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Recent victory at the Supreme Judicial Court streamlines loan recovery process for lenders

When Beal Bank had its hard-earned judgment overturned by the Massachusetts Appeals Court, it turned to Chris Litterio to take the case to the Supreme Judicial Court. The stakes were not simply the mid-six figure judgment, but reversing the stringent standard set by the appellate court for proving a debt owed by a creditor. Under the Appeal Court's decision, a bank that acquired a loan in the secondary market would be forced to resurrect a witness from every other bank that had previously owned that loan to testify as to what payments were made while that bank owned the loan. In modern day banking, buying and selling loans is routine. Had the Appeals Court's decision stood, banks that owned large portfolios of purchased loans stood to lose hundreds of millions of dollars. The cost of credit could have increased significantly.

In Beal Bank v. Eurich, the Massachusetts Supreme Judicial Court held that bank records of a loan payment history based on the records of prior owners of the loan were admissible without the need to have a witness from the prior owners testify about the accuracy of that information. In doing so, the court observed:

We recognize that the problem of proving a debt that has been assigned several times is of great importance to mortgage lenders and financial institutionsl Given the common practice of banks buying and selling loans, we conclude that it is normal business practice to maintain accurate business records regarding such loans and to provide them to those acquiring the loan. Therefore, the bank need not provide testimony from a witness with personal knowledge regarding the maintenance of the predecessors' business records. The bank's reliance on this type of record keeping by others renders the records the equivalent of the bank's own records. To hold otherwise would severely impair the ability of assignees of debt to collect the debt due because the assignee's business records of the debt are necessarily premised on the payment records of its predecessors.

For more information, please contact Chris Litterio at This e-mail address is being protected from spam bots, you need JavaScript enabled to view it

Maureen Mulligan was quoted in "Online IR Companies Take Fraud Charges to Mediation" in the April 29th issue of the Boston Business Journal. The article discusses the decision to mediate the fraud and trade secret case Shareholder.com v. CCBN.com Inc. et al.