Filed 7/11/17 CRE-Venture 2011-2, LLC v. Dowdy CA4/1
NOT TO BE PUBLISHED IN OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

COURT OF APPEAL, FOURTH APPELLATE DISTRICT

DIVISION ONE

STATE OF CALIFORNIA



CRE-VENTURE 2011-2, LLC,

Plaintiff and Respondent,

v.

LINDA L. DOWDY, as Cotrustee, etc., et al.,

Defendants and Appellants.
D070549



(Super. Ct. No. 37-2014-00003562-
CU-BC-CTL)


APPEAL from a judgment of the Superior Court of San Diego County, Randa Trapp, Judge. Affirmed.
Witham Mahoney & Abbott, and Matthew M. Mahoney for Defendants and Appellants.
Eisner Jafee, James H. Turken and Christopher Kadish for Plaintiff and Respondent.
As part of a commercial loan transaction, a bank that was the predecessor to plaintiff and respondent CRE-Venture 2011-2, LLC (Lender) made a $2 million loan to Gateway Capital Group, LLC ("Gateway"). Gateway, as a limited liability company, is owned by its members who are three family trusts owned and administered by the Robinson extended family, defendants and appellants Scott B. Robinson and Susan B. Robinson as cotrustees of the Robinson Family Trust, et al. (Defendants). To secure Gateway's promissory note, Defendants signed and later modified trust deeds encumbering property they owned, a residence in Rancho Santa Fe (the Robinson home). The modifications of the Gateway loan and its security arrangement increased its amount upwards twice, to over $3.4 million.
As part of the second loan modification process, in which additional collateral was required by Lender to raise the credit extended, Defendants entered into a "Pledge and Security Agreement" (the pledge agreement). The pledge agreement recites that it was negotiated to be a condition precedent to the restructuring of the modified loan, and it identifies, as the "pledged collateral," the Defendants' membership interests in Gateway LLC.
Gateway defaulted on the loan, and Lender nonjudicially foreclosed on the real property security, the Robinson home. Lender then brought this action to seek recovery for breach of the pledge agreement, on the ground that Defendants had failed to pay the principal amount of the Gateway note and interest as required under the terms of the pledge agreement. Lender prevailed against demurrers and a nonsuit motion brought by Defendants, and obtained judgment in its favor, pursuant to a directed verdict.
Throughout the trial proceedings and on appeal, Defendants have consistently taken the position that by entering into the pledge agreement, they acted as sureties for the debt of another, Gateway, and therefore they had a valid affirmative defense to this action, under Union Bank v. Gradsky (1968) 265 Cal.App.2d 40, 41-42 (Gradsky).) In that case, a guaranty related defense was recognized on the basis that a "true" guarantor of a loan, where the loan was secured by the primary debtor's real estate, is entitled to the statutory protections of Code of Civil Procedure section 580d, and the lender is estopped from suing the guarantor for a deficiency judgment after the lender's nonjudicial foreclosure sale, unless the guarantor's written agreement contains appropriate waivers of section 580d protections. The estoppel protects a guarantor from losing any subrogation rights as against the principal obligor in the event of a foreclosure. (Gradsky, supra, at pp. 47-48.) This pledge agreement did not contain any such Gradsky waivers, and Defendants contend that once the Gateway real property security was taken by nonjudicial foreclosure, Lender must be precluded from recovering any deficiency from Defendants, such as the $4.5 million amount that remained due after the foreclosure on the Robinson home.
Our task is to evaluate the propriety of the trial court's application of antideficiency principles to this unusual set of relationships among the parties, as reflected in their loan documents. As we will explain, there is a broad statutory definition of surety. (Civ. Code, § 2787, which "applies to a promise by the surety made to the creditor, to pay the debt, or perform any obligation of the principal debtor," 1 Witkin, Summary of Cal. Law (10th ed. 2005) Contracts, § 372, pp. 415-416; italics omitted.) In view of principles of law applicable to LLCs such as Gateway, and pursuant to both contractual and statutory interpretation, we conclude Defendants cannot demonstrate that their pledge agreement is controlling, to the exclusion of the other loan modification documents, such that its omission of a Gradsky waiver operates in their favor. Effectively, Defendants acted in the role of sureties within the expanded definitions in Civil Code section 2787. Defendants were pledgors of additional collateral to enable Gateway to borrow more money, and Lender was entitled to collect from that additional collateral, without regard to antideficiency statutory protections under section 580d. (Dreyfuss, supra, 24 Cal.4th at pp. 404, 406-407 ["creditor may proceed seriatim in foreclosing against multiple items of collateral," without violating antideficiency principles, where the modified loan agreement provided for additional collateral].)
The trial court's rulings on Defendants' demurrer and nonsuit request were correct, and the court was not required to give the jury instructions requested by Defendants defining technical terms (e.g., subrogation). The grant of a directed verdict for Lender was proper, to award it all of Defendants' membership interests in Gateway. We affirm.
FACTUAL AND PROCEDURAL BACKGROUND
A. Transactions
On April 16, 2008, Gateway executed its promissory note (Note) in favor of Lender, to acquire loan proceeds, a $2 million line of credit. The Note was signed by Gateway's manager. A security instrument provided collateral for the variable interest rate revolving line of credit, issued to Gateway as the borrower, through a deed of trust conveying all right, title and interest in the Robinson home, that was executed on behalf of the trustors (one Bradley and one Robinson trust, by their trustees; see fn. 8, post, regarding a third signatory to the pledge agreement). The deed of trust included waiver language pertaining to the borrower's waiver of "all rights and defenses Trustor may have because Borrower's obligation is secured by real property . . . [such as] rights and defenses based on [antideficiency protections, such as] section 580d."
After the initial transaction, the loan was modified twice to increase the loan amount to $3,439,500. The first modification of deed of trust identified the trustors in a slightly different way, naming them as Gateway "with vesting as follows [the same two Bradley/Robinson trusts]." The first modification stated that the Gateway note terms were modified to increase the line of credit from $2 million to $3 million. All other terms of the original deed of trust remained the same.
On April 1, 2009, the trustors, again defined as Gateway with vesting in the two trusts, and the lender reached an agreement on a second modification of deed of trust (the Second Modification of TD), to allow an increase in the Gateway revolving line of credit from $3 million to $3,439,500. The Second Modification of TD included a statement on the recorded document that Gateway as the Borrower "will hypothecate ownership interest in Gateway" to the lender, as additional collateral, with all other terms to remain the same. The parties acknowledged all the original obligations, and stated that their terms, "including all agreements evidenced or securing the obligation(s), remain unchanged in full force and effect." For example, in the original trust deed, Gateway agreed to waive antideficiency protections, as applicable to the Robinson home as security for the debt.
