REVIEW OF LOAN AGREEMENT AND ADDENDUM

REVIEW OF LOAN AGREEMENT AND ADDENDUM

I have gone through the documents you attached. In this review, I have responded to areas/terms that I find contentious because you have not specified any specific term that the borrower contests. Lastly, I have given my recommendations for any further steps you should take.

NOTE

  1. The borrower may contend that payment should not cover his/her College Retirement Equities Fund (“CREF”) annual investment growth. Such contention does not hold because nothing in the Rules of the Fund prohibits/limits how beneficiaries of the fund can dispense with their entitlements/accumulation units. CREF’s prospectus states in this regard that “… you can set up a program to make cash withdrawals or transfers automatically by specifying that we withdraw or transfer from an Account accumulation any fixed number of accumulation units, dollar amount or percentage of accumulation…”.  Accordingly, the contention would be invalid.

  2. The borrower may also contend on the provision in the Note that the total payment due will roll over until the investment growth is equal to or greater than the target amount. As in paragraph 1 above, this contention does not hold because the payment of the amount is subject to CREF’S guidelines. CREF provides for systematic withdrawals of funds. Notably, CREF does not set a maximum limit for withdrawals. It only sets a minimum withdrawal amount.  Accordingly, the contention would be invalid.

  3. The borrower may also contend with the provision that allows you to attach his/her property if he/she defaults on the payment(s). It is settled law that a debtor has a right to attach the creditor’s property upon default. It is also worth mentioning that the Deed of Trust created a lien over his/her property. Accordingly, you are entitled to recover your money from the borrower’s property when they violate the accelerated payment proposal in your agreement.

  4. Lastly, on the signature issue, the parties in a contract are free to settle on the manner of appending the said signatures. You should also note that no contract is enforceable unless both parties sign it, in whichever manner. It is a principle in equity that the law looks at the intent rather than the form. Therefore, the borrower has no legal basis for contesting your electronic signature. 

ADDENDUM

  1. In the AddendumAddendum, the only possible area of contention is the 50% Rate of Interest. It is trite law that contracts entered between parties signify their intention to be bound by the contract terms. In this regard, all contractual undertakings must be respected. The borrower had assented to the provisions of the AddendumAddendum by appending his/her signature on the AddendumAddendum. It follows, the borrower is prevented from falling back on his/her promise.

 

ADDITIONAL ISSUE (INJUNCTION CONCERN)

  • In your case, you seek a permanent injunction to prevent the borrower from making withdrawals from the annuity. There is a balancing test that courts typically employ in determining whether to issue an injunction. To seek a permanent injunction, the party must pass a four-step test: 


  • that you suffered an irreparable injury; 
  • that remedies available at law, such as monetary damages, are inadequate to compensate for the injury; 
  • that the remedy (permanent injunction) is warranted upon consideration of the balance of hardships between the plaintiff and defendant; and 
  • that the permanent injunction being sought would not hurt public interest.

 

  1. In balancing the damages to the plaintiff and the defendant and the public interest, the courts balance the relative harm and benefit to both the defendant and the plaintiff if the injunction is granted. It follows, the courts will weigh the impact of the injunction on both the borrower and you.

  2. Lastly, the court may also look at whether the borrower is acting in good or bad faith. If the court believes the defendant is acting in bad faith, the court will show little sympathy and rule in favor of a permanent injunction. 
  3. From your facts, the court will likely give you a permanent injunction against the borrower because the borrower has expressly indicated that he/she will not pay. 

 

CONCLUSION

In summary, I make the following observations:

  1. The borrower has no legal basis for denying his/her obligations under the Note and the Addendum. Accordingly, the court will likely find her liable for the breaches of the Agreements.

  2. The borrower indicated to you in writing that she does not intend to honor the agreement. This statement from her is a clear indication of bad faith. Accordingly, the court will likely grant a permanent injunction against her to prevent her from withdrawing from the account. 

 

Regards!

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