- 12 - collateral securing a recourse liability upon the debtor’s default on the liability, alone, does not extinguish the underlying liability. Lockwood v. Commissioner, 94 T.C. 252, 260 (1990). Unlike collateral securing a nonrecourse liability, the collateral securing a recourse liability does not represent the only source of repayment.13 In the instant case, the loan documents provide CareMatrix with the right to enforce petitioner’s repayment of the loan, irrespective of whether petitioner abandoned the collateral to CareMatrix.14 13Black’s Law Dictionary 1086 (7th ed. 1999) provides the following definitions of a recourse note and a nonrecourse note: recourse note. A note that may be satisfied upon default by pursuing the debtor’s other assets in addition to the collateral securing the note. Cf. nonrecourse note. nonrecourse note. A note that may be satisfied upon default only by means of the collateral securing the note, not by the debtor’s other assets. Cf. recourse note. 14We recognize, and petitioner does not dispute, that the terms of the loan documents on their face provide for a recourse liability. Petitioner instead contends that the loan is nonrecourse based upon two alternative contentions. The first contention is that the substance rather than the form of the transaction should govern and that the underlying facts and circumstances support the conclusion that the loan is nonrecourse. Alternatively, petitioner contends that the parties intended for the loan to be nonrecourse, that the parties made a mutual mistake in executing a promissory note that did not accurately reflect their intent, and that the terms of the loan documents should be reformed to accurately reflect such intent. Petitioner contends that petitioner “transferred” the collateral to CareMatrix in satisfaction of a nonrecourse liability, that the “transfer” of the collateral is properly treated as the sale (continued...)Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Next
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