Guarantors Left Holding The Bag.

Borrowers agreed to pay only interest on a loan until its maturity date.  The loan contained a provision that barring an uncured default outstanding at the time of the maturity date, and in the bank’s sole and absolute opinion and judgment, the maturity date would be extended.  Indeed, it was extended five times.  After the last extension, the bank downgraded the loan to the category of substandard. Thereafter the bank sent the borrower a term sheet “for a possible restructure,” but noted it was “for discussion purposes only, is subject to Bank approval and should not be construed as a commitment to lend.”  Four months later, the bank sold the loan; the borrowers were in default at that time.  The guarantors sued the bank claiming the bank led the borrower to believe it would extend the loan as a matter of course.  A jury found the bank intentionally failed to disclose an important fact to the guarantors, but it was done without an intent to deceive. The court then found in favor of the bank.  The appellate court affirmed. SCC Acquisitions v. Central Pacific Bank   (Cal. App. Fourth, Div. 3; July 11, 2012) 207 Cal.App.4th 859.