A related document was also executed on April 1, 2009, a "Change in Terms" agreement, signed by Mr. Robinson as Gateway's manager, agreeing that Gateway as the borrower was hypothecating its ownership interest as additional collateral.
The same date as the Second Modification of TD, Defendants (signing as trustees and LLC members) entered into the hotly disputed pledge agreement. The parties represented that in the Second Modification of TD (between Lender and Gateway), they had agreed as "a condition precedent to the restructuring of the Loan evidenced by the Note that Pledgor shall have pledged all of Pledgor's rights and interests in and to certain collateral." (It should now be noted that somewhat inconsistently, the pledge agreement represents that it secured any obligation between the pledgors [Defendants] and the secured party [Lender], although the underlying obligation on Lender's Note was that of the primary borrower, Gateway; see pts. II.A-B, post, discussing contradictions in documents and alter ego arguments.)
In any event, Defendants and Lender in the pledge agreement identified the "pledged collateral" as "[a]ll right, title and interest in and to all of the membership interests in Gateway . . . together with dividends, distributions, cash or cash equivalents, any and all other equivalents, now or in the future, arising from the Interests." Defendants represented to Lender that they owned all of the collateral subject to the pledge agreement, they had the authority to grant the security interests, they would not assign or transfer any membership interest in Gateway, and they would remain the sole members and manager of Gateway at all times that the indebtedness evidenced by the Note is outstanding. Defendants further agreed that the pledge agreement "shall create a continuing security interest in the Pledged Collateral." As "Representations and Warranties," Defendants stated "that this Agreement does not violate any of the provisions of the Articles of Organization, Operating Agreement or any other agreement affecting Borrower."
It is unclear from the record whether the "Change in Terms" signed by Gateway was attached to the Second Modification of TD, or to the pledge agreement. The amended complaint includes it in the pledge agreement (all as exhibit G to the amended complaint). In the version offered as trial exhibit 9, the pledge agreement does not include that separate document. Instead, trial exhibit 8 (Second Modification of TD) includes the Change in Terms document. In any case, all three documents were dated April 1, 2009 and all refer to the modification agreements increasing the loan amount.
Eventually, Gateway's real property security, the Robinson home, was taken by Lender's nonjudicial foreclosure. The notice of default was sent in July 2012, and the nonjudicial foreclosure was completed April 14, 2014. Lender cleared about $1 million after liens, and claimed there was still a $4.5 million deficiency on the large Gateway loan.
B. Pleadings Proceedings; Trial Begins
The complaint was filed in February 2014, and after the nonjudicial foreclosure was completed, Gateway was dismissed as a defendant. The remaining Defendants demurred and ultimately, the amended complaint was filed. It pleads that Defendants held themselves out as "the sole members of and owners of all interests in Gateway" and entered into the pledge agreement in that capacity, as a condition precedent to the restructuring of the loan, and as "further" security. Lender alleged that it was entitled to all rights and remedies of a secured party upon the borrower's default, under both the Uniform Commercial Code and the security documents. It also alleged that the pledge agreement required Defendants, as pledgors, to comply with any agreements by which Gateway was bound and to perform its obligations.
The amended complaint acknowledged that the pledge agreement contained a typographical error, where it stated that the pledge agreement secured obligations between "pledgor" and the secured party. Instead, Lender alleged that the pledge agreement should properly have read that the pledge agreement secures any obligation between "borrower" (Gateway) and the secured party (Lender), as well as performance by Defendants of all obligations of Gateway under the note.
Lender's amended complaint alleged facts regarding Gateway's execution of the Change in Terms agreement on April 1, 2009 in connection with the Second Modification of TD. Specifically, the Change in Terms agreement modified the note terms by increasing the loan amount, and stated that "Borrower will hypothecate ownership interest in Gateway" to the lender as additional collateral. The Change in Terms agreement expressly stated that all other terms of the Note would remain the same. Breach of the pledge agreement was alleged, because Defendants had not paid the principal amount of the note and interest, as they had agreed to do in compliance with Gateway's agreements.
Although Defendants demurred to the amended complaint, the court overruled it on the grounds that additional facts in the amended complaint had clarified the relationship between Defendants and Gateway "such that it now appears Gradsky may not apply because the foreclosure did not destroy pledgors' subrogation rights against the principal debtor, Gateway." In explanation of the ruling, the court referred to the pledge agreement and observed that Lender now believed there was a typographical error in it, such that it should read, "Agreement secures any obligation between Borrower and Secured Party and performance by Pledgor of all obligations of Borrower now or hereafter existing under the Note." (Italics omitted.) Thus, the court concluded, "[A]s pled, Pledgors are the sole members and owners of all interests in Gateway, the original borrower under the loan. All their interests in Gateway were assigned by the Pledgors to [Lender] under the Pledge Agreement. The foreclosure of the Robinson home has not deprived Pledgors of any right to pursue Gateway for reimbursement, since it was their interest in Gateway they pledged. At this stage of the pleadings, it appears the bank's decision to foreclosure has not prejudiced the Pledgors and as such, this case is different than Gradsky, and thus it may not apply."
Although Defendants sought writ relief to set aside the demurrer ruling, this court denied the petition. In their answer, Defendants alleged affirmative defenses, including estoppel to enforce the pledge agreement.
C. Dispositive Nonsuit and Jury Instruction Rulings
The matter went to jury trial on the second cause of action, with Defendants challenging any pledge agreement liability. Lender presented its case through the testimony of four witnesses (Robinson family and Lender's principal), about their understandings of the transactions. Mr. Robinson testified that Gateway and the Defendants were separate entities for tax and other business purposes. There were two other members of Gateway who had not signed the pledge agreement, and he believed the bank knew this. He did not ask other questions about the pledge agreement at the time of signing. He believed it was not Gateway that gave security or hypothecated its ownership interest to the bank, but rather that the trusts would do so. The trusts did not currently have any assets. Other trustees testified they did not participate in Gateway's business decisions.
Lender obtained admission into evidence of the underlying loan documents establishing the debt, and the Gateway membership interests documentation as pledged collateral (trial exhibits 2, 4, 7, 8 and 9). In trial exhibit 8, evidence was admitted of the Second Modification of TD and the Change in Terms agreement, which state that Borrower (Gateway) hypothecated its own interest in Gateway as collateral for the increased loan. Lender's principal confirmed the nonjudicial foreclosure had taken place and estimated that the deficit on the Note was about $4.5 million.
Following the presentation of Lender's case-in-chief, Defendants moved that a nonsuit be granted. Defendants asserted the pledge agreement was unenforceable because it failed to include a Gradsky waiver of antideficiency protections. Defendants contended that Lender was restricted to its nonjudicial foreclosure remedy on the Robinson residence. The motion was denied. (§ 581c.)
Defendants also sought to give a computer illustrated opening statement and to have the jury instructed on the applicability of antideficiency statutory protections and related legal concepts. Lender objected to the illustrations and to the proposed defense jury instructions on the grounds that they were not supported by evidence in the record, and would have required expert testimony to explain the complicated legal theories being presented. The court took briefing on the matter and ultimately denied Defendants' request to give the jury such illustrations and special instructions. Defendants acknowledged that without their proposed special instructions on their sole affirmative defense, under Gradsky, supra, 265 Cal.App.2d 40, it would be futile to continue with trial. The court therefore entered a directed verdict in favor of Lender, and Defendants appeal.
DISCUSSION
We will discuss Defendants' arguments that the judgment and its underlying rulings are reversible (on demurrer, nonsuit and instructional issues), in terms of each applicable standard of review. This set of facts is largely undisputed and gives rise to common legal issues concerning Defendants' claims they, as sureties, were unfairly deprived of their sole affirmative defense under Gradsky, supra, 265 Cal.App.2d 40. "In enacting section 580d the Legislature obviously had in mind the two-party transaction between the creditor whose loan is secured by a deed of trust or mortgage and the debtor who gave that security for the loan to him." (Gradsky, supra, at p. 43 [interpreting § 580d in context of its effect on ability of lender to pursue guarantor following trustee's sale].) In light of the unusual nature of this three-way transaction, we are required to set forth applicable standards and to clarify the state of the record regarding Defendants' entitlement to assert such a defense, in their roles as sureties, guarantors, or providers of additional collateral. We then analyze the trial court's specific rulings interpreting the loan documents.
I
APPLICABLE STANDARDS
A. De Novo Reading of Loan Documents
On appeal, the trial court's resolution of the legal issues presented by the transactional documents in the record and the application of statutes is subject to de novo review. (Dreyfuss, supra, 24 Cal.4th 400, 406.) In interpreting the contract provisions containing surety terms, Civil Code section 2837 requires that the same rules are to be observed as in the case of other contracts. Guaranty or surety contracts " 'may be explained by reference to the circumstances under which they were made and the matter to which they relate, the main object being to ascertain and effectuate the intention of the parties.' " (River Bank America v. Diller (1995) 38 Cal.App.4th 1400, 1411, fn. 5, 1413-1415 (River Bank America) [statutory distinction between surety and guarantor has been eliminated by Civ. Code, § 2787].) The courts must look to the purpose and effect of an agreement to answer for a debt to determine whether an attempt to recover on it would amount to a deficiency judgment, in violation of the antideficiency laws, and labels alone are not determinative. (River Bank America, supra, at pp. 1422-1423.)
B. Policies of Antideficiency Statutory Protections; Development of the Law
During these 2008 and 2009 transactions, section 580d provided in pertinent part: "No judgment shall be rendered for any deficiency upon a note secured by a deed of trust or mortgage upon real property or an estate for years therein hereafter executed in any case in which the real property or estate for years therein has been sold by the mortgagee or trustee under power of sale contained in the mortgage or deed of trust." Section 580d "appl[ies] only when a personal judgment against the debtor is sought after a foreclosure." (Dreyfuss, supra, 24 Cal.4th at p. 407.)
" 'The antideficiency statutes are to be construed liberally to effectuate the legislative purposes underlying them, including the policies " '(1) to prevent a multiplicity of actions, (2) to prevent an overvaluation of the security, (3) to prevent the aggravation of an economic recession which would result if [debtors] lost their property and were also burdened with personal liability, and (4) to prevent the creditor from making an unreasonably low bid at the foreclosure sale, acquire the asset below its value, and also recover a personal judgment against the debtor.' " ' " (Cadlerock Joint Venture, L.P. v. Lobel (2012) 206 Cal.App.4th 1531, 1541.) "The foregoing black letter law is usually easy to apply to a single creditor with a single promissory note secured by a single deed of trust" (ibid.), which is not our case.
"[E]ven though California's antideficiency statute [§ 580d] does not protect guarantors directly, as a practical matter the 'Gradsky defense' precludes deficiency judgments against them unless the lender elects the relatively cumbersome remedy of judicial foreclosure." (Cathay Bank v. Lee (1993) 14 Cal.App.4th 1533, 1535 (Cathay Bank).) The effect of the Gradsky defense (unless waived) is to estop a lender from recovering a deficiency judgment against a guarantor, "when it elects a particular remedy (nonjudicial foreclosure) which cuts off the guarantor's subrogation rights against the debtor." (Ibid.) The court in Cathay Bank further explains:
"Gradsky is based on the interplay of two ideas: (1) a guarantor can pay a debtor's debt and thereby obtain the same rights against the debtor that the original lender had; and (2) a lender (and therefore a guarantor standing in a lender's shoes) cannot obtain a deficiency judgment against a debtor if the lender elects a nonjudicial foreclosure. [Citation.] Taken together, the two ideas mean that if a lender elects nonjudicial foreclosure, the lender effectively destroys the guarantor's subrogation rights against the debtor. No security remains and the lender (i.e., the guarantor standing in the lender's shoes) has no further rights against the debtor. [¶] From this, the court in Gradsky reasoned that because only the lender has the option of preserving its rights and preserving the guarantor's subrogation rights (by electing judicial foreclosure), the lender must be estopped to pursue the guarantor if the lender elects a remedy which destroys the guarantor's subrogation rights. [Citation.] The underlying rationale seems to be that the courts should remedy the basic inequity which occurs when the lender nonjudicially forecloses." (Cathay Bank, supra, at p. 1535, fn. 3; italics omitted.)

