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reference. At the time of filing the petition, petitioners
resided in Novato, California.
Mr. Assaad was a real estate developer and investor.3 On or
about December 8, 1988, petitioners purchased approximately 2.2
acres of land in Atherton, California, which consisted of three
parcels: 3, 9, and 15 Isabella. Mr. Assaad intended to develop
the three parcels by constructing three residential homes for
sale. Pacific Bank (Pacific) lent $1.46 million to Mr. Assaad
(the land loan) for the purchase of the land. The land loan was
secured by a deed of trust covering the three parcels of land.
On July 29, 1989, Pacific lent Mr. Assaad $2.64 million
under a construction loan agreement (the Pacific construction
loan) for two of the units in the Atherton project, 3 and 15
Isabella. A deed of trust in favor of Pacific was recorded with
respect to the two parcels.4 Mr. Assaad signed a promissory note
and executed a guaranty of completion and performance in favor of
Pacific for the construction loan. The note provided for an
initial interest rate of 12.5 percent and a variable interest
rate on the basis of “an index which is THE PACIFIC BANK GUIDANCE
RATE”. A 12-month interest reserve of $228,000 was included in
3Mr. Assaad was also the sole shareholder of Golden Sunset
Homes, Inc., which owned a residential care home, Hopkins Manor.
4The loan was also collateralized with a deed of trust of
$1.5 million with respect to Hopkins Manor.
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