Macdonald | Fernandez LLP

MACDONALD | FERNANDEZ LLP


221 Sansome Street
San Francisco, CA 94104
Telephone: (415) 362-0449
Facsimile: (415) 394-5544
914 Thirteenth Street
Modesto, CA 95354
Telephone: (209)549-7949
Facsimile: (209) 236-0172

Tuesday, July 30, 2013

Assets Excluded From Personal Guarantee Did Not Extend to Proceeds

In Series AGI West Linn of Appian Group Investors De LLC v. Eves, 13 C.D.O.S. 6177 (1 Dist. Cal. App. 2013), the court upheld a ruling that a personal guarantee that excludes a particular asset from the reach of the creditor does not also exclude the sale proceeds of that asset without specific terms to that effect.  Specifically, the personal guarantee of a $3.1 million loan provides that "the personal guarantee may only be collected from assets not expressly excluded" as provided on an attached schedule, including the guarantor's residence.  The agreement and the attachment did not mention the proceeds of any sale of the residence.  Strictly interpreting the contract, the court held that it could not read in an implied term where the contract provided that only assets specifically identified would be excluded.  In light of this opinion, it will be important for borrowers and lenders to consider specific language extending excluded assets to sale proceeds, rents and profits, commingled funds, exchanged assets (as in a 1031 exchange) and the proceeds of loans secured by such assets.


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