If you take out a loan, be prepared to pay it back. An unexceptional notion within the finance and lending industry, but one that the Georgia Court of Appeals has reaffirmed in a recent decision.
The case involved a real estate developer and a lender. The time was 2007, when the real estate bubble was still growing. By 2008, the lender was experiencing difficulties and was also worried about the developer and the condominiums it was building. The lender stopped advancing principle for the project and the developer ceased making the interest payment due under the loan agreement.
By the end of 2008, the lender was in receivership and the FDIC issued a notice with a deadline for all creditors to file claims. The land developer failed to make the required claim. The FDIC then formed a successor entity RES-GA that was assigned all of the lender’s interests. RES-GA sued the developer for the missing payments required under the terms of the loan.
The court discusses whether the developer raised affirmative defenses or counterclaims, and the effect of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA) on their asserting those claims. The court concludes that the lender’s failure to submit a required claim before the deadline barred the assertion of their defenses, however characterized, as it meant they had failed to exhaust their administrative remedies under FIRREA.
Contracts can be simple or complex and often are both, but the court reminds that here, failing an essential requirement can end many legal rights that otherwise may have been available.
The developer failed to properly file notice within FIRREA’s claims process, which effectively barred the court from considering these claims. The exhaustion of administrative remedies doctrine means you cannot bring a case in court until you have completed the administrative process at this required.
Source: caselaw.findlaw.com, “RES-GA SCL, LLC. v. STONECREST LAND, LLC et al.,” Court of Appeals of Georgia, Nos. A15A0458, A15A1438, July 16, 2015