GMSR obtains reversal in Court of Appeal in commercial guaranty action

Bank of America, N.A. v. Danny Lahave, et al. (2013) 2013 Cal.App. Unpub. LEXIS 2161 (California Court of Appeal, Second Appellate District, Division One) [unpublished]. A commercial mortgage loan guaranty purported to waive any defense of illegality that the borrower might have against collection. A U.S. bankruptcy court had previously determined that, as to the borrower, the late fee was an unenforceable penalty that violated public policy. However, relying on the waiver provision, the superior court enforced a late fee against GMSR’s clients, the borrower’s guarantors. The Court of Appeal reversed. It agreed with GMSR that the late fee was an illegal penalty that was as unenforceable against the guarantors as a matter of public policy and that the waiver was unconscionable