July 22, 2013
attorneys regularly represent and defend
borrowers and guarantors in lender-initiated lawsuits. This litigation often involves the defense of prejudgment attachment proceedings that are ancillary to guarantee and judicial foreclosure actions. We begin the process of representation by a preliminary review of our prospective client's case and possible defenses to any lender action. A part of this review is securing an understanding of the terms of the loan agreement, promissory note, deed of trust and commercial guaranty that are typically included in commercial real estate loan documentation. We are regularly asked to review cases rife with the elements of lender-initiated sham guarantees.
The sham guaranty defense in commercial
real estate loan litigation
is based upon the principle that a borrower cannot also be the guarantor of his own debt. The essence of the defense is that the documents have been structured so that the guarantor has become the
borrower - in
a borrower entitled to the unwaivable anti-deficiency protections afforded by statutory and case law.
law has been trending toward a more expansive protection of de facto borrowers even if they are nominally designated as guarantors in lender documents. These protections are intensively fact-based. Facts that must be addressed in any guarantor defense include whether the borrower functioned as a genuine entity as distinguished from a mere shell. This can easily arise when a borrower is an inter-vivos or living trust and the guarantor is the settlor, trustee and beneficiary of the trust. There are numerous additional inquiries that must be made to gain a full understanding of whether the lender purposely structured the loan transaction to preclude the guarantor from the protections of
About Hackard Law, a Professional Law Corporation
Hackard Law, a Professional Law Corporation, focuses on transactional and litigation matters.
Michael A. Hackard
is the principal attorney of Hackard Law - a
law firm representing families with extensive business interests as well as clients impoverished by others' wrongdoing. For information about
Michael A. Hackard
, please visit:
10630 Mather Blvd.
Sacramento County, CA
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