Facts

Plaintiff GSF Enterprises Inc. entered into two short term bridge loan agreements with Victorville Mediterranean Gardens LLC and Executive Information and Investment Group LLC, totaling $250,000. Pursuant to the terms of the loan agreements, the funds were to be used in furtherance of the defendants' efforts to develop a certain parcel of land in Victorville, into a 428-unit apartment complex. Construction funding was to have been via an HUD-guaranteed loan.

In reality, the funds loaned by GSF were used to pay the past-due mortgage on the undeveloped land, and to reimburse individual defendant Larry D. Gonzales for alleged expenses.

The court found that Gonzales fraudulently misrepresented material facts to induce GSF's consent to the bridge loan agreements.

Specifically, Gonzales concealed key facts, including that he was actually in no position to qualify for the HUD guarantee, that the project was in significant financial distress with substantial sums due to the holder of the first trust deed on the land and other creditors, and that the property itself was not owned by either of the limited liability companies that were the borrowers under the bridge loan notes.

Critically, Gonzales was found to be the alter ego of both limited liability companies and judgment for rescission was entered against him, personally, as well as against the shell companies.

Result

GSF obtained $250,000 total judgment for rescission of loan agreements based upon fraud of principal member of limited liability company borrowers. Plaintiff also obtained judgment of alter ego liability on the part of principal member, Larry Gonzales.