What If Your CCP 998 Offer is Silent on Costs?

By: Tony Carucci

In California, the “prevailing party” in litigation is generally entitled to recover its costs as a matter of law. See Cal. Code Civ. Proc. § 1032. But under California Code of Civil Procedure section 998, a party may make a so-called “offer to compromise,” which can reverse the parties’ entitlement to costs after the date of the offer, depending on the outcome of the litigation. Cal. Code Civ. Proc. § 998. The potential payoff of a 998 offer is that “If an offer made by a defendant is not accepted and the plaintiff fails to obtain a more favorable judgment or award, the plaintiff shall not recover his or her postoffer costs and shall pay the defendant’s costs from the time of the offer.” Cal.… Read More »

Author: acarucci | Leave a comment Tagged , , , , , , , ,

Share this Article:

Franchisors Should Consider Signing a Conditional Lease Assignment Rather Than a Franchisee’s Lease

By:  Richard H. Herold

In Franchise & High Properties, LLC v. Happy’s Franchise, LLC, a 2015 decision issued by the Court of Appeals in Michigan, the franchisor, Happy’s Pizza Franchise, LLC, signed a five-year lease for the commercial space to be occupied by its franchisee, Happy’s Pizza #19, Inc.  The franchisor did so to secure a right of first refusal to purchase the property and to enforce the franchise agreement to have the lease assigned to the franchisor if the franchisee defaulted.

The issue in the case was whether the term “tenant” referred solely to Happy’s Pizza #19 or whether it also included Happy’s Franchise as a co-tenant. … Read More »

Author: Richard Herold | Leave a comment Tagged , , , , ,

Share this Article:

California’s One-Action Rule May Apply to Federal Lenders

By: Anthony J. Carucci

California’s one-action rule provides that “[t]here can be but one form of action for the recovery of any debt or the enforcement of any right secured by mortgage upon real property or an estate for years therein . . . .” Cal. Code Civ. Proc. § 726(a). In other words, the one-action rule prescribes that the only process for recovery of a debt secured by a mortgage or deed of trust is to foreclose on the lien. The rule aims to prevent a multiplicity of actions and vexatious litigation, and to force a beneficiary to look to all of the security as the primary fund for payment of a debt before looking to the trustor’s other assets.… Read More »

Author: acarucci | Leave a comment Tagged , , , , , , , , , ,

Share this Article:

Guarantors’ “Lost Profits” Completely Offset Lender’s Deficiency Claim

By: Ben Reeves

Believe it or not, lenders can breach loan agreements too…and when they do, there can be significant consequences. In Great Western Bank v. LJC Dev., LLC, 726 Ariz. Adv. Rep. 21 (Ariz. Ct. App. Nov. 10, 2015), the Court of Appeals affirmed that guarantors’ “lost profits” resulting from the lender’s breach of a loan agreement completely offset the amount owed under the guaranty. Much can be learned from this unusual outcome, so please continue reading for an analysis of the facts and legal principles of this case.

The Loan Agreements

In Great Western Bank, the bank entered into an acquisition and development loan (the “A&D Loan”) with Cedar Ridge Investments, LLC (“Borrower”) to allow Borrower to acquire and begin the development of infrastructure for a fifty-home subdivision in Flagstaff, AZ to be known as Cedar Ridge.… Read More »

Author: Ben Reeves | Leave a comment Tagged , , , ,

Share this Article:

Guarantor Waivers Narrowed

By:  Lyndsey A. Torp and Sean M. Sherlock

A general waiver by a guarantor of “all defenses” does not actually waive “all defenses.”   California Bank & Trust v. Del Ponti, — Cal.Rptr.3d —, 2014 WL 6908141 (Cal.App. 4 Dist.).  That was the holding in a recent opinion wherein the California Court of Appeal affirmed judgment against a lender, holding that the bank could not recover on its loan guaranties because it had breached the underlying loan agreement.

In California Bank & Trust v. Del Ponti, borrower obtained a construction loan from Vineyard Bank (which was later assigned to California Bank & Trust) to develop a townhome project, with guaranties from two principals of the borrower. … Read More »

Author: Sean M. Sherlock | Leave a comment Tagged , , ,

Share this Article:

Guarantors Score Two Victories Before the Nevada Supreme Court.

By:  Bob Olson and Nathan Kanute

On May 29, 2013, the Nevada Supreme Court issued two decisions that all real estate lenders need to be aware of because they have the potential to eliminate the ability of a lender to recover a deficiency judgment from a guarantor.

In Nevada it is common for lenders to commence foreclosure proceedings and, at the same time, sue all guarantors that have waived the benefit of Nevada’s one-action rule for the full amount of the debt they guaranteed.  Often the foreclosure sale will occur before lender obtains a judgment against the guarantor.  In Lavi v.Read More »

Author: Bob L. Olson | Leave a comment Tagged , , ,

Share this Article:

Unmitigated Waivers: Guarantors Remain Liable Despite 4-Year Delay in Foreclosure Sale

debt clockBy:  Ben Reeves

If a lender delays foreclosure allowing years of default interest to accrue such that a guarantor’s obligation increases from $6 million to $12 million, should the guarantor remain on the hook for the full $12 million?  In Pi’ikea, LLC v. Williamson, 683 Ariz. Adv. Rep. 32 (Ct. App. 2014), the Arizona Court of Appeals recently confirmed that if the guarantor waived the “mitigation of damages” or “impairment of collateral” defense in its guaranty contract, then the answer is an unmitigated YES.

The Facts

In 2004, TBM Equities, LLC borrowed $5,922,000 to build an apartment complex in Tucson, AZ. … Read More »

Author: Ben Reeves | Leave a comment Tagged , , , , ,

Share this Article:

Guarantors Beware! A.R.S. § 33-814 May Not Save You from a Deficiency Judgment

By:  Ben Reeves

In First Credit Union v. Courtney, 309 P.3d 929, 669 Ariz. Adv. Rep. 18 (Ct. App. 2013), the Arizona Court of Appeals rejected three creative arguments that A.R.S. § 33-814 protected the guarantors from paying on their guaranty.  The opinion provides a stark reminder that Arizona courts will usually enforce a guarantor’s contractual obligation to repay a debt.

In 2006, First Credit made a $3.56 million construction loan to Orange Grove I, L.L.C. (the “Borrower”).  First Credit secured the loan with a lien against commercial real property called the Appian Estates.  The Courtneys guaranteed repayment of the loan. … Read More »

Author: Ben Reeves | Leave a comment Tagged , , ,

Share this Article: