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U.S. Bank National Association v. Yashouafar

California Court of Appeals, Second District, Fifth Division

December 17, 2014

U.S. BANK NATIONAL ASSOCIATION, etc., Plaintiff and Respondent,
v.
MASSOUD YASHOUAFAR et al., Defendants and Appellants.

APPEAL from a judgment of the Superior Court of Los Angeles County, No. BC466344 Rita Miller, Judge.

Page 640

COUNSEL

Krane & Smith, Marc Smith, Cynthia R. Hodes; Law Office of Katharine J. Galston and Katharine J. Galston for Defendants and Appellants.

Jeffer Mangels Butler & Mitchell, Robert B. Kaplan, Neil C. Erickson, and Thomas M. Geher, for Plaintiff and Respondent.

Page 641

OPINION

MOSK, ACTING P. J.

INTRODUCTION

Plaintiff and respondent U.S. Bank National Association[1] brought an action to enforce a Guaranty and Indemnity Agreement (Guaranty) that defendants and appellants Massoud Yashouafar and Solyman Yashouafar signed in favor of plaintiff’s predecessor-in-interest for the outstanding obligations owed by the borrowers on a promissory note (Note). The trial court granted plaintiff’s motion for summary judgment. On appeal, defendants contend that the trial court used the wrong date in calculating a prepayment fee (or Yield Maintenance Amount) for borrowers’ prepayment of the Note’s indebtedness. Alternatively, defendants argue that if the trial court used the correct date in calculating the prepayment fee, then the prepayment fee was an unenforceable penalty.

We hold that even though the legal issue was not raised before the trial court, the documents should be interpreted so that the prepayment obligation only accrues upon payment and not on acceleration of the Note. Accordingly, we reverse and remand the matter to the trial court for a recalculation of the prepayment fee, if any.

BACKGROUND[2]

In 2006, Figueroa Tower I, Figueroa Tower II, and Figueroa Tower III (Borrowers) executed the Note in favor of German American Capital Corporation (GACC) in the principal sum of $62 million. The Note had a maturity date of August 1, 2016. To secure repayment of their debt to GACC under the Note, Borrowers, as trustors, executed in favor of Chicago Title Company, as trustee, a “Deed of Trust, Assignment of Leases and Rents,

Page 642

Security Agreement and Fixture Filing” (Deed of Trust)[3] for the benefit of GACC with respect to the real property security—the Trust Property—which included certain real property located in Los Angeles County. Defendants executed in favor of GACC the Guaranty pursuant to which they agreed to guarantee payment of, among other things, “all obligations, requirements, and indemnities of Borrowers under the Loan Documents.” Ultimately, through various assignments and a merger with another bank, plaintiff became the holder of the Loan Documents.

A. Section 3(b) of the Note

Section 3(b) of Note provides: “Except as provided in Section 3(a)(1) above, if for any reason the indebtedness evidenced by this Note (‘Debt’) is prepaid at any time (which prepayment Payee may, in its sole and absolute discretion, prohibit subject to Section 3(a) above), including without limitation any prepayment which occurs after such indebtedness shall have been declared due and payable by Payee pursuant to the terms of this Note or the provisions of any other Loan Document due to a default by Maker, then there shall also then be immediately due and payable, a prepayment fee equal to the premium described in Section 12.4(c) of the Security Instrument, without regard to any prepayment prohibition. In the event that any prepayment fee is due hereunder, Payee shall deliver to Maker a statement setting forth the amount and determination of the prepayment fee, and provided that Payee shall have in good faith applied the formula described in Section 12.4(c) of the Security Instrument, Maker shall not have the right to challenge the calculation or the method of calculation in the absence of manifest error. Maker hereby expressly (i) waives any rights it may have under California Civil Code Section 2954.10 to prepay this Note, in whole or in part, without penalty, upon acceleration of the maturity of this Note, and (ii) agrees that if a prepayment of any or all of this Note is made, following any acceleration of the maturity of this Note by the holder hereof on account of any transfer or disposition as prohibited or restricted by the Security Instrument, then Maker shall be obligated to pay, ...


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