RL BB Acquisition, LLC v. Bridgemill Commons Development Group, LLC
2014 U.S. App. LEXIS 10907
| 6th Cir. | 2014Background
- Bernard Dixon (borrower) sought refinancing from BB&T for a $6.4M note secured by Bridgemill Commons; bank required additional collateral and guaranties.
- Starr Stone Dixon (spouse) signed a personal guaranty for the BCDG note; she later claimed she was pressured into signing and never spoke with the loan officer.
- Plaintiff (assignee of the note) sued Starr for breach of the guaranty; district court granted summary judgment for Plaintiff after holding Starr could not assert ECOA/Regulation B violations as an affirmative defense.
- Starr pleaded that BB&T violated ECOA and Regulation B’s “spouse‑guarantor” rule (prohibiting creditors from requiring an applicant’s spouse to guarantee credit) and sought to use that violation to defeat enforcement of the guaranty.
- The Sixth Circuit considered (1) whether Regulation B’s expanded definition of “applicant” (to include guarantors for spouse‑guarantor rule enforcement) is entitled to Chevron deference, and (2) whether ECOA/Regulation B violations may be asserted as an affirmative defense (recoupment) to an enforcement action.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Is Regulation B’s definition of “applicant” (including guarantors for the spouse‑guarantor rule) a permissible construction of ECOA? | Regulation B exceeds ECOA; “applicant” in statute excludes guarantors. | Agency rule is a permissible reading of an ambiguous statutory term; entitled to Chevron deference. | Regulation B’s definition is a permissible construction and is entitled to deference; guarantors may seek relief under the spouse‑guarantor rule. |
| Can a spouse‑guarantor assert ECOA/Regulation B violations as an affirmative defense (recoupment) in an enforcement action on the guaranty? | ECOA provides remedies but does not authorize affirmative defenses; plaintiff argued defense is unavailable. | Allowing recoupment is consistent with equity and ECOA’s remedial purposes; protects spouse‑guarantors. | A violation may be raised as a defense of recoupment; district court’s bar on the defense reversed and summary judgment vacated and remanded for merits. |
Key Cases Cited
- Chevron U.S.A., Inc. v. Natural Res. Def. Council, 467 U.S. 837 (agency deference framework)
- Bolduc v. Beal Bank, SSB, 167 F.3d 667 (1st Cir. 1999) (ECOA violation usable as recoupment defense)
- Silverman v. Eastrich Multiple Investor Fund, L.P., 51 F.3d 28 (3d Cir. 1995) (recognizing recoupment defense for ECOA violations)
- Beach v. Ocwen Fed. Bank, 523 U.S. 410 (1998) (recoupment allowed absent clear congressional prohibition)