Legal Question in Civil Litigation in California

You could be held to be responsible, unless it was not a "true" guarantee. There is case law that has held that where a corporation is the nominal primary obligor and the debt is guaranteed by its officers and shareholders, the guarantors may be considered the primary obligors. (River Bank America v. Diller (1st Dist. 1995) 38 Cal.App4th 1400, 1423-1424.) In that particular case, the court held that there was a factual issue that allowed Code of Civil Procedure section 580d to apply to protect the guarantors from a deficiency judgment, because they were not "true" guarantors, but the primary obligor by another name.

There are other defenses as well. In Union Bank v. Gradsky, the Second District Court of Appeal held that a lender COULD NOT recover the unpaid balance upon the note following the lender's nonjudicial foreclosure sale, based on reasons of estoppel, which destroys the guarantor's rights of subrogation against the primary debtor. "We hold that the creditor cannot recover from the guarantor the unpaid balance upon the note following the creditor's nonjudicial sale of the security" (Union Bank v. Gradsky (2nd Dist. 1968) 265 Cal.App.2d 40, 41.)

There are exceptions to this provision as well, such as when the guarantor signs what is commonly called a "Gradsy" or "Mariners" waiver. An attorney familiar with this area of law would need some more factual information and a review of the relevant underlying paperwork, to give you a definitive answer or to provide you with a defense against collection.

There are only two lawyers on Lawguru that I know who are familiar with this area: myself, and an attorney named Bryan Whipple. Outside of Lawguru, there was a fellow named John Hetland, who taught Real Estate at Berkeley, but I believe he has retired. both from teaching and the practice of law. My old boss was real familiar with this stuff, but he has retired and gone inactive, also, since being diagnosed with cancer.

That is the whole point of 'personal guarantees' - you are liable for the company's debt, but you also have use of any defenses the company may have. Get yourself a good litigation attorney, you need one.

Mr. Roach gives good information. Apparently, however, he is not aware that I have done commerical loan work-outs, and both debtor and creditor side commercial real estate debt collection work for over twenty years. If you would like a consultation at no obligation, to go over you paperwork and evaluate your options, please feel free to contact me.

Is this related to a tenant in common investment?

Best,

Daniel Bakondi, Esq.

[email protected]

415-450-0424

The Law Office of Daniel Bakondi, APLC

870 Market Street, Suite 1161

San Francisco CA 94102

http://www.danielbakondi.com

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