CADC/RADC Venture 2011-1 LLC v. Bradley
235 Cal. App. 4th 775
| Cal. Ct. App. | 2015Background
- Plaintiff sought deficiency judgments on guaranties for the Nohea Napa loan ($2.1 million) secured by the Napa property.
- Defendants Bradley and Yates guaranteed the loan and waived anti-deficiency protections.
- Nohea was the borrower; No Boundaries initially owned the related interests and later Nohea was to transfer to No Boundaries for a 1031 exchange.
- Defendants used No Boundaries/Nohea as entities for tax planning; ownership/structure raised alter ego concerns.
- Charter Oak Bank approved the loan with expectation that Nohea would assume the loan; later FDIC took over and Midland/Sabal serviced, leading to foreclosure.
- Foreclosure sale occurred in 2012, after which plaintiff pursued a deficiency; trial and appellate proceedings followed, including a UCL counterclaim by defendants.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Are the guaranties shams barring enforcement? | Bradley/Yates were true guarantors | Guaranties were shams due to control by borrower | No; guaranties enforceable; not shams |
| Was there sufficient separation between borrower and guarantor to enforce guaranties? | There was legal separation; no alter ego | No boundaries between entities; alter ego applies | Not true guarantors; adequate separation exists |
| Did Charter Oak structure the loan to subvert antideficiency laws? | Structure aimed to circumvent laws via shell entities | No improper structuring; entity choice was defendants' | No evidence of subversion; equity did not support sham finding |
| Did plaintiff’s conduct support a UCL violation? | Enforcement of guaranties after foreclosure was unfair/unlawful | UCL claim predicated on improper conduct; lacks basis | UCL claim fails; judgment in favor of plaintiff on UCL affirmed |
Key Cases Cited
- River Bank America v. Diller, 38 Cal.App.4th 1400 (Cal. Ct. App. 1995) (lender’s structuring to avoid antideficiency laws can render guaranty a sham)
- Union Bank v. Brummell, 269 Cal.App.2d 836 (Cal. Ct. App. 1969) (subversion of anti-deficiency protections by title transfer to shell entity)
- California Bank & Trust v. Lawlor, 222 Cal.App.4th 625 (Cal. Ct. App. 2013) (noting lack of evidence of lender structuring to subvert antideficiency laws)
- Torrey Pines Bank v. Hoffman, 231 Cal.App.3d 308 (Cal. Ct. App. 1991) (criteria for determining guaranty alter ego issues and statutory aims)
- Cadle Co. II v. Harvey, 83 Cal.App.4th 927 (Cal. Ct. App. 2000) (guarantor waivers of anti-deficiency protections permit deficiency recovery)
- Prunty v. Bank of America, 37 Cal.App.3d 430 (Cal. Ct. App. 1974) (broad construction of anti-deficiency statutes to limit personal liability)