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entitled to the same amount of rent. Thus, any appreciation in
the property over the term of the lease is likely to accrue to
Benavidez, not to Guaderrama, upon exercise of the option.
Guaderrama does not appear to be an equity participant with any
real profit or loss opportunities, and thus the transaction is
inconsistent with a lease.
Intent of the Parties
The record indicates that Benavidez intended for this
transaction to be a financing arrangement. He had sought
financing from banks on two or three separate occasions but had
been turned down because they would not accept the liquor license
as collateral. Benavidez testified that it was his intent to
have Guaderrama finance the construction of the new restaurant
and for Benavidez to pay him back over a period of time.
While Guaderrama’s intent is less clear, he indicated in his
testimony that he viewed the liquor license the same way that
Benavidez did--as collateral. Guaderrama further explained that
he had been getting a return of 6 or 7 percent on his savings and
was willing to use his savings to build the restaurant for
Benavidez if he charged 15 percent interest as opposed to the 6
or 7 percent return he was receiving. Thus, Guaderrama was
willing to finance the construction of Severo’s in exchange for a
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