This record reflects the transaction involved negotiations among relatively sophisticated parties and investors. We are not presented with issues on whether this amounted to a "sham" guarantee, such as where the lender has purposefully structured the loan to avoid potential antideficiency protections. (See CADC/RAD Venture 2011-1 LLC v. Bradley (2015) 235 Cal.App.4th 775, 786-787 (CADC/RAD Venture 2011-1 LLC) ["A guaranty is an unenforceable sham where the guarantor is the principal obligor on the debt," e.g., the guarantor is, in reality, the principal obligor under a different name throughout the operation of trust or corporate law or a comparable legal principle].) The state of the record and the operative terminology used by the parties requires some clarification, before we can consider whether Lender's choice to nonjudicially foreclose on Gateway's real property security should estop it, under Gradsky principles, from seeking the equivalent of a deficiency judgment under the terms of the related pledge agreement.
II
THRESHOLD ISSUES: STATE OF RECORD AND USE OF TERMINOLOGY
A. Terms of Loan Documents
We first address the continuing controversy in the briefing about the effect of several potential drafting errors in the loan documents, regarding the obligations they imposed and upon which parties. Copies of these loan documents are attached to the amended complaint as exhibits, but we utilize the copies in the record provided as trial exhibits 2, 4, 7, 8 and 9.
According to trial exhibit 8, the Second Modification of TD, both it and two copies of the attached Change in Terms agreement state that "Borrower will hypothecate ownership interest in Gateway . . . , to [Lender] as additional collateral; all other terms to remain the same." Trial exhibit 8 also attaches a six-page copy of the pledge agreement referring to the modification of the loan and providing that as a condition precedent to the restructuring of the loan, "Pledgors shall have Pledged all of Pledgor's rights and interests in and to certain collateral" (the interests in Gateway).
Trial exhibit 9 likewise includes the six-page copy of the pledge agreement, with numerous additional attachments from the Second Modification of TD and a disbursement request and authorization from Gateway as the borrower. Its attachments do not include the Change in Terms agreement.
Both in opposing the demurrer to the original complaint, and in the amended complaint, Lender admitted to some kind of drafting error in the pledge agreement, on the identification of whose obligations were secured by that agreement. According to Lender, "the Pledge Agreement . . . appears to include an error in language regarding the party having obligations under the Note. While the Pledge Agreement refers to 'all obligations of Pledgor' under the Note, this clause clearly is intended to refer to the obligations of Borrower as the party to the Note. . . . Thus, a fair reading of the language of the Pledge Agreement as a whole indicates that the agreement erroneously referenced 'obligations of Pledgor,' when in fact it meant to refer to 'Borrower.' "
Thus, in the amended complaint, Lender alleges that since the pledge agreement was provided by pledgors as a condition precedent to the restructuring of the loan, that agreement should properly be read as securing obligations between "Borrower and Secured Party and performance by Pledgor of all obligations of borrower now or hereafter existing under the note." Lender alleged that the Change in Terms agreement modified the Note and Borrower promised to hypothecate its ownership interest in Gateway as additional collateral, thus providing "further" security in the form of the pledge agreement. The trial court's demurrer ruling accepted this explanation.
On appeal, Defendants contend that because of the admitted drafting error committed by Lender's predecessor, "the evidence shows the Borrower never hypothecated such an interest." According to Defendants, Lender "mistakenly relies on the Second Modification of Deed of Trust and Change in Terms Agreement." Defendants argue that the proper way to read these documents is to conclude that "the controlling document is the Pledge Agreement which effected the hypothecation." Defendants thus argue, "if Gateway hypothecated its membership interests as collateral for the loan, where is any pledge agreement executed by Gateway? No such document exists." Defendants claim that the omission of Gateway from the pledge agreement demonstrates Gateway had no ownership interest in the pledged collateral (itself). Gateway was voluntarily dismissed from this case after the lender nonjudicially foreclosed on the Robinson family home. Defendants suggest this shows it was not really Gateway's interest that was hypothecated by the pledge agreement, or else Lender would still be proceeding against Gateway.
We disagree with Defendants that we can read the pledge agreement as "controlling" to the exclusion of the other related agreements dated April 1, 2009, since the pledge agreement itself recites that a condition precedent to the restructuring of the loan was that Defendants (pledgors) would pledge their rights and interest in Gateway. Even bearing in mind that Gateway was an LLC that was owned by its members, Gateway had a manager who could conduct its business. (See fn. 9, ante.) The face of the Second Modification of TD (trial exhibit 8) states that the credit line amount is increased and borrower (Gateway) would hypothecate its ownership interest as additional collateral. Defendants do not show why Mr. Robinson could not have committed Gateway's resources in that manner. Defendants effectively ratified the manager's business decision by signing the related pledge agreement.
Another inconsistency in the loan documents is the varying terminology used to identify the trustor who provided security for the Gateway loan. Originally, it was the trustees for Defendants who executed the trust deed. With respect to the subsequent modifications of the deed of trust on the Robinson home, the amended complaint pleads as background facts that they were entered into between Gateway "and vested in" Defendants as trustees, for the purpose of increasing the credit extended, and otherwise established that "all other terms [of the original deed of trust] to remain the same."
At trial, counsel for Lender inquired of Mr. Robinson about the purpose of the modifications of the deed of trust that used the term, "with vesting as follows," for increasing the credit being extended. Lender's counsel then acknowledged in passing that it was the same group of Defendants that were involved in the entire transaction. Neither the briefs nor other portions of the record have discussed any significance of this "vesting" language. It has not been treated at trial or on appeal as an effective means of changing the identity of the original trustors in the deed of trust on the Robinson home, Defendants, into Gateway as the trustor. Instead, Gateway has always been treated as the borrower, on whose behalf Defendants provided security and additional collateral. Using this reading of the documents, we next consider alter ego issues argued on appeal about the respective roles of the parties.
B. LLC Characteristics and Alter Ego Appellate Claim
The amended complaint pleads that under the pledge agreement, Defendants held themselves out to be "the sole members of and owners of all interests in Gateway." On appeal, Defendants contend there was another drafting error, because only three of the supposed members of the LLC signed it. Defendants point to testimony from Mr. Robinson that Gateway had supplied its operating agreement to the lender, listing its members. When Mr. Robinson testified that he told bank representatives that two Gateway members (Linda L. Dowdy Trust and Richard W. Robinson) were not listed in it and the bank told him not to worry about it, a hearsay objection was sustained. He did testify that he believed the bank knew about that. At the close of trial, Defendants clarified that there were five owners of Gateway as of January 1, 2008, before these transactions, and fewer at other times.
