Guarantor Rights in Surprising Places

It is worth remembering that a "guarantor" includes someone who grants a lien on his or her property to secure the principal's debt even if the granting party is not personally liable for payment of the obligation. The plaintiff in Mead v. Sanwa Bank California was a ground lessor who had executed the Deed of Trust in order to "subordinate" the fee to the bank's mortgage in a ground lease financing.

When the bank attempted to foreclose on the plaintiff's fee interest in the property, it was met with a contention that the plaintiff's statutory rights as a guarantor had been violated. Even though the bank prevailed , the facts remind us to include standard guaranty waivers in any document in which one party grants a lien on its interest in property to secure the debt of another party. Such a situation can arise in a number of surprising settings and the need to include waivers is easy to overlook.