Legal Question in Credit and Debt Law in California

Promissory Note, Collateral, full-recourse loan and collection

I had signed a promissory note for a full recourse loan with my previous employer, to purchase some shares of the company, in-order to early exercise some stock options. The shares were then pledged as a collateral.

I'm no longer working for that company and they are asking me to payback the loan. I'm asking them to just take the shares that they hold as collateral. The clause in the 'pledge agreement', allows them to take a full recourse and/or sell/re-purchase those shares in the collateral.

We are in California and the pledge mentions that they will act within the framework of California Commercial Code.

My question is ...

If they send a collection agency or goto court, will I be forced to pay the loan amount from my bank account, if I have that amount in my account?

Can't they first recover from the collateral and then I pay the remaining amount, if any?

Arent my liabilities restricted to the collateral?


Asked on 6/08/02, 11:21 am

1 Answer from Attorneys
Larry Rothman Larry Rothman & Associates

Re: Promissory Note, Collateral, full-recourse loan and collection

While the Uniform Commercial Code is generally followed, the terms of the agreement are important. If you fax me your agreement to 714 363 0229, I will call you and provide you with free consultation.

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Answered on 6/08/02, 5:08 pm


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