An Event Of Default
by Ron Davis
A dispute involving a Florida shopping center, located on Sanibel Island, and a bank lender has not turned out the way the two businesses and their successors have hoped.
Problems between the two go back to 2005. At that time the loans to the shopping center stood at $450,000. The lender, Regions Bank, had renewed the loans on a regular basis, but more recently had faltered. That occurred when the bank demanded full repayment “under the loan.” A major change in the relationship followed.
At the time of the loan transaction, the sole members of the partnership were a couple whose business was known as the AT Phoenix Company. Under the terms of the loan, a default of any other loan between the parties would constitute “an event of default.”
Regions then decided that it wanted full possession of the shopping center. The defendants did not contend, however, that they are not in default under the loan and could not dispute that the default constituted an event of default.
Regions did not address the equitable nature of this remedy, but argued that because of its undisputed holding of the note and mortgage, is in default and it is entitled to foreclose. (Florida law required that Regions must establish that the default impaired the security, something Regions has not done.) Summary judgment on the foreclose claim is therefore not warranted.
The judge hearing the case noted that the only argument that Regions offered had little to do with a remedy except, the judge added, an inappropriate offer of a remedy that is judged as “not appropriate.”
The judge concluded that the defendants “do not offer any substantive argument regarding their claim. They gave no evidences that Regions breached the loan agreement, and the breach counterclaims thus fails. Nor do the defendants have any evidence that Regions breached the covenant of good faith and fair dealing.
“Even if such evidence existed, under Florida law, a breach of the covenant of faith and fair dealing must be founded on a breach of an express term of the parties’ contract. Without evidence of any breach of the loan agreement, the defendants have no claim for breach of the covenant of good faith and fair dealings.”
(United States District Court M.D, Florida, Ft. Myers Division, Regions Bank, Plaintiff vs. Legal Outsource PA, Periwinkle Partner)
Decision: June 2017
Published: June 2017