Based on such facts, Defendants argue that the amended complaint failed to plead alter ego issues and without them, Lender cannot make any case for enforceability of the pledge agreement. Defendants contend that since their opening brief discussed the separateness of an LLC from its members, but Lender did not respond directly to this issue in its respondent's brief, Lender has somehow conceded the merits of their appeal. (See Sonora Diamond Corp. v. Superior Court (2000) 83 Cal.App.4th 523, 538 [a plaintiff must plead and prove alter ego allegations].) Lender simply responds that there was a "unity of interest" between Gateway and Defendants, as its interest holders, for purposes of applying antideficiency law.
Defendants are correct that an LLC has a legal existence separate from the members. (People v. Pacific Landmark, LLC (2005) 129 Cal.App.4th 1203, 1211-1212 [LLC is a hybrid business entity providing members with limited liability similar to corporate shareholders]; PacLink Communications Internat., Inc. v. Superior Court (2001) 90 Cal.App.4th 958, 963.) An LLC can carry out various business activities, such as entering into contracts. (Former Corp. Code, § 17003, subds. (a), (d), (e).) Under former Corporations Code section 17004, subdivision (a), a member could lend money to and do business with the LLC, similar to a person who was not a member. (9 Witkin, Summary of Cal. Law, supra, Partnership, §§ 143-144, pp. 705-707.)
Generally, a LLC member or manager cannot be held liable for the "debts, obligations, or other liabilities" of the LLC, "whether arising in contract, tort, or otherwise," solely by reason of his or her status as a member or manager. (Former Corp. Code, § 17101, subd. (a); current Corp. Code, § 17703.04, subd. (a).) A member of a limited liability company can be subject to liability under the common law governing alter ego liability. (Former Corp. Code, § 17101, subd. (b); People v. Pacific Landmark, LLC, supra, 129 Cal.App.4th 1203, 1212.) Alter ego liability may be imposed under equitable principles, where the necessary unity of interest and ownership is shown, and " ' "if the acts are treated as those of the corporation [LLC] alone, an inequitable result will follow." ' [Citation.] . . . Conditions under which the corporate entity may be disregarded vary by circumstance, but courts often consider commingling of funds, personal use of corporate assets, inadequate corporate records, lack of employees, offices, or operating funds, and inadequate capitalization." (CADC/RAD Venture 2011-1 LLC, supra, 235 Cal.App.4th 775, 788-789.)
Both former and current versions of the Corporations Code (former § 17101, subd. (c) and current § 17703.04, subd. (c)) allow a member of an LLC to be held liable "pursuant to the terms of a written guarantee or other contractual obligation entered into by the member, other than an operating agreement." (Ibid.) These principles indicate that as LLC members, Defendants had the ability to enter into business transactions affecting their interests in the LLC, which remained a separate legal entity for tax and other purposes. The members could transact business with the LLC itself. In the pledge agreement, Defendants represented that they owned the pledged collateral and had the authority to execute the agreement. We attach some significance to the change in the identity of the two sets of trustees who signed the modifications to the trust deeds, as opposed to the three signers of the pledge agreement, now including an additional Bradley entity or subtrust. (See fn. 8, ante.) This factor supports treating Defendants' pledge agreement as a separate contractual arrangement.
At this late date and in their reply brief on appeal, Defendants are bound by what the documents in the record say. They cannot properly claim, nor have they established, that there were two other LLC members who were essential participants in the pledge agreement or in the litigation as a whole. Instead, our reading of the loan documents as a whole results in a conclusion that Defendants, as pledgors, represented they had the necessary authority to bind Gateway interests, and they took action to transfer or assign their interests to others, under certain conditions. Alter ego allegations were not essential to Lender's pleadings about the enforceability of the pledge agreement.
C. Definitions Relevant to Sureties; Dispute Over Surety Terminology
In the opening and reply briefs, Defendants flatly state that they are sureties for Gateway's debt. Just as definitively, Lender asserts that Defendants did not qualify as sureties. We look to Civil Code section 2787 definitions, in light of the purposes of antideficiency law, to properly characterize the parties. Civil Code section 2787 defines a surety as one who "promises to answer for the debt, default, or miscarriage of another, or hypothecates property as security therefor." (4 Witkin, Summary of Cal. Law, supra, Secured Transactions in Personal Property, § 1, pp. 558 559 [there is a combination of old and new law on suretyship]; Pearl v. General Motors Acceptance Corp. (1993) 13 Cal.App.4th 1023, 1028, 1032.) A guaranty is no longer an entirely separate and independent obligation from that of the primary obligor. (5 Miller & Starr, Cal. Real Estate, supra, § 14:1, p. 14-2.) "The rights and liabilities of a surety now apply to guarantors as well as other sureties." (Ibid., fn. omitted.)
"Persons who are in fact principal obligors are not treated as sureties merely because they executed an instrument purporting to be a guaranty. The court looks to the contract between the parties to find the relationship of these individuals to the entire enterprise. What matters is the substance of the relationship between the parties and their respective obligations relative to the debt, as well as to the understanding of the creditor or the purported surety, rather than solely the words of the contract, to determine whether a surety relationship exists." (5 Miller & Starr, Cal. Real Estate, supra, § 14:5, pp.14-26 to 14-27; fns. omitted; Cadle Co. II v. Harvey (2000) 83 Cal.App.4th 927, 933.)
Generally, the obligation of a surety "must be neither larger in amount nor [in] any other respects more burdensome than that of the principal." (River Bank America, supra, 38 Cal.App.4th at pp. 1410, 1416 [construing related loan and guaranty agreements as providing that personal obligations on the guaranties "were completely separate from, and not affected by, the security provisions in the notes"]; Civ. Code, § 2809.) Where there is a series of agreements, such that a suretyship obligation is not created contemporaneously with the creation of the principal obligation, separate contractual consideration is required. (Civ. Code, § 2792; 5 Miller & Starr, Cal. Real Estate, supra, § 14:2, p. 14-8.) That is what happened here, when the pledge agreement was entered into a year after the original loan was negotiated, and was negotiated in connection with the Second Modification of TD. Effectively, it amounted to additional consideration and was given to satisfy a condition precedent to the Second Modification of TD on the original note.
For purposes of analysis, we think that Lender goes too far in contending that Defendants, as Pledgors, cannot qualify as sureties, on the grounds that a "unity of interest" existed between Gateway and Defendants such that they were operating as one and the same. Defendants made some efforts to keep Gateway going as a separate entity, and it entered into its own transactions, as the face of the various agreements shows. The record does not establish that Defendants were equivalent to or acted as "merely the principal obligor under a different name," as compared to Gateway. (River Bank America, supra, 38 Cal.App.4th 1400, 1422-1423 [test for a true guarantor considers separateness between guarantors and debtors]; see 5 Miller & Starr, Cal. Real Estate, supra, § 14:6, pp. 14-34 to 14-35.) We accordingly treat the pledge agreement as constituting a form of a surety arrangement, and shall read it together with the modifications made to the trust deeds that were given as security, on behalf of the principal borrower Gateway.
