Opinion ID: 2278904
Heading Depth: 3
Heading Rank: 1

Heading: Personal Liability for Losses on the Loan

Text: It is undisputed that the refinancing loan made by Pinnacle and assigned ultimately to Wells Fargo was a non-recourse loan under which the holder agreed to look only to the mortgaged property in the event of a default on the loan and not to pursue any personal liability against Diamond Point, any general partner of Diamond Point, or any guarantor of the loan. Wells Fargo's claim against those entities for losses allegedly sustained upon Diamond Point's default was based on the carve out exception to the non-recourse provision; i.e., by failing to disclose that Sam's Club intended to vacate its store  indeed, by certifying the contrary  Diamond Point committed fraud or made an intentional misrepresentation. The Konover defendants, against whom personal liability was asserted, defended on the ground that Wells Fargo had failed to prove that Diamond Point's omission to disclose Sam's Club's intention to vacate in its borrower's certificates was the proximate cause of any loss suffered by Wells Fargo. That argument has three prongs: (1) that it was not Sam's Club's departure that caused the default on the loan but rather the departure and rejection of the lease by Ames; (2) that there was no evidence that Wells Fargo ever reviewed the borrower's certificates and therefore relied on them; and (3) that Pinnacle knew about Sam's Club's intention to close its store before it made the loan. Adjunctively to this third prong, the defendants urge that, because Sam's Club's intention had been disclosed to Pinnacle, the borrower's certificates were not really inaccurate. The May 31, 2000 certificate, they note, is prefaced with the phrase that the representations in the certificate are [i]n addition to all other representations, warranties and covenants made by Diamond Point. They thus argue that, as Pinnacle had already been told about Sam's Club's intention to vacate, the representation that Diamond Point had no knowledge of any tenant's intention or notice to vacate the premises, being merely cumulative, was not inaccurate. We shall consider these prongs in inverse order.