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Banking & Finance Law Report

Category Archives: Bank Litigation

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“The Bandits’ Club” gets its due

Posted in Bank Litigation, Regulation and Compliance

Our colleagues at Antitrust Law Source posted an interesting update about probable charges alleging that traders at approximately a dozen global banks – including Deutsche Bank, JPMorgan Chase, Barclays, and USB – fixed the foreign exchange market, or “forex,” market. The U.S. Department of Justice may bring charges by the end of the year. Read the complete article on Antitrust Law Source.…


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Ohio Supreme Court Resolves Certified Conflict Regarding Oral Forbearance Agreements

Posted in Bank Lending, Bank Litigation, Collection and Foreclosure, Commercial Law, Commercial Lending, Commercial Loans and Leases, Community Banking, Ohio Law, Real Estate

Last Spring, we discussed on this blog a trifecta of noteworthy lending cases pending before the Ohio Supreme Court. Today, the Court resolved one of them, and in doing so also resolved a certified conflict among Ohio’s appellate districts regarding whether Ohio’s Statute of Frauds bars a party from relying on an oral forbearance agreement to defeat a judgment that was entered pursuant to a written contract. The court’s unanimous opinion in FirstMerit Bank, N.A. v. Inks, Slip Opinion No. 2014-Ohio-789, is available here.

Daniel Inks, Deborah Inks, David Slyman, and Jacqueline Slyman guaranteed that Ashland Lakes, LLC would repay a $3.5 million loan from FirstMerit Bank. When the LLC defaulted, FirstMerit sued the guarantors, and the trial court awarded judgment to FirstMerit based on confessions of judgment entered by the defendants under warrants of attorney. The Slymans and Inkses then appealed to Ohio’s Ninth District Court of Appeals on the basis that the confessing lawyer did not produce the original warrants of attorney. After filing that (ultimately unsuccessful) appeal, the Slymans and Inkses also moved the trial court for relief from judgment, arguing that FirstMerit was not entitled to recover because it had entered into an oral forbearance agreement with the LLC. The trial court concluded that this argument was barred by Ohio’s Statute of Frauds, and the Slymans and Inkses appealed from that decision as well. The Ninth District Court of Appeals reversed the trial court’s decision on the Statute of Frauds, saying:

By its plain language, …


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Agreeing to Renegotiate a Loan Does Not Waive Lender’s Right to Foreclose

Posted in Bank Lending, Bank Litigation, Collection and Foreclosure, Commercial Lending, Real Estate, Workouts

In its Oct. 30, 2013 decision in General Electric Capital Corporation v. Tartan Fields Gold Club, Ltd., et al., 2013-Ohio-4875, the Fifth District Court of Appeals made clear that a lender does not waive its right to enforce its rights upon the borrower’s default merely entering into negotiations to restructure a loan; the court further held that the lender’s enforcement of its default rights during negotiations is not an act of bad faith. The court also relied on longstanding Ohio precedent that without more, a lender does not have a fiduciary relationship with a borrower.

In 2007, Tartan Fields Golf Club, Ltd. borrowed $13.3 million from GECC and secured the loan with a mortgage on its Delaware County golf course development. When Tartan Fields approached GECC in early 2009 about renegotiating the loan, GECC required that Tartan Fields sign a “Pre-Negotiation Agreement” that provided, among other things, that Tartan acknowledged that GECC had no fiduciary, confidential or special relationship with GECC; the Pre-Negotiation Agreement also gave both parties the unilateral right to terminate negotiations with three business days’ notice to the other party in their sole discretion and contained an integration clause.…


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10th District Court of Appeals Upholds Subordination and Flow Down Provisions in Commercial Construction Documents

Posted in Bank Litigation, Commercial Lending, Ohio Law, Real Estate

On March 29, 2013, the Court of Appeals for the 10th Appellate District in Columbus issued a decision of significance for mortgage lenders that rely on contractual subordination and flow down provisions in construction contracts. 

In KeyBank Natl. Assn. v. Southwest Greens of Ohio, L.L.C., 10th Dist. No. 11AP-920, 2013-Ohio-1243, the 10th District Court of Appeals upheld the September 14, 2011 decision by Judge John Bessey of the Franklin County, Ohio Common Pleas Court that the plaintiff lenders (the "Lenders") had priority over the subcontractors/ mechanic’s lien claimants even though the lenders recorded their mortgage subsequent to the notice of commencement’s recording.  The decision is significant because during this period fraught with contested foreclosures and inter-creditor disputes over priorities in real estate, the 10th District has affirmed Ohio’s broad construction and consistent enforcement of flow down provisions in construction documents.

In the spring of 2008, defendant Columbus Campus, LLC ("Campus") contracted with a general contractor to construct a continuing care retirement community on 88 acres in Hilliard, Ohio.  On March 10, 2008, Campus filed a notice of commencement; on April 16, 2008, the Lenders executed a $90 million construction loan agreement with Campus secured by a mortgage on the 88-acre property; the Lenders recorded their mortgage on April 22, 2008.  By March, 2009, the Lenders had disbursed approximately $45 million of the loan proceeds pursuant to various draw requests, $27 million of which was paid to the general contractor and various subcontractors.…


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Signs of Trouble Before Payment Default

Posted in Bank Lending, Bank Litigation, Bankruptcy, Collection and Foreclosure, Commercial Lending, Commercial Loans and Leases

This article is Part Two in a seven-part series on how to structure sales and what to do when your customer fails to pay. You can find Part One of this series here: Structuring Sales to Ensure Payment. Please subscribe to this blog by entering your email in the box on the left, or check back weekly for additional articles in the series. 

With the recent economic slowdown in many sectors and the parade of corrupt corporate executives on the evening news, corporate managers are more sensitive than ever to signs of troubled business practices and how those practices affect outstanding receivables.  Many distressed businesses display early warning signs of impending trouble, including some or all of the following:

  • Lack of a sound business plan- The company may not have a plan or may have expanded past the vision of it original business plan.
  • Ineffective management style- The management of a small company that has experienced rapid growth may not be able to delegate authority effectively. 
  • Poor lender/vendor relationships- The company may not respond quickly or fully to its vendor’s request for financial information or may actively hide information from its vendors.
  • Change in market conditions- The market for the company’s product may have changed, leaving the company with a shrinking market share and lower sales. The company’s technology or marketing may be obsolete to compete in the current marketplace (remember 8-track tapes?).
  • Over-diversification of products- The company may enter non-traditional markets too quickly in an effort to increase flagging sales but without the necessary resources or knowledge to

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