GECCMC 2005-C1 Plummer Street Office Limited Partnership v. NRFC NNN Holdings

Opinion

ROTHSCHILD, J. —NRFC NNN Holdings, LLC (Northstar), appeals from a judgment holding it liable as a guarantor on a loan in favor of GECCMC 2005-C1 Plummer Street Office Limited Partnership (Plummer) and a post-judgment order awarding Plummer attorney fees and costs. We conclude that as a matter of law the guaranty was not triggered. Therefore we reverse the judgment and the postjudgment order.

[1000]FACTS AND PROCEEDINGS BELOW

Plummer lent $44 million to a borrower.1 Borrower used the money to purchase two commercial properties in Chatsworth. Borrower leased these properties under two leases to Washington Mutual Savings and Loan as the sole tenant. The loan was a nonrecourse loan, secured by the properties and certain other enumerated items but not by the assets of Borrower in general, subject to exceptions for certain forms of borrower misconduct. In addition, Northstar, an affiliate of Borrower, executed a guaranty that would be triggered by the same forms of borrower misconduct that triggered the exceptions to the nonrecourse character of the loan. The guaranty provided in relevant part that “[t]he Loan shall be fully recourse to Guarantor, and Guarantor hereby unconditionally and irrevocably guarantees payment of the entire Loan, if any of the following occurs after the date hereof: . . . (iv) without the prior written consent of [Plummer, either lease] is terminated or canceled.”

Washington Mutual went out of business and it and its successors ceased paying rent to Borrower and abandoned the property. In February 2009, Borrower ceased making loan payments to Plummer. In May 2009, Plummer took title to the properties through a nonjudicial foreclosure sale in which it bid approximately $11 million. Plummer then brought this suit against Northstar as guarantor for the balance due on the loan—approximately $42 million plus attorney fees and costs.

Plummer and Northstar filed cross-motions for summary judgment. The principal issue was whether Washington Mutual’s ceasing to pay rent and abandoning the property terminated the leases triggering Northstar’s duty to pay the amount owing on the loan if the leases were “terminated” “without the prior written consent of Lender.” The trial court concluded that the leases were terminated without Plummer’s consent and, therefore, Northstar was liable on the guaranty. The court awarded Plummer damages of $42,220,349.35 plus prejudgment interest. In a separate order the court awarded Plummer attorney fees and costs in the amount of $760,797.50. Northstar filed timely appeals from the judgment and the postjudgment attorney fees award.