Coastline RE Holdings Corp. v. Cunningham (June 7, 2019, C076994) 2019 WL 2402272

An LLC obtained a loan and its principal personally guaranteed repayment. Later, the lender entered FDIC receivership, and the FDIC sold all of its assets, including the loan, to another bank. After the borrower-LLC defaulted, the successor bank sued to enforce the guaranty. The guarantor argued that his guaranty was unenforceable under California’s “sham guaranty” doctrine, citing oral arrangements he allegedly had made with the originating lender’s employees.

The trial court granted the successor bank’s summary judgment motion, finding that the federal “special powers” doctrine barred the sham guaranty defense. The special powers doctrine recognizes that because FDIC receivership sales must occur at great speed, with no time to examine a failing bank’s off-the-books side agreements, the failing bank’s written loan files must be deemed accurate, and no alleged oral agreements contradicting those loan files can be enforced after an FDIC receivership sale.

The guarantor appealed the resulting $3.9 million judgment for the successor bank, and the Third District Court of Appeal affirmed. Adopting GMSR’s arguments on behalf of the bank, the Court held that the special powers doctrine barred the “sham guaranty” defense, and that the bank was not required to specifically plead the special powers doctrine before relying on it in summary judgment briefing.