The transcript of the video follows below for further review.
The case of Rister v. Yadkin Bank arose out of a United States Small Business Administration ("SBA") loan that Defendant Yadkin Bank ("the Bank") made in 2011 to a corporate borrower, Mystique Makeover, LLC, a salon in Charlotte, North Carolina, operated by Maria L. Rex. Rister attempted to represent himself in the litigation. In July 2011, Plaintiff Timothy Rister and Ms. Rex signed a Commitment Letter with the Bank, acknowledging that they each intended to be guarantors on the loan for a maximum principal amount of $100,000. In September 2011, Rister signed an SBA Unconditional Guarantee (SBA Form 148) with respect to the loan, agreeing unconditionally to pay the lender all amounts owed under the loan. In 2014, Ms. Rex ceased her business operations due to disability, the corporate borrower defaulted on the loan, and Ms. Rex filed for bankruptcy. Following the borrower's default, the Bank's North Carolina counsel, Ellis & Winters LLP, sent a demand letter to Rister dated May 2, 2014, informing him that as a result of the default, the principal balance, all accrued but unpaid interest, and all other amounts owing under the loan were immediately due and payable in full. In September 2014, Rister commenced the present action, filing a Complaint against the Bank containing seventeen counts, following which the Bank filed a Motion to Dismiss the Complaint in its entirety.
Rister asserted claims of "negligence/mistake/deception/bad faith" concerning a "commitment fee." Rister alleged that the Commitment Letter failed to sufficiently define the "packaging fee" and "SBA fee". He alleged that the terms "packaging fee" and "SBA fee" are "ambiguous and vague," and that the Commitment Letter failed to provide a "detailed breakout as to what these fees were." He also alleges that, by virtue of the Commitment Letter and the Unconditional Guarantee, the Bank "owed a duty of good faith and fair dealing" to him, "created a confidential relationship" with him, and had "a fiduciary duty to disclose details of [the] 'packaging fee' and 'SBA Fee'" to him because he and the Bank "were in a commitment letter contract and a 'contract of guaranty'". In addition, Rister alleged that the Bank's failure to sufficiently define the SBA and packaging fees caused a "unilateral mistake" on his part, such that "any contract is unenforceable or voidable by the plaintiff."
The Court noted that courts have refused to find a general duty of care between a lender and a guarantor. Likewise, Rister's allegations that the Bank failed to provide a detailed breakout of the fees do not state a claim for breach of the covenant of good faith and fair dealing, which occurs when "a party unreasonably exercises discretion authorized in a contract."
With respect to Rister's claim of unilateral mistake, the Court noted that one of the "basic elements required for a court to find a unilateral mistake" is that the mistake "must be to a 'basic assumption' or the essence of the contract." The Court stated that the Amended Complaint did not plausibly allege that Rister made a mistake as to a basic assumption of an agreement. Indeed, as the Bank points out, the nature of Rister's alleged mistake is unclear from the Complaint. Moreover, the fees listed in the loan are only a small fraction of the amount of the loan, and so it is difficult to imagine how any mistake concerning those fees could be basic to the transaction. The second element of a unilateral mistake is that "the party alleging the mistake must not bear the risk of the mistake by being aware, at the time the contract is made, that the party has 'limited knowledge' of the facts to which the mistake relates and treating this limited knowledge as sufficient." The allegations in the Complaint failed to meet this element because Rister was or should have been aware at the time he signed the Commitment Letter that the Letter did not include a "detailed breakout" of the fees. Finally, even if Rister could establish the elements of a unilateral mistake, "courts do not grant relief when the mistake is unilateral, instead of mutual, and is not due to the fault of the other party." The Court ruled that Rister had not plausibly alleged that he made a unilateral mistake due to the fault of the Bank.
In sum, the allegations in Rister's Complaint failed to state a claim upon which relief may be granted.
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Client personally guaranteed an SBA 7(a) loan to help with a relative’s new business venture. After the business failed, Treasury was able to secure a recurring Treasury Offset Program (TOP) levy against his monthly Social Security Benefits based on the claim that he owed over $1.2 million dollars. We initially submitted a Cross-Servicing Dispute, but then, prepared and filed an Appeals Petition with the SBA Office of Hearings and Appeals (SBA OHA). As a result of our efforts, we were able to convince the SBA to not only terminate the claimed debt of $1.2 million dollars against our client (without him having to file bankruptcy) but also refund the past recurring amounts that were offset from his Social Security Benefits in connection with the TOP levy.
Client personally guaranteed SBA 7(a) loan for $350,000. The small business failed but because of the personal guarantee liability, the client continued to pay the monthly principal & interest out-of-pocket draining his savings. The client hired a local attorney but quickly realized that he was not familiar with SBA-backed loans or their standard operating procedures. Our firm was subsequently hired after the client received the SBA's official 60-day notice. After back-and-forth negotiations, we were able to convince the SBA to reinstate the loan, retract the acceleration of the outstanding balance, modify the original terms, and approve a structured workout reducing the interest rate from 7.75% to 0% and extending the maturity date for a longer period to make the monthly payments affordable. In conclusion, not only we were able to help the client avoid litigation and bankruptcy, but our SBA lawyers also saved him approximately $227,945 over the term of the workout.
Client received the SBA's Official 60-Day Notice for a loan that was obtained by her small business in 2001. The SBA loan went into default in 2004 but after hearing nothing from the SBA lender or the SBA for 20 years, out of the blue, she received the SBA's collection due process notice which provided her with only one of four options: (1) repay the entire accelerated balance immediately; (2) negotiate a repayment arrangement; (3) challenge the legal enforceability of the debt with evidence; or (4) request an OHA hearing before a U.S. Administrative Law Judge.
Client hired the Firm to represent her with only 13 days left before the expiration deadline to respond to the SBA's Official 60-Day Notice. The Firm attorneys immediately researched the SBA's Official loan database to obtain information regarding the 7(a) loan. Thereafter, the Firm attorneys conducted legal research and asserted certain affirmative defenses challenging the legal enforceability of the debt. A written response was timely filed to the 60-Day Notice with the SBA subsequently agreeing with the client's affirmative defenses and legal arguments. As a result, the SBA rendered a decision immediately terminating collection of the debt against the client's alleged personal guarantee liability saving her $50,000.
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