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floor plan loan is intended to finance the purchase of new car
inventory through the time they are sold. Under floor plan
loans, the lender purchases automobiles that are received in the
auto dealership's inventory. Each time an automobile is sold,
the dealership is required to pay the lender the cost of that
automobile.
On August 4, 1987, Sanwa Bank informed the auto dealership,
attention of petitioner, that the floor plan line of credit for
$2,500,000 had been increased to $3,500,000, effective July 29,
1987. The auto dealership, represented by petitioner, in an
unsigned and undated document entitled "Certified Corporate
Resolution To Borrow", sought to borrow up to $3,500,000 from
Sanwa Bank.
On July 31, 1988, Sanwa Bank increased the floor plan loan
to $5 million. Sanwa Bank issued a promissory note entitled
"Commercial Optional Advance Promissory Note". Petitioner's name
is shown on the document as president of the auto dealership. On
the same date, in a related document entitled "Continuing
Guaranty", petitioner was listed as "Guarantor".
Petitioner's auto dealership opened March 1987 and during
the first 2 years, it was the number one Acura dealer in the
United States. In the middle of 1989, petitioner's auto
dealership began experiencing financial reverses because of an
economic downturn in the State of California and because of the
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