Bradley

INTRODUCTION

Plaintiff CADC/RADC Venture 2011-1 LLC brought this deficiency action to enforce commercial guaranty agreements executed by defendants Richard J. Bradley and G. Reynolds Yates. Defendants argued the guaranties were shams, and therefore unenforceable, due to their close relationship with the borrower on the subject loan, Nohea Napa Gateway, LLC (Nohea). Defendants in turn brought a counterclaim against plaintiff, as well as its servicing agent, Sabal Financial Group, LP (Sabal), asserting their attempts to enforce the guaranties constituted an unfair business practice in violation of the unfair competition law (UCL) (Bus. & Prof. Code, § 17200 et seq.).

Under California law, a lender may not pursue a deficiency judgment against a borrower where the sale of property securing a debt produces proceeds insufficient to cover the amount of the debt. Lenders may pursue deficiency judgments against guarantors, but only true guarantors. Where the borrower and the guarantor are the same, however, the guaranty is considered an unenforceable sham.

Here, the jury found in favor of defendants on the sham guaranty issue, and the trial court rejected defendants’ UCL…