We all know that many large commercial real estate loan transactions include “bad boy” guaranties from the principals of the borrower which spring into action upon the occurrence of certain events, like the filing of a bankruptcy petition. Some borrowers do not take these guaranties seriously since they think that they are in violation of public policy and/or constitute an unenforceable penalty. The public policy argument is that the springing recourse nature of the guaranty creates a conflict of interest between the guarantor’s self-interest and the fiduciary duty that the guarantor owes to the borrower’s shareholders, and perhaps creditors as well, as the borrower enters the zone of insolvency. The unenforceable penalty argument is that the full recourse provision does not attempt to calculate the actual damages that may be suffered by the lender as a result of the occurrence of the “bad acts.” A state court judge in New York was faced with these arguments recently and ruled that while he understood that “there are many real estate developers who now regret having exposed themselves to the loss of fortune by investing in an overheated real estate market…[the court] does not have a mandate to rewrite the rules relating to commercial real estate finance.” The court upheld the enforceability of the guaranties and granted summary judgment in favor of the lenders. UBS Commercial Mortgage Trust 2007-FL 1 v. Garrison Special Opportunities Fund LP, No. 652412/10 (N.Y.Sup. Ct. Mar. 8, 2011); and Bank of America, NA v. Lightstone Holdings, LLC, No. 601853/09 (N.Y.Sup.Ct. July 14, 2011).