We further seek to clarify that the concept of additional collateral for an obligation has not been fully briefed by the parties. Lender relies on Dreyfuss, supra, 24 Cal.4th 400, 407 to argue that the pledge agreement furnished additional collateral as security for Gateway's increased line of credit, and that when Lender called upon it, there was no violation of either the Gradsky principles or antideficiency laws. In Dreyfuss, the court clarified that section 580d "applies only when a money judgment is sought against the debtor for the balance due on a note secured by a deed of trust. As discussed, there is a significant difference between selling additional security that has been pledged for a loan and recovering a deficiency judgment against the personal assets of the borrower." (Dreyfuss, supra, at p. 413.)
Defendants only reply that Dreyfuss, supra, 24 Cal.4th 400 and Birman v. Loeb, supra, 64 Cal.App.4th 502, 514 should "have no relevance unless the 'Borrower' in this case, Gateway, set aside the additional collateral for its increased line of credit. That did not happen. Pledgors set aside collateral for the increase in the line of credit. Neither Dreyfuss nor Birman addressed the legal distinction between an LLC and its members, much less the Gradsky defense." However, we have rejected Defendants' argument that the documents do not show that Gateway was a participant in setting aside additional collateral for its increased line of credit, even if there were admittedly drafting errors. We also disagree that alter ego concepts are essential to this statutory analysis. (Pts. II.A and II.B, ante.)
We conclude the legal principles concerning additional collateral are squarely applicable to the record in this case, even though the briefing is sketchy about the additional or serial collateral concept. We accordingly do not view that issue as new and dispositive, for purposes of applying the rule of Government Code section 68081 (precluding an appellate court from deciding an appeal based upon an unbriefed issue unless the parties have an opportunity for supplemental briefing; see People v. Neilson (2007) 154 Cal.App.4th 1529, 1532-1534 [statutory purpose is to prevent decisions based on issues never addressed by the parties]). In light of applicable authorities, we examine Defendants' contentions that the pledge agreement violates antideficiency protections, for lack of a Gradsky waiver.
III
ANALYSIS OF RECORD: DEMURRER AND NONSUIT
A. Review Standards
Both the rulings on demurrer and on the nonsuit addressed common legal issues about the applicability of the Gradsky waiver to this set of presented facts about the loan documents and the nonjudicial foreclosure that took place. The trial court was required to apply antideficiency statutory standards to the facts as pleaded and proved. Determining the meaning of a statutory standard requires the resolution of a question of law. (People ex rel Lockyer v. Shamrock Foods Co. (2000) 24 Cal.4th 415, 432.) "The soundness of the resolution of such a question is examined de novo." (Ibid.)
In considering the issues on demurrer, we review the complaint on a de novo basis to determine whether it contains sufficient facts to state a cause of action. " 'We treat the demurrer as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law.' [Citation.] The trial court exercises its discretion in declining to grant leave to amend. [Citation.] If it is reasonably possible the pleading can be cured by amendment, the trial court abuses its discretion by not granting leave to amend. [Citation.] The plaintiff has the burden of proving the possibility of cure by amendment." (Grinzi v. San Diego Hospice Corp. (2004) 120 Cal.App.4th 72, 78 (Grinzi); Blank v. Kirwan (1985) 39 Cal.3d 311, 318.)
When deciding whether granting a nonsuit request is justified, " 'the court may not weigh the evidence or consider the credibility of witnesses. Instead, the evidence most favorable to plaintiff must be accepted as true and conflicting evidence must be disregarded. The court must give "to the plaintiff ['s] evidence all the value to which it is legally entitled, . . . indulging every legitimate inference which may be drawn from the evidence in plaintiff['s] favor." ' [Citation.] A mere 'scintilla of evidence' does not create a conflict for the jury's resolution; 'there must be substantial evidence to create the necessary conflict.' " (Nally v. Grace Community Church (1988) 47 Cal.3d 278, 291.) "The plaintiff must be given an opportunity to present all the facts he expects to prove before a nonsuit is proper." (Loral Corp. v. Moyes (1985) 174 Cal.App.3d 268, 273.)
We address separately in part IV, post, the issues concerning Defendants' requested jury instructions. For now, we outline the rationale in Gradsky, supra, 265 Cal.App.2d 40 for applying the prohibitions of section 580d not only to the primary debtor, but to a surety or guarantor, unless appropriate waivers exist.
B. Gradsky Principles and Focus on Remedies
The gist of the Gradsky holding, where the creditor elected to hold a nonjudicial sale of real property security, is to allocate loss where there is a remaining deficiency. (Gradsky, supra, 265 Cal.App.2d at pp. 47-48.) We adapt a commentator's accurate analysis: "If the guarantor has to pay the creditor the unpaid balance, the guarantor doesn't get any subrogation rights against the principal debtor because the creditor lost the right to a deficiency and there is no longer any security. To allow the guarantor subrogation would circumvent the prohibition against deficiency judgments. On whom should this loss fall? The creditor had an election of remedies; it also has a statutory duty [citations] not to impair the guarantor's remedies against the principal debtor. When the Bank elected to pursue a remedy that destroyed both the security and the guarantor's right of reimbursement from the principal debtor, the Bank was estopped to recover the deficiency from the guarantor. 'The result follows not because section 580d . . . prevents recovery of a deficiency judgment against the guarantor, but because the section prevents a deficiency judgment by the guarantor against the debtor.' " (4 Witkin, Summary of Cal. Law, supra, Security Transactions in Real Property, § 202, p. 1017, citing Gradsky, supra, at p. 47.)
The court in Gradsky, supra, 265 Cal.App.2d at pages 46 to 47, relied in part on Civil Code section 2819, providing in relevant part that a surety will be exonerated, with some exceptions, "if by any act of the creditor, without the consent of the surety the original obligation of the principal is altered in any respect, or the remedies or rights of the creditor against the principal, in respect thereto, [are] in any way impaired or suspended." As a surety defense, Civil Code section 2819 requires that we examine the transaction to determine whether, as a matter of law, these principles of estoppel should prevent Lender from recovering amounts due on the Note after the nonjudicial foreclosure, from Defendants. This pledge agreement did not contain an express waiver of a defense based on the creditor's election of remedies (i.e., the foreclosure; Gradsky, supra, at p. 48).
Here, as in Cathay Bank, supra, 14 Cal.App.4th 1533, we seek to determine "what is it, precisely, that the guarantor is being asked to waive? The answer is supplied by Gradsky[, supra, 265 Cal.App.2d 40] itself: it is the defense based on estoppel which arises out of the operation of section 580d in the context of a nonjudicial foreclosure." (Cathay Bank, supra, at p. 1538; italics omitted.) Thus, to assert entitlement to the Gradsky defense, its claimant (surety) must be able to demonstrate the lender, if it nonjudicially forecloses, will destroy the claimant (surety's) subrogation rights against the primary (defaulting) obligor (Gateway). Defendants phrase their argument as follows:
"The Gradsky defense is a 'what would happen if' defense. The operative analysis is what would happen if [Lender] were allowed to foreclose on [Defendants'] Pledgors' membership interests in Gateway. If that were to happen, then [Defendants] Pledgors would no longer have an economic interest in Gateway, and would therefore have every incentive to sue Gateway in an action for subrogation. But such a lawsuit would be prohibited under California's anti-deficiency laws because of [Lender's] prior voluntary decision to nonjudicially foreclose on the Robinson family home. This is exactly the type of unequitable scenario contemplated by the Gradsky defense, and why Respondent is estopped from pursuing Pledgors for their pledged interests."

