Lawyers who represent lenders in recovering on defaulted loans are consistently confronted with the lender’s quest to recover the maximum amount at the lowest cost.  Not an unreasonable request.  However, too often the lender’s own form of agreement does not provide assistance in keeping down the costs.

In preparing this article I chose to go beyond the four corners of the judge’s decision and took advantage of electronic filing of documents (PACER) so I could see the promissory note at issue.  I was looking, in particular, to see whether a certain typical clause was included in the form but could not find it.

This case was brought against an individual to recover on two promissory notes.  Simple.

The Court ruled:

at oral argument…. the Defendant conceded that he owed the Plaintiff monies under the two Promissory Notes and that he was in default, as well. The Defendant challenged, however, the amount which Plaintiff claims to be due and owing. The Defendant consented to the entry of summary judgment as to liability but reserved the right to contest the amount of the debt at a hearing on damages. Accordingly, the Motion for Summary Judgment is GRANTED as to liability only.

The Defendant retains the right to challenge the Plaintiff’s proof as to the amount of the judgment sought and to present evidence regarding the same. A hearing to determine the Plaintiff’s damages (the amount of the judgment) shall be held….

Translated?  The bank is granted summary judgment on liability only but still needs to prove the amount owed at a separate evidentiary hearing. 

Could this “extra trial” have been avoided?

It appears (from the decision) that at the hearing on the motion for summary judgment the pro se defendant made a “bald protest” as to the amount claimed by the bank.  For whatever reason, the judge considered that sufficient to put the bank to its burden of proof on the amount owing.

Lenders typically include a clause providing that it will send monthly statements of account which statement shall be deemed to be true and correct unless timely objected to.  Thus, the statement will be deemed to be an account as stated and primary evidence in a contest as to the amount owed. 

A typical clause might read as follows:

Account Stated.  Lender’s books and records showing the account between Lender and Borrower shall be admissible as evidence in any action or proceeding, shall be binding upon the Borrower for the purpose of establishing the items therein set forth and shall constitute prima facie proof thereof.  Lender’s monthly statements setting forth the transactions hereunder rendered to Borrower whether by electronic means or otherwise shall, to the extent to which no written objection is made within thirty (30) days after the end of the month following the month of the statement, be binding upon Borrower and constitute an account stated between Lender and  Borrower and be binding upon Borrower.

A clause such as this shifts the burden of proof on the amount due to the borrower and away from the lender.  Had this clause been included in the note, the bald allegation of a dispute as to the amount would not have prevented the granting of a judgment in an amount certain and would have avoided the necessity of additional proceedings, which likely will include discovery and court appearances, all of which run up the cost of litigation.

Lending money is easy.  Getting it back is not.  That is why we fill up so many pages of a loan agreement.  Plan your divorce before you get married.

TD Bank, N.A. v. Michael C. Culver, 2019 WL 2579232

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