Central District Consumer Bankruptcy Attorney's Association

It's my understanding that the "sham guaranty" defense may apply when a
creditor sets up a loan and guaranty transaction in such a way so that it
works as a run around the antideficiency laws with respect to real estate
such that the guarantors essentially end up being sued for the deficiency
rather than as true guarantors. In such a situation, the court can find
the guaranty to be a "sham" such that it is not enforceable.
Is anyone aware of any similar defense to a personal guaranty when there is
no real estate involved but it's clear that the lessor never intended to
rely on the assets of an LLC but instead the guarantors were really the
main obligors? I have an equipment lease agreement between two companies,
and 3 personal guaranties. There appears to be no security for the lease
agreement other than the personal guaranties. It's clear that the lessor
was really relying on the guarantors rather than the LLC who signed the
lease since the LLC had not yet done business and had no assets.
The Lease has "come hell or high water" clause which under article 2A of
the UCC is enforceable and means that even if the goods don't work, the
lessee still has to pay the contract price. The contract waives every
defense. In a commercial context, such provisions are harsh but enforceable
though they would likely not be in a consumer context. The only thing we
can argue is fraud in the inducement, and that's what we've done, but if
there is some other way to knock out these guaranties, I am all ears. (The
lessor sued the LLC and the guarantors but is not pursing the LLC because
it's dead.)
Does anyone have experience with commercial personal guaranties and any
insights here? If so, please email me or give me a call. My experience
from working at Frandzel Robbins a while back tells me that when someone
signs a personal guaranty they're prettymuch toast, but I could be wrong.
Holly Roark
Certified Bankruptcy Specialist*
holly@roarklawoffices.com **primary email address**
www.roarklawoffices.com
Central District of California
Consumer Bankruptcy Attorney
1875 Century Park East, Suite 600
Los Angeles, CA 90067
T (310) 553-2600
F (310) 553-2601
*By State Bar of California Board of Legal Specialization
**For a quicker response, email me at holly@roarklawoffices.com.
I only use gmail for my listservs, and am likely to miss private emails
directed to my gmail account.**
It's my understanding that the "sham guaranty" defense may apply when a creditor sets up a loan and guaranty transaction in such a way so that it works as a run around theantideficiency laws with respect to real estate such that the guarantors essentially end upbeing sued for the deficiency rather than as true guarantors. In such a situation, the court can find the guaranty to be a "sham" such that it is not enforceable.
Is anyone aware of any similar defense to a personal guaranty when there is no real estate involved but it's clear that the lessor never intended to rely on the assets of an LLC but instead the guarantors were really the main obligors? I have an equipment lease agreement between two companies, and 3 personal guaranties. There appears to be no security for the lease agreement other than thepersonal guaranties.It's clear that the lessor was really relying on the guarantors rather than the LLC who signed the lease since the LLC had not yet done business and had no assets.
The Lease has "come hell or high water" clause which underarticle 2A of the UCC is enforceable and means that even if the goods don't work, the lessee still has to pay the contract price. The contract waives every defense.In a commercial context, such provisions are harsh butenforceable though they would likely not be in a consumer context. The only thing we can argue is fraud in the inducement, and
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