Under Gradsky, we are instructed to examine the remedies available to Lender in terms of the effect of the antideficiency statutes upon them. (Gradsky, supra, 265 Cal.App.2d at pp. 46-47.) Under Civil Code section 2856, the rights that a surety may have (e.g., subrogation, reimbursement, or defenses under Civ. Code, §§ 2787-2855), may be waived, including the application of antideficiency principles such as section 580d, as it relates to the principal borrower's obligation. This translates into asking if Defendants, as pledgors, had such rights to assert antideficiency protections and the related waiver privilege as outlined in Gradsky.
C. Additional Collateral Principles
In Thoryk v. San Diego Gas & Electric Company (2014) 225 Cal.App.4th 386 (Thoryk), this court examined one of the various exceptions to statutory antideficiency protections for a borrower, the "mixed collateral" rule. "Where there are liens established upon both personal and real property in the subject transaction, a foreclosing lienholder using the power of sale may continue to pursue remedies against the former property owner/borrower. (Hatch v. Security-First National Bank (1942) 19 Cal.2d 254, 261 [no violation of § 580a where creditor does not seek a personal judgment for the unpaid balance of a loan, but instead seeks to enforce additional security secondarily liable for the principal loan, such as selling a pledge or other trust deeds given as additional security for the otherwise secured loan]; Mortgage Guarantee Co. v. Sampsell (1942) 51 Cal.App.2d 180, 186 (Sampsell) [sale of real property under the power of sale in the deed of trust does not wipe out the indebtedness and the creditor may proceed against 'any other security.'].)" (Thoryk, supra, at p. 393.)
In Thoryk, we restated the rules: "Where additional collateral was created for an obligation, a debtor-creditor relationship may survive a nonjudicial foreclosure, if the proceeds of the sale were insufficient to pay the debt. (See Redingler v. Imperial Savings & Loan Assn. (1975) 47 Cal.App.3d 48, 50-51 (Redingler) [creditor could collect on insurance policy named as additional security for mortgage, up to the amount of the indebtedness remaining after the foreclosure sale].) In Sampsell, supra, 51 Cal.App.2d 180, 186, the foreclosing creditor could collect on the debtor's assignment of rental income, because 'the sale of the real property under the deed of trust does not wipe out the indebtedness nor prevent the creditor from proceeding to recover upon any other security.' " (Thoryk, supra, 225 Cal.App.4th at p. 401.) Where a lienholder had nonjudicially foreclosed and acquired the property for less than the full amount of the outstanding indebtedness, the foreclosure did not extinguish all of the debt on the note. "The question is what further recourse [the lienholder] should have, that does not contravene the purpose of the antideficiency statutes." (Id. at p. 403.) We summarized other such holdings:
"In other situations, creditors have been allowed additional recovery against a debtor following foreclosure under a power of sale, because the particular claims did not conflict with the policy behind the antideficiency laws. [Citation.] Thus, '[t]he courts have repeatedly held that resort to additional security following a nonjudicial foreclosure is not an attempt to secure a deficiency judgment.' [Citation.] These cases that allow a nonjudicially foreclosing lender to resort to 'additional security' involve certain types of valuable property that were mentioned or incorporated into the mortgage documents. In Dreyfuss, supra, 24 Cal.4th 400, 406, 411 412, serial enforcement of security was allowed, through separate nonjudicial foreclosure proceedings, because the borrowers had separately granted security interests in several different parcels of real property. In Redingler, supra, 47 Cal.App.3d at pages 50 to 51, the borrower had specifically agreed to allow insurance policy proceeds to be paid to the lender. In Sampsell, supra, 51 Cal.App.2d 180, 186, the borrower had assigned certain rental income to the lender, which could be reached despite a nonjudicial foreclosure." (Thoryk, supra, 225 Cal.App.4th at p. 403.)

