At Howard Law, P.C., we focus on consumer debt and predatory lending issues, which includes litigation when appropriate. So our Corona foreclosure defense lawyers were interested to see a case from our neighbors in Nevada about the use of binding arbitration required by a mortgage contract. Binding arbitration is a type of private-sector "judging" that has become popular among large corporations. Consumer advocates don't always like it, because the system permits the party with more power (usually a corporation selling services to the consumer) to force the issue out of public courtrooms. And in private arbitration, there's a danger that the arbitrator will attempt to make the decision desired by the company paying his or her salary. Marshall Sylver made similar allegations in Sylver v. Regents Bank, a recent Nevada Supreme Court decision that upheld the arbitrator's decisions.
Sylver took out two loans in 2008: one to buy a house and another for commercial property. Unfortunately, financing never appeared for the commercial property and Sylver was unable to sell the prior home that was supposed to provide the financing for the new home. Regents filed a foreclosure complaint; Sylver's cross-complaint accused Regents of breach of fiduciary duty, false representations and mortgage lending without the proper Nevada credentials. The district court compelled arbitration, as the loan documents required. Regents told the arbitrator that a key witness was unavailable, but Sylver later claimed the witness had said he was available but was never asked to testify. Nonetheless, Sylver didn't ask for a continuance and the arbitrator ruled for Regents. On the bank's motion to confirm the award, Sylver argued that Regents had procured the award with undue means, and the judgment was against the manifest weight of the law. The district court confirmed the award.
On appeal, Sylver renewed both arguments. The Nevada Supreme Court started by defining "undue means" as intentional misconduct similar to fraud or corruption. It then found that Sylver hadn't met the burden of providing undue means influenced this award. The conduct he alleges--intentionally misrepresenting the availability of a witness--does not rise to the level of intentional bad faith equivalent in seriousness to fraud, it said. Sylver never offered evidence showing that the misrepresentation of the witness's availability was intentional, and due diligence could have turned up the information. Nor had Sylver shown a causal connection between the alleged misconduct and the award, the court noted. The high court also found that the award was not a manifest disregard of the law, a claim that was based on Regents's lack of proper credentials to make home loans in Nevada. The arbitrator concluded that this was illegal, but said the error was unintentional and not material to the issue at hand. The high court ruled that this was not a clear disregard of the law, and upheld the confirmation of the award.
Vincent Howard and our Garden Grove foreclosure defense attorneys suspect the outcome could have been different under another court. The Nevada high court reasoned that the public policy good of enforcing the loan outweighed the public policy good of enforcing the licensing law. It also noted that the goal of the licensing law was to prevent predatory lending by out-of-state lenders. This is precisely the allegation Silver was making about Regents, and a sympathetic court might have decided he had made a strong enough case. It's also worth wondering whether a Nevada trial court would have treated the misrepresentation about the witness as lightly as the Supreme Court seemed to. Discovery violations are sometimes the basis for sanctions, and rightly so--they undermine the goal of basic fairness. Vincent Howard and our Rubidoux foreclosure defense lawyers strongly advise clients not to sign onto an arbitration contract to get a mortgage.
If you believe you were misled when you took out your home loan, applied for a loan modification or went to court, you should call Howard Law, P.C. today to discuss a predatory lending case. You can call 1-800-872-5925 or send us a message online.