Beal Bank v. Crystal Properties, Ltd.

Beal Bank (“Beal”) appeals the district court’s order affirming the bankruptcy court’s grant of summary judgment in favor of the debtor, Crystal Properties (“Crystal”). Beal asserts that the bankruptcy and district courts incorrectly concluded that Crystal was not required to pay interest at the default rate on seven defaulted loans Beal acquired from the Federal Deposit Insurance Corporation (“FDIC”). The central issue is whether, and, if so, when, the default interest rate, as provided in the original loan agreement between Beal’s predecessors and the Ngs (later Crystal) is triggered. Beal argues that the default interest rate was triggered the moment the Ngs failed to make interest payments to its predecessors (early 1995). Crystal contends that the default rate became applicable after the first quarter of 1997, when Beal recorded the notices of default. We agree with the bankruptcy and district courts, concluding under well-established authority, that the default interest rate did not apply to Crystal’s loans until the first quarter of 1997, when the holder first took affirmative action to put the debtor on notice that it intended to exercise its option to accelerate, and thus…