Mead v. Sanwa Bank California

Theodore Zwicker was the general partner of Cooley Executive Plaza II (Cooley). Zwicker sold an undeveloped parcel of land to Albert and Barbara Mead (plaintiffs), who then immediately executed a ground lease of the parcel to Cooley. Under the terms of the lease, the Meads agreed to subordinate their fee interest in the land to construction loans and a promissory note Cooley was to execute. The lender was Sanwa Bank California (Sanwa) (defendant). As part of this agreement, the Meads executed a deed of trust, which listed both the Meads and Cooley as trustors and encumbered both the Meads’ fee interest and Cooley’s leasehold interest in favor of Sanwa. The deed of trust further stated that the Meads were not personally liable for Cooley’s obligations to Sanwa. Moreover, all parties generally understood that the Meads and Cooley intended the deed of trust to secure only Cooley’s obligations under the construction loan and the promissory note, both of which were signed only by Cooley. Cooley defaulted on both the lease and the promissory note. During a prolonged series of efforts by Sanwa to collect on its debt, the Meads filed an action seeking a judgment requiring Sanwa to exhaust all its remedies against Cooley before foreclosing on the Meads’ fee interest in the property. The trial court ultimately ruled in favor of Sanwa, and the Meads appealed. One issue on appeal was whether the Meads were sureties rather than principal obligors.