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what is the case law in new york on past practices contradicting

a bank contract provision and...
what is the case law in new york on past practices contradicting a bank contract provision and unjust enrichment on a prepayment penalty provision in a commercial bank agreement
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9/16/2013
Ely
Ely, Counselor at Law
Category: Legal
Satisfied Customers: 102,694
Experience: Private practice with focus on family, criminal, PI, consumer protection, and business consultation.
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Hello friend. My name is XXXXX XXXXX welcome to JustAnswer. Please note: (1) this is general information only, not legal advice, and, (2) there may be a slight delay between your follow ups and my replies.

I am sorry for your situation. Can you please tell me more about "contradicting past practices?" What do you mean - what has happened, exactly?

And what of the pre-payment penalty? In other words, if I knew more about the situation and what was attempted to be achieved here, it would help me render the answer better.

This is not an answer, but an Information Request. I need this information to answer your question. Please reply, so I can answer your question. Thank you in advance.
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Customer reply replied 4 years ago


they are tied together


there is a provision in a bank agreement that call for a 1% prepayment penalty on a line of credit with 200 underlying accounts. i have done business with the bank under this agreement for 6-7 years and they have never charged the prepayment penalty on any of the amounts prepaid during that time. they have subsequently decided to exit the business i am in and are winding down the portfolio and are saying going forward they will start charging the fee.


the intent of the fee was truly to protect them from doing business with companies and building portfolios and then have them take them to a cheaper bank when they are large enough to get a better deal. thats not the wording but that was the intent and their past practices is consistent with that intent

Ah, thank you!

Okay, I need a little more information. Also, apologies for the wait in advance as I would be writing out my answer.

1) Is this in NY or NYC?
2) How much money do you feel is being owed here?
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Customer reply replied 4 years ago


contract is interpreted under new york law


line is 15,900,000.00 so if paid in full 159000.00 or that total over time

Kevin,

Thank you.

1) Is this in NY or NYC?

You had answered "contract is interpreted under new york law," but you had not told me if this was NYC or simply New York State. While the law is the same, I wanted to guide you to the proper Court in such a scenario. In any case, we will touch base about that in a second.

line is 15,900,000.00 so if paid in full 159000.00 or that total over time

Okay, thank you. Allow me to answer your question.

what is the case law in new york on past practices contradicting a bank contract provision and unjust enrichment on a prepayment penalty provision in a commercial bank agreement

A better way to ask this would be do I have a claim in Court, because that is essentially what is being asked here (if you would permit me to put words in your mouth and my apologies for that). After all, all causes of action are based in law.

To sue in a state court, one needs to have a "cause of action." There are numerous causes of action, such as "breach of contract," "negligence," "fraud," "unjust enrichment," etc., as well as causes of action rooted in statutory law. Every state has their own although they are very similar to each other in every state because they all stem from the same common law. A pleading in Court needs at least one cause of action, although it is not unusual to have more than one.

Here, one may have a cause of action for promissory estoppel. Essentially, it is stated:

"Enforcement by Virtue of Action in Reliance:
"(1) A promise which the promisor should reasonably expect to induce action or forbearance on the part of the promisee or a third person and which does induce the action or forbearance is enforceable notwithstanding the Statute of Frauds if injustice can be avoided only by enforcement of the promise. The remedy granted for breach is to be limited as justice requires.
"(2) In determining whether injustice can be avoided only by enforcement of the promise, the following circumstances are significant:
"(a) the availability and adequacy of other remedies, particularly cancellation and restitution;
"(b) the definite and substantial character of the action or forbearance in relation to the remedy sought;
"(c) the extent to which the action or forbearance corroborates evidence of the making and terms of the promise, or the making and terms are otherwise established by clear and convincing evidence;
"(d) the reasonableness of the action or forbearance;
"(e) the extent to which the action or forbearance was foreseeable by the promisor.


Swerdloff v. Mobil Oil, 74 AD 2d 258 - NY: Appellate Div., 2nd Dept. 1980 citing of section 217A of the Restatement of Contracts Second.

To put it simpler: "The elements of a promissory estoppel are a promise clear and unambiguous in its terms; reliance by the party to whom the promise is made, such reliance to be both reasonable and foreseeable; the party asserting the estoppel must be injured by his reliance." King & Son v. DE SANTIS CONST, 97 Misc. 2d 1063 - NY: Supreme Court, New York 1977.

To put is even more simpler: The doctrine states that if one REASONABLY relied on another's action/inaction to their detriment, they may have a claim. So if I told you "you can have an apple every day from me" and I gave you one for 3 years, and then I stopped giving you one, and you were hungry, that may be promissory estoppel (an absurd analogy but it carries the point).

So one may have this as a cause of action. However, there is a hiccup: "This is a doctrine where it is contended that reliance on a promise (as distinguished from reliance on an express or implied statement of fact) is the basis of a legal right." Swerdloff v. Mobil Oil, 74 AD 2d 258 - NY: Appellate Div., 2nd Dept. 1980.

In other words, they can argue that "yes, but we had a clear agreement in writing that supersedes our action." But in the end, this is up to the Jury. The Jury may feel bad for the individual versus the big bank and in such a scenario, decide with their hearts more than their minds. It is an argument, but it is weak. I am sorry, I am being honest. But again, the Jury can often surprise with their decisions...

The NY Supreme Court has jurisdiction over a case like this.

An attorney is recommended. And again, while by default the Judge decides a case,either party may ask for a jury trial, and in this case where the argument is a bit weak and the Plaintiff leads with emotion more than fact, a jury is recommended.

Good luck.

Please note: I aim to give you genuine information and not necessarily to tell you only what you wish to hear. Please, rate me on the quality of my information and do not punish me for my honesty. I understand that hearing things less than optimal is not easy, and I empathize.

Gentle Reminder: Please use the REPLY button to keep chatting, or RATE my answer when we are finished. Kindly rate my answer as one of the top three faces and then submit, as this is how I get credit for my time with you. Rating my answer the bottom two faces does not give me credit and reflects poorly on me, even if my answer is correct. I work very hard to formulate an informative and honest answer for you; please reciprocate my good faith. (You may always ask follow ups at no charge after rating.)
Ely
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