Robert K. and Dawn E. Lowry - Page 11

                                       - 11 -                                         
          indebtedness.  Before the settlement agreement had been                     
          negotiated, AAL had begun the process of foreclosure on the Deed            
          of Trust.                                                                   
               At the time AAL agreed to accept a deed to the Fitch                   
          Property in lieu of foreclosure, the balance due on the secured             
          Note substantially exceeded the fair market value of the Fitch              
          Property, so that if foreclosure had proceeded, AAL could have              
          pursued a deficiency judgment of a substantial amount against the           
          partners, who were personally liable on the Note.  See Ghirardo             
          v. Antonioli, 924 P.2d 996 (Cal. 1996).  Thus, to protect                   
          themselves against the possibility of a deficiency judgment, the            
          partners required the Covenant Not to Sue.  Notwithstanding                 
          petitioners’ assertion that the Covenant Not to Sue became                  
          immediately effective on December 15, 1993, the day it was                  
          signed, by its terms the Covenant Not to Sue was conditioned                
          upon, among other things, the conveyance of the Fitch Property to           
          AAL.  This could only take place upon satisfaction of the terms             
          of the escrow.                                                              
               The escrow instructions, dated December 9, 1993, refer,                
          among other things, to a Settlement Agreement dated November 30,            
          1993, and the fact that “Borrower [the Partnership] has tendered            
          to you [the Title Company] in escrow the Grant Deed (the ‘Deed’)            
          from Borrower to Lender.”  (Emphasis added.)  Reference is also             
          made to the delivery to the Title Company of “an executed copy of           






Page:  Previous  1  2  3  4  5  6  7  8  9  10  11  12  13  14  15  16  17  18  19  Next

Last modified: May 25, 2011