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ICSC Legal Database - CasesMonday, February 22, 1999 05:01 PM

Case Index:
00143

Citation:
Bank of America Nat. Trust v. Hotel Rittenhouse, etc.,595 F.Supp. 800 (E.D.Pa. 1984).

Issue:
Whether defendant limited partnership and/or the individual general partner may successfully counterclaim

against a foreclosing mortgagee on the basis of violations of the Bank Holding Company Act, Federal Securities

 Laws, Equal Credit Opportunity Act, an d the Racketeer and Influenced Corrupt Organizations Act.

Facts:
Plaintiff moved to foreclose a mortgage on a major highrise apartment-hotel project in center city Philadelphia, to

 recover on a promissory note and mortgage against a limited partnership, its general partners and a husband

and wife who were guarantors. T he note, mortgage and guarantee were executed in connection with a

construction loan. The loan agreement allowed the Bank or its agents at any reasonable time, to examine or

audit the partnerships books, accounts and records, to monitor the progress of co nstruction and all problems

arising in relation thereto - all at the expense of the mortgagors. Several years later, the construction project

was running behind schedule and the partnership had requested extra advances in a restructuring of the loan

agree ment. At this point, the Bank authorized an accounting firm to audit the partnership's books. The

defendants claim that the

audit was not conducted in accordance with generally accepted accounting principals; that the bill was twelve

times the estimated f ee; that the audit disrupted the partnership's construction operation; and that the Bank's

Loan Officer had preconceived unfavorable notions about the partnership's financ al picture which i. had

expressed to the accountancy firm.

Holding:
On Bank's motion for summary judgment. the Fed eral District Court held that the Bank's appointment of an

auditor did not violate the Bank Holding Company Act; that none of the instruments relating to the promissory

note continu ng guarantee or limited Pa rtnership agreement constituted "securities" for purposes of Federal

Security laws; that the guarantor was not a credit "applicant' for purpose of protection of the Equal Credit

Opportunity Act; that requiring the signatures of both spouses on the joint a pplication was not discrimination on

 the basis of marital status under the Equal Credit Opportunity Act. Summary judgment was granted for the

defendant.

Publication:
Legal Update

Date:
Winter 1984

Classification 1:
Mortgages

Classification 2:

Classification 3:

00143 - Legal Update - Winter 1984