Federal National Mortgage Ass'n v. Westland Liberty Village, LLC

The Supreme Court reversed the judgment of the district court finding that there was no default of the loan in this case and issuing a wide-ranging preliminary injunction reaching matters that were not argued or briefed, holding that the district court erred in disregarding the loan agreements' provisions setting forth what constituted a default.

At issue before the Supreme Court was the conditions under which a lender or its assignee is entitled to the appointment of a receiver after a borrower defaults on a real property loan agreement. Once Borrower in this case assumed ownership of properties housing multi-family apartment complexes the lender observed a significant decrease in occupancy. Observing that significant repairs were needed and relying on specific provisions in the loan agreements Lender demanded deposits into repair and replacement escrow accounts. Lender deemed a default when Borrower did not make the deposits. Lender sued and sought a receiver. Borrower countersued alleging breach of contract and seeking injunctive relief. The district court granted judgment for Borrower. The Supreme Court reversed, holding that the district court (1) abused its discretion in refusing to appoint a receiver on Borrower's default; and (2) abused its discretion in issuing a preliminary injunction.