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Keywords

defendantattorneyliabilityappealsummary judgmenttrustforeclosurecorporation

defendantattorneyliabilitysummary judgmenttrustforeclosurepartnershipcorporation

Related Cases

Resolution Trust Corp. v. Northpark Joint Venture, 958 F.2d 1313, 22 Fed.R.Serv.3d 1031

Facts

In April 1985, Northpark Joint Venture entered into a loan agreement with Texas State Mortgages, Inc., securing a $9.15 million loan with a deed of trust on property in Mississippi. The individuals who formed Northpark executed personal guaranties for up to $3,202,500 of the debt. After Northpark defaulted, the property was sold at foreclosure for $3,202,500, leaving an unsatisfied debt of over $4.4 million. The Resolution Trust Corporation, as receiver for the lenders, filed suit against the guarantors in Texas state court, which granted partial summary judgment against them, leading to the appeal.

In April 1985 Northpark Joint Venture (“Northpark”), a joint venture formed under Texas law, entered into a loan agreement with Texas State Mortgages, Inc. (“TSM”). TSM advanced Northpark $9.15 million, which Northpark in a promissory note agreed to repay with interest. To secure repayment of the loan, Northpark executed a deed of trust granting TSM a lien upon certain real property located in Mississippi. In addition, the individuals who formed Northpark—Steven S. Schiff, Charles G. Dannis, Stephen T. Crosson, Barry Howard, Robert L. Schiff, Charles H. Perry, Herbert G. Schiff and Telstar Partnership—executed absolute and unconditional personal guaranties to repay up to $3,202,500 of the $9.15 million indebtedness.

Issue

Whether the guarantors are liable for the unsatisfied indebtedness following the foreclosure sale.

The principal issue in this case is whether the defendants must bear responsibility for the unsatisfied indebtedness.

Rule

Under Texas law, a guarantor is liable for the indebtedness specified in the guaranty agreement, regardless of the principal's non-recourse status.

Analysis

The court determined that the guaranties executed by the defendants were unambiguous and required them to pay the unsatisfied indebtedness. Despite Northpark's non-recourse status, the court found that the term 'indebtedness' in the guaranties encompassed the total amount owed, including the deficiency after foreclosure. The court applied Texas law, which governs the interpretation of the guaranty agreements, and concluded that the guarantors had accepted greater liability than that of the principal.

Conclusion

The court affirmed the lower court's ruling that the guarantors were liable for the deficiency amounting to $3,202,500, plus interest and attorneys' fees.

Who won?

Resolution Trust Corporation prevailed in the case as the court upheld the summary judgment against the guarantors, confirming their liability for the deficiency.

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