Personal guarantee amid foreclosure proceedings at center of issue
In a high-stakes mortgage litigation spanning two states, X-Caliber Funding LLC has brought a suit against nursing home operator Mark Petersen, seeking to enforce a personal guarantee on a $40 million loan tied to financially troubled facilities in Illinois.
The case, filed in New York Supreme Court and later removed to federal court, underscores the enduring risks faced by guarantors and the strategic challenges lenders encounter in multi-jurisdictional loan enforcement.
X-Caliber Funding, acting as servicer for US Bank, N.A., extended the loan in February 2021 to seven limited liability companies (LLCs) owned and operated by Petersen. The LLCs ran nursing home facilities across Illinois. To secure the loan, Petersen personally guaranteed the obligations of the LLCs under both the Loan Agreement and a Security Agreement executed in April 2022.
By December 2023, the LLCs had defaulted, failing to make required principal payments. X-Caliber demanded full repayment. Petersen and the LLCs did not respond, prompting the lender to take action.
Simultaneously, X-Caliber initiated foreclosure proceedings in the Northern District of Illinois, seeking to place the nursing home facilities under receivership. The court appointed Michael F. Flanagan as Receiver, who subsequently designated Joseph Tutera to manage the properties.
By March 2024, Peoria based Petersen Health Care had filed for Chapter 11 bankruptcy, owing creditors a reported $295 million
In January 2025, Flanagan moved to implement a structured sale process for the facilities. Petersen objected, contending that the proposed procedures would fail to achieve fair market value and could unjustly increase his personal liability.
In August 2024, X-Caliber filed an enforcement action in New York, moving for summary judgment in lieu of complaint under N.Y. C.P.L.R. § 3213. Petersen removed the case to the U.S. District Court for the Southern District of New York and sought to halt the proceedings, arguing that the pending Illinois sale might offset or extinguish his liability.
The court denied Petersen’s motion to stay, holding that his liability under the personal guarantee was distinct from the outcome of the Illinois asset sale and could proceed independently.
In response, Petersen filed counterclaims against X-Caliber and third-party claims against:
- Joseph Tutera, the facility manager,
- Illinois Debt Acquisition Company (IDAC), and
- Walnut Creek Management, LLC.
He alleged that the lender and third parties conspired to devalue the nursing homes, thereby increasing his exposure under the guarantee. X-Caliber and the other defendants moved to dismiss these claims, characterizing Petersen’s allegations as inconsistent and unsupported.
Court rulings and next steps
- Motion to stay denied: The New York court declined to halt proceedings pending resolution of the Illinois sale.
- Summary judgment pending: Petersen faces the possibility of being held personally liable for the full $40 million loan balance.
- Counterclaims in question: The court expressed skepticism regarding Petersen’s counterclaims and is weighing dismissal motions.
- Status update required: The parties must file a joint status report on the Illinois sale by June 10, 2025, or upon court approval of a sale, whichever occurs first.
Key takeaways for finance professionals
- Personal guarantees remain potent: Guarantors may be held liable regardless of concurrent foreclosure actions.
- Parallel proceedings proceed independently: Courts are willing to advance enforcement actions even as asset sales unfold elsewhere.
- Jurisdictional strategy matters: Procedural differences between states can significantly impact enforcement timelines and outcomes.
The X-Caliber Funding v. Petersen case illustrates the complexities and risks inherent in commercial lending, particularly when personal guarantees intersect with multi-state litigation. With summary judgment looming, Petersen’s financial liability remains unresolved, casting a spotlight on the perils of cross-jurisdictional loan disputes.
