Legal Question in Real Estate Law in California

It varries from bank to bank. Most, however, are taking a very hard line.

I suggest sitting down with a competent real estate attorney and having him or her review the underlying transaction. First of all, you may have a defense that you are not a true guarantor. A true guarantor is a person or entity who is not already liable on the guaranteed obligation. The fact that the principal obligor and guarantor are not literally the same individual or entity is not dispositive. "The correct inquiry ... is whether the purported debtor is anything other than an instrumentality used by the individuals who guaranteed the debtor's obligation, and wehther such instrumentality actually removed the individuals from their status and obligations as debtors ...Put another way, are the supposed gurantors nothing more than the principal obligors under another name?" (River Bank America v. Diller (1995) 38 Cal.App.4th 1400, 1422.)

The fact that you mention that you are guarantors for your company are what raise this issue. For example, in Union Bank v. Dorn (1967) 254 Cal.App.2d 157, 158-159, the court found that the guarantors, who were the general partners of a primary obligor partnership were themselves principal obligors. Thus, the antideficiency rule of Code of Civil Procedure section 580d, prohibiting a deficiency judgment after a nonjudicial trustee's sale on the security applied, because they were supposed guarantors.

In River Bank, the case I set forth above, the court found that the guarantors were "supposed guarantors" and not true guarantors where the corporation was the primary debtor, and the debt was guaranteed by its shareholders and officers.

There are other issues, such as whether you signed waivers of anti-deficiency legislation (at one time called Gradsky waivers), and whether the waiver complied with the statute. There are many issues that I would want to look at, that I do not have the room to go into here, and which are not provided by your inquiry.

If your company is a corporation or an LLC, the stockholders or members will probably be treated as separate persons for purposes of finding them to be true guarantors. As you probably know, there is a legal theory called "alter ego" or "piercing the corporate veil" under which shareholders and members can be held personally liable by a plaintiff. However, veil-piercing cannot be used defensively; i.e., a defendant cannot assert that there is no real distinction between his corporation and himself.