In Thoryk, supra, 225 Cal.App.4th 386, the conclusion was that the lienholder's trust deed did not sufficiently describe "additional security" for the mortgage debt, such as recovery for third party tort claims for injury to the real property (wildfire). The lienholder therefore could not obtain recovery against the defaulting borrower that was in the nature of a deficiency judgment. (Id. at p. 405.)
D. Application of Authorities to Rulings
The judgment allows Lender to proceed against the security provided in the pledge agreement, in addition to its previous foreclosure on the Robinson home as security. Defendants contend this was error on the basis that before the foreclosure, Defendants could have paid off Gateway's indebtedness and could have obtained a subrogation position, to stand in the shoes of Lender and proceed against Gateway as the primary debtor. (Civ. Code, § 2848; see fn. 4, ante.) In arguing they could have succeeded to Lender's rights against Gateway in that manner, Defendants cite to the rule that an individual member of a business association may possess either derivative or personal claims (e.g., fraud) against the corporation or LLC. (See, e.g., Denevi v. LGCC, LLC (2004) 121 Cal.App.4th 1211, 1221-1223.)
We are entitled to look to the purpose and effect of the pledge agreement and its associated loan documents, to determine whether an attempt to recover on it would amount to a deficiency judgment in violation of the antideficiency laws. (River Bank America, supra, 38 Cal.App.4th 1400, 1422.) A lender may recover a deficiency judgment from a separate guarantor, if it is not merely the principal debtor under a different name, and if it is not obligated in the same way as the principal borrower. (CADC/RAD Venture 2011-1 LLC, supra, 235 Cal.App.4th 775, 792 [when businesses or individuals as borrowers take advantage of corporate-type protections to obtain loans, they assume the risks of doing business in that way].) To be eligible for the Gradsky defense, Defendants would have to show Lender's nonjudicial foreclosure on Gateway's original security should operate to bar Lender from pursuing Defendants as sureties or guarantors.
However, Lender is seeking to pursue liability under the later pledge agreement, which gave separate consideration for the loan modification, in the form of additional collateral for the primary obligor's debt. Defendants had previously agreed that the Gateway LLC could be managed as a business entity, separate from them (by Mr. Robinson). It is not dispositive here that Mr. Robinson used the Gateway real property security as his residence. It was owned by Defendants, as trusts, and these pledge agreement enforcement efforts do not necessarily invoke all the policies favoring antideficiency protections for a borrower, in a more traditional two party transaction.
The correct analysis, as set out in Cathay Bank, supra, 14 Cal.App.4th 1533, is whether under the circumstances of the transaction, the guarantor possessed subrogation rights that may be lost, and if those rights would have created for the guarantor "an immunity from a deficiency judgment," under section 580d. Only then would the guarantor have a Gradsky defense (estoppel against the lender to seek a deficiency after taking the security), requiring an inquiry into whether it was adequately waived. The focus is on the documents at the time of formation of the obligations, in evaluating if the guarantor needs to be told the (potential) "true legal consequences of what would otherwise happen if the lender selects another remedy (nonjudicial foreclosure)." (Cathay Bank, supra, at pp. 1538-1539.) Although the waiver language set forth in Civil Code section 2856 has been liberalized since the Cathay Bank decision was issued, those 2013 amendments were made after the transactions in this case (2008-2009; see fn. 13 regarding amendments to Civ. Code, § 2856). Regardless, the key consideration is finding the apparent intent of the parties as reflected in their documents, to evaluate the availability of a Gradsky defense and its effect upon potential remedies.
Viewed in this light, Defendants (as parties to the pledge agreement) cannot show that they had such subrogation rights that were derived from Lender's position as against Gateway, and that were destroyed by the foreclosure, and that should entitle them to a defense against being held for a deficiency on the Note. Without such subrogation rights, there is no entitlement to waive a defense based upon them. When we keep in mind that Lender took the Robinson home as security for Gateway's Note, we do not find a basis to estop Lender from proceeding on a subsequently negotiated agreement, with slightly different parties, the pledge agreement that was entered into by Defendants concerning their own membership interests in Gateway, and that supplied additional collateral. Those membership interests are from a different source than the Robinson home, which Defendants owned as another kind of asset.
Lender's analysis is somewhat inaccurate, insofar as it states that Defendants cooperated with Gateway by using the pledge agreement as "a means for Borrower to set aside additional collateral as security for Borrower's increased line of credit." (Italics added.) Rather, it was the Second Modification of TD and the Change in Terms agreement that were carried out by Gateway, the borrower, to affect its own interests. The additional collateral pledged by Defendants was related to the modification of Gateway's original obligation, but it went beyond the original security provided and was implemented by different decision makers (Defendants). Without the cooperation of Gateway's membership holders, in providing additional consideration that made additional and different collateral available to Lender, a condition precedent to the negotiation of the Second Modification of TD would not have been satisfied. The nature of the pledge agreement, negotiated as a condition precedent to loan modification, takes the transaction out of the Gradsky situation. Defendants directly owned the Robinson home, but they also separately owned membership in the Gateway LLC. Dreyfuss, supra, 24 Cal.4th 400 identified a significant distinction "between selling additional security that has been pledged for a loan and recovering a deficiency judgment against the personal assets of the borrower." (Id. at p. 413.) Recovery on Defendants' pledge agreement is not the same as recovering directly on Gateway's (borrower's) assets.
Civil Code section 2819 would provide for a surety to be exonerated, "if by any act of [Lender], without the consent of [Defendants], the original obligation of [Gateway] is altered in any respect," or if Lender's remedies or rights against Gateway were "impaired or suspended." (Ibid.) Gateway remained liable on the Note, after Lender's nonjudicial foreclosure on the Gateway real property security. But Defendants consented to modifying the loan and therefore altering (increasing) Gateway's original obligation. Defendants expressly undertook to create additional collateral as an incentive to Lender to increase Gateway's loan amount (condition precedent). Gateway, a dismissed defendant, was only held liable up to its security amount. Arguably, Defendants as Gateway's members could only have been held liable to Lender as sureties up to that security level, if not for their execution of the pledge agreement providing additional collateral, together with Gateway's Second Modification of TD. Lender's previous nonjudicial foreclosure on the Robinson home did not bar it from proceeding against Defendants on the alternate or additional collateral they pledged.
The pledge agreement, the Second Modification of TD and the Change in Terms agreement together were clearly intended to provide additional collateral beyond that which Gateway had already provided, both in the form of the trust's original real property security, and through Gateway's manager's agreement to hypothecate the Gateway ownership interests to Lender (insofar as the manager had such authority under LLC law; it has not been shown otherwise). The record suggests that the Gateway members agreed to comply with the manager's business decision, and they implemented it through the pledge agreement which utilized their membership status. They did not need to waive any antideficiency protections of Gateway as the original debtor, either directly or indirectly as members of Gateway, for the pledge agreement to be deemed enforceable, because it created additional collateral beyond the original security. There is no basis for Lender to be estopped from pursuing Defendants for the pledge agreement's additional collateral, since Defendants have their own documented legal identities as membership interest holders, which are different from that of the primary obligor, Gateway. (Thoryk, supra, 225 Cal.App.4th 386, 405 [loan documents must sufficiently describe any "additional security" to be provided for the debt].)
Gateway and Defendants, as its interest holders, acted together in pursuit of a common goal. Based on the nature of Defendants' relationship with Gateway, and their ability to convey its interests, Defendants' pledge agreement was not required to identify them as potential holders of Lender's subrogation rights, who would be statutorily immune from a deficiency judgment in the event of a foreclosure, in the same manner as the primary obligor. No additional Gradsky policies apply to protect Defendants, as standing in the shoes of Lender, from being held for additional collateral after the foreclosure. (Dreyfuss, supra, 24 Cal.4th 400, 408 [" 'A creditor that draws on (additional security) does no more than call on all the security pledged for the debt. When it does so, it does not violate the prohibition of deficiency judgments.' "].)
We conclude the facts alleged in the amended complaint withstand the demurrer's arguments that Lender should be estopped from acquiring Gateway's original security for the loan and then proceeding against the additional collateral given as part of the loan modification. The pledge agreement could be enforced independently of the previous nonjudicial foreclosure on Gateway's security, the Robinson home, without offending antideficiency rules. Equitable principles did not require the insertion of a waiver of a Gradsky defense within the pledge agreement, to protect Defendants as sureties who provided additional collateral. The ruling on demurrer was proper.
Further, Defendants' motion for nonsuit was not well taken. Lender provided evidence about the intricately related nature of the transactions and how the Gradsky defense did not apply to the pledge agreement, due to its nature as part of the Second Modification of TD, as a condition precedent to changing the terms to increase the loan amount. The testimony given did not support the application of the estoppel rationale discussed in Gradsky, supra, 265 Cal.App.2d 40. Lender showed its entitlement to pursue Defendants as the equivalents of sureties, who may be held to the pledge agreement for amounts beyond the real property security, in the form of additional collateral.
IV
ANALYSIS OF INSTRUCTIONAL CLAIMS
" '[A] party is entitled to have the jury instructed on his theory of the case, if it is reasonable and finds support in the pleadings and evidence or any inference which may properly be drawn from the evidence.' " (Moore v. Preventive Medicine Medical Group, Inc. (1986) 178 Cal.App.3d 728, 744.) Counsel must be permitted to argue a party's proposed application of law to the facts as brought out at trial. (Cassim v. Allstate Ins. Co. (2004) 33 Cal.4th 780, 795.) Defendants sought permission to present jury instructions that would have explained the rationale of Gradsky, supra, 265 Cal.App.2d 40, and its underlying legal theories. Although they did not present any expert testimony about how the Gradsky defense would have operated, they argue on appeal that the transactional facts testified to by the witnesses were enough to invoke such an instructional duty. (See Evid. Code, § 801, subd. (a) [expert opinion is admissible if it is "[r]elated to a subject that is sufficiently beyond common experience [and] would assist the trier of fact."].)
The requested jury instructions at issue here were similar to a proposed mini-opening statement, with 14 illustrative slides, that Defendants sought to present at the outset of trial, described by their attorney as follows: "I think this jury needs to understand three concepts so they even know what we're talking about in this case. I said they needed to understand subrogation, California's anti-deficiency laws, and the Gradsky defense. . . . [¶] . . . And that's what we intend to inform the jury about. There's going to be no application of facts to law, none whatsoever. It's going to be these are some issues that we believe that you need to hear." The trial court denied the request to give the augmented opening statement, and instead traditional opening statements were made.
Generally, an expert cannot testify to an opinion about the proper legal interpretation of contracts, or other such issues of law. (Summers v. A.L. Gilbert Co. (1999) 69 Cal.App.4th 1155, 1180.) "Even if an expert's opinion does not go to a question of law, it is not admissible if it invades the province of the jury to decide a case." (Id. at p. 1182.) Lender liability, such as in the former field of savings and loan law, was deemed a proper subject of expert testimony, with respect to an attorney's professional standard of care in undertaking to advise clients about applying for government approval of a banking license. (Jeffer, Mangels & Butler v. Glickman (1991) 234 Cal.App.3d 1432, 1443.) This is not a professional liability matter concerning a standard of care, but rather a dispute about the proper legal interpretation of contracts and related issues of statutory law, which are not generally jury issues.
We have concluded above that Defendants cannot show that the Gradsky defense was properly available to them. They cannot invoke the protection of the antideficiency statutes to prevent enforcement of the pledge agreement. They accordingly were not entitled to jury instructions to explain their mistaken view of the law to the jury, and have not provided any legal basis for this court to reverse the judgment.
DISPOSITION
The judgment is affirmed. Costs on appeal are awarded to Respondent.



HUFFMAN, J.

WE CONCUR:




BENKE, Acting P. J.




AARON, J.