The lender claimed the mortgage secured $13 million while the guarantors who signed it claimed it only secured $800,000. The issue turned on the interpretation of the mortgage. The mortgage expressly secured the ‘principal amount’ (which encompassed the $13 million, however there was another clause:
The lender shall not ultimately receive in payment of the principal amount pursuant to its exercise of security rights under this security in excess of $800,000.
The lender argued this let the property off the hook for monies in excess of $800,000, but not the guarantors on their personal promises to repay. However the Judge disagreed, the ‘security rights under this security’ included the personal promises to repay by the Guarantors.
One of the Guarantors sought to escape entirely on the grounds his name was signed on the mortgage pursuant to a general power of attorney, without express authority to enter into a mortgage. However the Judge noted that a general power of attorney confers authority to enter into a mortgage.