Facts: A borrower obtained a construction loan from a lender. The lender did not properly disburse construction funds, delaying construction and causing the borrower to incur increased costs. Later, the lender went into Federal Deposit Insurance Corporation (FDIC) receivership and its assets including all loans and commitments were purchased by a second lender under a purchase and assumption (P&A) agreement. An abridged version of the P&A agreement was published on the FDIC’s website, stating the second lender only purchased the failed lender’s assets and did not assume liabilities associated with borrower claims arising out of the failed lender’s lending activities.
Claim: The borrower sought money losses from the second lender stemming from the first lender’s failure to properly disburse construction funds, claiming the partial P&A agreement published on the FDIC website did not absolve the second lender of the failed lender’s liabilities for loan commitments since it is not the verified P&A agreement entered into by the second lender and the FDIC.
Counterclaim: The second lender sought to dismiss the borrower’s claims for losses, claiming it was not liable for the first lender’s activities since the partial P&A agreement published on the FDIC website did not transfer the failed lender’s liability for borrower claims.
Holding: A California Court of Appeals held the borrower may pursue the second lender for money losses arising from the first lender’s conduct since, although the abridged P&A agreement on the FDIC website stated the second lender did not assume the failed lender’s borrower liabilities, the full P&A agreement holds the second lender liable for the failed lender’s loan commitments. . [Jolley v. Chase Home Finance LLC (2013) __ CA4th__]
