Real estate investment firm scores appellate victory in commercial foreclosure

On the outside, Carmel Rincon is a peaceful residential mid-rise building in the heart of San Francisco’s Embarcadero District. Behind the scenes, it was the setting for a dramatic finance litigation saga brought on by the nonjudicial foreclosure of the property. Manatt represented the acquiring real estate investment firm, Carmel Partners affiliate CP III, through every step of the transaction. After the district court granted summary judgment in favor of the previous owner and guarantor, Manatt Litigation secured a major appellate victory.

The $110 million loan for the building originated when Richard D. Cohen’s firm, Rincon EV Realty LLC, bought Rincon Towers for $143 million with the goal of converting the rental complex into condominiums. After the originator, Bear Stearns Commercial Mortgage, Inc., collapsed in 2008, Maiden Lane Commercial Mortgage Backed Securities Trust 2008-1, a trust set up by the Federal Reserve Bank of New York, picked up the Rincon loan. Carmel eventually purchased the loan for around $85 million; the loan was due in June 2009. When the borrower failed to pay, CP III foreclosed and acquired the property for $73 million. Because Cohen’s companies allowed certain third-party contractors and other creditors to file liens on the property, Manatt also sued, invoking the “bad boy guaranty” to recover the difference between the amount due on the loan (approximately $118 million with interest and costs) and the $73 million credit bid purchase price of the property.

The lower court initially sided with Cohen, granting his motion for summary judgment, concluding that the transfer provision in the guaranty was not triggered. In a unanimous summary order, the U.S. Court of Appeals, Second Circuit, reversed and remanded the case back to the district court for trial, where CP III will seek to recover the loan balance and related legal and other expenses.


CP III Rincon

Service Type

Appellate, Commercial / General Litigation, Real Estate Litigation


Real Estate, Developer


San Francisco