California Pacific Bank, a California Banking Corporation v. Small Business Administration, an Agency of the United States Government

The California Pacific Bank (hereinafter “the Bank”) appeals from summary judgment for the Small Business Administration (SBA) in a dispute arising out of loans to four small businesses made by the Bank and guaranteed by the SBA.

The SBA is empowered to make business loans either directly or through selected lending institutions. 15 U.S.C. § 636 (a) (1970). The latter type of loan is made on either an “immediate” or “deferred” participation basis. Immediate participation loans are those in which the lending institution or the SBA agrees to purchase from the other, immediately upon disbursement, an agreed percentage of the loan. 13 C.F.R. § 122.7 (1977). The loans at issue here, however, were of the deferred variety, i. e., they- were made by the Bank with a • guarantee by the SBA to purchase an agreed percentage of them within a short time after default. 13 C.F.R. § 122.10 (1977).

The SBA guaranteed 90% of these four loans. This figure was not accidental. The Small Business Act expressly mandates that SBA “participation” in deferred loans “not be in excess of 90 per centum of the balance of the loan outstanding at the time of disbursement.” 15 U.S.C. § 636 (a)(3) (1970).…