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Bank Overdraws its Argument Against VLF Client


Team VLF earned another victory as Capital One dismissed its claim against VLF’s clients on a claim that they personally guaranteed a business loan. Our clients held firm to their position that the debt belonged to a now non-existent restaurant, and not them, individually.

VLF filed a motion for summary judgment, arguing that the party directly liable on the small business credit account agreement was a corporation, and that defendants were, at most, guarantors. VLF further contended that Capital One had insufficient proof to prove the existence of an account or guaranty agreement because it had failed to keep basic records, including the agreements, establishing the essential terms of the transaction.

VLF also argued that account stated was inapplicable to guarantors. Poor record-keeping is commonplace in the credit industry, and credit companies have increasingly come to rely upon account stated claims as a way to circumvent the need for good record keeping. All a plaintiff needs to show is an agreement ‘fixing’ the amount of the debt, and an agreement to pay that amount. The agreement can be implied, and credit card companies have resorted to account statements or other documents in lieu of the actual agreements to prove their claims. A guarantor’s liability on a debt, however, is not contingent upon the existence of a transaction between the lender and guarantor; it is a form of secondary liability predicated upon the primary borrower’s failure to pay. Hence, in the case of guarantors, a plaintiff cannot establish the existence of prior transactions between it and the guarantor.

After VLF filed a Motion for Summary Judgment, Capital One dismissed the lawsuit a day before its response was due, and eleven days prior to trial.

Mark Twain famously said “A bank lends you an umbrella when the sun is shining and wants it back when it rains.” At The Vethan Law Firm,P.C., we make sure our clients don’t get caught in the rain without an umbrella.

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