Lender's Failure to Follow Borrower's Instructions Leads to Substantial Judgment for Borrower

Lender's Failure to Follow Borrower's Instructions Leads to Substantial Judgment for Borrower

A lender isn’t always the boss when it comes to payment and collection of a loan. The borrower’s directions are important. They confirm, rebut, or otherwise disclose when, where, and how collateral is to be used.

When Domina Law Group pc llo’s client asked for professional services, she faced a demand, by a creditor with an initially appropriate looking promissory note, security agreement, and pledge of thinly-traded publicly held NASD “pink sheet” shares. The shares, issued by a relatively new company, comprise a significant part of the client’s assets.

The creditor claimed a substantial six-figure loan was unpaid and demanded payment. But, according to the client, the creditor’s debt would have been paid if instructions to adhere to the client’s directions, liquidate the collateral when market conditions were high, and not speculate in the collateral would have been followed.

These facts developed: Client borrowed money from lender, secured the loan with the stock pledge and, thereafter, was rewarded when the shares increased significantly in value. Client directed lender, who held the stock in lender’s possession as collateral, to liquidate the shares. Lender held a power of attorney as a part of the collateral package; it gave the lender authorization to act on the client’s directions.

But, the lender believed the shares would continue to increase in value. The lender also held shares in the same company and was one of its largest investors.

Domina Law Group pc llo filed suit seeking (a) a declaration the debt should be deemed paid, and (b) a money judgment for the amount of cash in excess of the loan that would have been produced if the shares had been sold when the borrower-client directed sale occur.

A dispute about the extent of the borrower’s authority to direct liquidation of collateral, and the lender’s authority to decline liquidation by using the collateral power of attorney, followed.

When the dust settled, “our client won a $598,500 judgment, and is in a position to be restored to the appropriate financial circumstances” said Domina Law Group pc llo’s Brian E. Jorde. Jorde, who developed the case and discovered the relevant facts, noted, “the lender’s adamant refusal to follow the borrower’s directions because the ‘lender knew best’ paid no dividend in the end.”

Jorde said his clients “are finally vindicated in their legal position.” They expect to recover payment on the judgment rendered in District Court, Douglas County, Nebraska.

Domina Law Group pc llo is a firm of trial lawyers. We specialize in complex litigation on a national basis. Our lawyers are ethical, aggressive, and committed to providing spirit and vitality to the judicial system and our client’s legal rights.