Trial Victory: Breach of Guaranty Lawsuit Against Los Angeles Attorney

We are pleased to have won in trial last week against a Los Angeles litigation attorney on a breach of guaranty lawsuit.  The court awarded our client a judgment of $428,000 plus attorneys fees.  We are honored that the client chose us to represent them in trial and happy to be able to get them this outcome.

The attorney purchased an industrial building in El Monte in the name of his law corporation in 2007.  He personally agreed to guarantee the loan on behalf of the corporation.  When his practice suffered, the attorney stopped making payments on the loan and went into default.  Although the lenders worked with the corporation over two years and two forbearance agreements, the borrower was unable to bring the loan current.

Our client bought the loan in 2012 and worked over six months with the borrower in an attempt to resolve the default.  The borrower rejected a forbearance offer and stopped paying on the loan.  Our client foreclosed on the property in November 2012.

The foreclosure of the property left a shortfall of $340,000.

In 2013 we sued the guarantor for breach of guaranty and demanded payment of the $340,000.  We attempted repeatedly to settle the case but the attorney was unwilling to discuss settlement or even make an offer.

At trial the attorney (who was represented by trial counsel) argued that he was orally promised an unending forbearance.  The court found his testimony to be unbelievable (along with the testimony of his Corporate Administrator and Chief Financial Officer).  Although he advertised himself on his website as an experienced real estate attorney, the attorney–in direct questioning by the judge–denied it.

The trial judge found that we as plaintiff had established the elements of our cause of action and that defendant’s equitable defenses were not credible.  The court pointed out that the defendant was an experienced trial attorney and real estate attorney.  The court could also not understand the defendant’s testimony that he was not involved in the negotiation of the loan or any of the forbearance agreements, leaving that to his legal assistants.  The attorney even denied having read the Guaranty that was at issue in this lawsuit.  In response to the claim of an “unending forbearance agreement”, the court did not believe that any lender would ever make such a promise.

Instead the trial court judge indicated that he believed that the guarantor was paying as little as possible as late as possible to avoid foreclosure.  Noting that there are cases where equity would work against a lender, the trial court said this was not one of those cases.

The court awarded our client judgment in the principal amount of $340,911.14 plus prejudgment interest at the loan’s default rate of 12.65% from November 1, 2012 to the present for a total of $87,804.51.  We will be submitting a cost memorandum and filing a motion to collect our attorneys’ fees, pursuant to the terms of the Guaranty.

Lessons learned:

1.  Breach of Guaranty lawsuits are very difficult to win if you are the guarantor.  In a typical guaranty the guarantor has waived most of his defenses and will have a very difficult time evading his contractual liability.

2.  Defendant should never have gone to trial.  Attorneys who are defendants rarely make good decisions on the merits and risks of their case.  They need a strong attorney to represent them who can forcefully tell them about the problems in their case and steer them towards settlement, even if they are deadset against it.

3.  I have handled a number of trial involving attorneys as defendants.  The judge typically holds the attorney to a higher standard than other defendants because they are lawyers.  Don’t underestimate this when analyzing your position in the case.

We are pleased to have won this victory for our client.