Georgia Court Grants Summary Judgment on Most Claims Against Multi-Family Home Lender | King and Spalding

On February 24, 2022, the Georgia State Business Court issued an order granting in part and denying in part a multi-family real estate lender’s motion for summary judgment on the borrowers’ claims arising from charges the lender has earned by selling mortgage-backed securities linked to borrowers’ loans. The borrowers, entities that own Georgia apartment complexes, alleged that Red Mortgage Capital, LLC (and its affiliates) breached its contractual obligation to offer them loans at the “best” interest rates available and fraudulently misrepresented the rates because, according to borrowers, Red Mortgage had built into the rates a premium it could collect post-closing from investors who purchased the mortgage-backed securities linked to the loans.

The court granted summary judgment to Red Mortgage on most of the claims, finding that Red Mortgage had no contractual obligation to procure or offer the “best” rates and that it had no legal obligation to disclose the business bonus she expected to earn from the position. – the closing of securitization transactions. The court held, among other things, that the merger clauses of the loan documents excluded any argument based on alleged promises or representations not contained in the documents and that the Georgian fraud statute further excluded claims based on promises or representations. oral. The court also entered summary judgment on the state’s RICO claims because they were based on the same insufficient theories of liability. The court allowed a narrow set of claims, related to payments to a third-party consultant, to proceed based on a factual dispute about that consultant’s status and whether his fees (which ultimately included a portion sales premium) had been adequately disclosed. in the loan documents.

The deal is Overlook Gardens Properties, LLC vs. ORIX USA, LP, No. 20-GSBC-2 (Ga. State-wide Bus. Ct. February 24, 2022). The plaintiff borrowers are represented by Charles A. Gower, PC and Waldrep, Mullin & Callahan, LLC. Red Mortgage and its affiliates are represented by King & Spalding LLP. The order is available here.

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