And for 30 years, it's been an uphill battle -- but not always for the same reasons.
I was, for reasons of my own, re-reading Matter of Ingersoll today, and was amazed to find out how few differences there were between this 1981 case and present-day WCA efforts. I suppose it's not so amazing that these challenges to the enforceability of credit agareements were made back then, when the WCA was new and there was some hope that maybe courts would be vigorous about enforcing it. That hasn't worked out so well: The most common reaction I get from judges to a WCA argument is "that can't be what the law says." I'd have understood that a lot better back in 1981, when nobody knew what the law said. Now, I'm stuck wondering whether what the law means now is because of how it was treated back then -- that is, whether, had judges in the early days of the WCA been more expansive in its interpretation (as they should have been), the law would now have more life than I and a few others are able to breathe into it.
Ingersoll borrowed nearly $300,000 from several lenders, and then, when he couldn’t pay,(in the words of the court) “removed” a foreclosure action to the seemingly-friendlier confines of the Western District of Wisconsin Bankruptcy Court, after which both creditors and debtor asked the court to resolve the validity of the claims made by the lenders.
Ingersoll’s complaints will be dealt with in order. First, he challenged the “dragnet clauses” that are both common and easily enforced in Wisconsin. The Court noted that Wisconsin allows dragnet clauses, and noted also that in Wisconsin, such clauses (which use property securing the instant loan to also secure future loans without a new security agreement) “would be closely scrutinized and would be enforced only to the extent that the future transactions or liabilities sought to be secured were in clear contemplation of the parties.”
Having declared that to be the rule, the Court then de facto interprets “close scrutiny” to mean “noting that the contracts contain dragnet clauses and quitting there”:
The language in paragraph (2) of the Ixonia Agreement explicitly refers to securing "debts, obligations and liabilities of any Customer to Lender arising out of . . . credit granted in the future by Lender to any Customer . . ." The Farmers and Co-op Agreements state: "to secure Customer's debts, obligations and liabilities to Lender arising out of existing or future credit granted by Lender to Customer . . ." Ingersoll makes no argument and presents no evidence that would rebut the inference drawn from the Agreements' language that the parties intended the Agreements to secure future loans.
The Court also noted that Ingersoll’s deposition showed that Ingersoll took out the dragnet clause loan to “beef up” his credit, and found that to support the inference that Ingersoll wanted future advances secured by present-day property.
The Court then summarily dealt with the second challenge, finding the contractual language allowed the property to secure antecedent debts and noting that Wisconsin had no rules prohibiting such an agreement.
Ingersoll then challenged whether foreclosure of his property was allowable as a remedy under the Wisconsin Consumer Act. The Court noted that foreclosure as a remedy was allowed if a right to cure was presented first (per the contract language), and held that with respect to one creditor, although the aggregate of loans owed to that creditor was $140,000 or so, at least one loan was below the WCA’s limit and since there was no proof a right to cure had been provided, summary judgment could not be granted as to that loan. The other creditors’ loans were to become the subject of an evidentiary hearing to show the “amounts and purposes” of each.
Ingersoll next challenged whether one creditor’s security was limited to $25,000 because the caption indicated it was a “Consumer” agreement limited to $25,000 or less. The Court compared that agreement with another one that lacked the caption, and , noting that Ingersoll admitted he had not read or relied on the caption in any way, held that the caption did not limit the security to $25,000.
Ingersoll then argued there was no consideration for his agreements. The Court noted that mortgages need no consideration, and that the documents were signed under seal, creating presumption that there was valid consideration. The Court held that the pre-existing debts were sufficient consideration in that the creditors continued to renew the obligations based on the security agreements.
Finally, the Court noted that the Truth-In-Lending Act provided no general right to void transactions, limiting its remedies to those in the statute: Ingersoll had argued that his right to rescind under TILA had not been disclosed to him and that therefore he could void the transactions. In addition to rejecting that claim (and ruling that the WCA provided no concomintant state rights to that remedy) the Court also pointed out that the Trustee in bankruptcy would likely hold Ingersoll’s claims for TILA damages if they existed.