Written by attorneys · grounded in primary & secondary sources — see below
A right to recover an obligation from a party's personal assets in addition to or instead of designated collateral. The right arises when a debtor or secondary obligor remains personally liable after default or when a secured party may charge back uncollected amounts.
Rising Sun Electronics pledged its inventory and equipment to secure a line of credit from Redwood Bank. The board resolution authorized the pledge with recourse, meaning the bank could pursue the company's general assets if the collateral proved insufficient after default. When sales declined, the bank collected from the pledged assets and then obtained a judgment against the corporation's remaining cash reserves.
Roberto Reyes guaranteed a loan made by Reliance Insurance to his supplier. After the supplier defaulted, Reliance collected from Reyes under the guaranty. Reyes then asserted his right of recourse against the supplier's remaining inventory that had secured the original obligation.
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Radiance Media assigned its accounts receivable to Redwood Bank as collateral. When several account debtors failed to pay, the bank attempted collection through an outside agency. After the accounts remained uncollected, the bank exercised its right to charge back the balances to Radiance Media under the security agreement.
Rowan Russell sold her mortgaged commercial building to Ricardo Rojas. The deed recited that Rojas assumed the mortgage debt. After Rojas defaulted, the lender pursued Russell personally because she had not been released from the original obligation.
Rosalind Reed borrowed from Reliance Insurance on a nonrecourse basis secured only by her apartment complex. When the complex value fell below the debt, the lender foreclosed but could not obtain a deficiency judgment against Reed's other assets.
Rajesh Rao guaranteed a mortgage loan for his corporation. After the corporation defaulted, Rao paid the lender in full to avoid foreclosure. Rao then sued the corporation to compel it to reimburse him and restore his personal assets.
A recourse loan permits the lender to pursue the borrower's personal assets after foreclosure or default if the collateral is insufficient. A nonrecourse loan limits recovery to the collateral alone. The distinction turns on whether the borrower or guarantor remains personally liable after the security interest is enforced.
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A secured party that collects from account debtors in a commercially reasonable manner may charge back uncollected amounts to the debtor or secondary obligor if the security agreement grants that right. The charge-back restores the secured party to the position it would have occupied had it not undertaken collection.
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No. The original mortgagor remains personally liable unless the mortgagee expressly releases the transferor. The transferee's assumption creates an additional source of recovery but does not automatically discharge the transferor.
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The transferor may compel the transferee to perform the assumed obligation through an action for exoneration. The court may order the transferee to pay the mortgagee directly or enter a money judgment that the transferor must then pass through to the mortgagee.
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…or change; and where the legislative body does not itself possess the requisite information—which not infrequently is true—recourse must be had to others who do possess it. Experience has taught that mere requests for such information often are unavailing, and also that information which is volunteered is not always…