to recover under a guaranty. The court reversed the trial court's ruling that defendant was protected by antideficiency laws because defendant owned the debtor so that defendant was effectively the primary obligor on the loan, making the loan guaranty a sham. The court held that in order for the sham guaranty defense to apply, the lender must have structured the loan transaction to circumvent the antideficiency law by casting defendant as the guarantor instead of the borrower. Here, by the time plaintiff was requested to make the loan, defendant had already created the structure under which a special purpose entity owned by defendant would hold title, and the lender merely complied with an already-determined structure.

Cal.App. 2nd Dist. (B259937) 10/4/16


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