Magazine article The RMA Journal

Promissory Estoppel Can Be a Defense to Enforcement of a Promissory Note

Magazine article The RMA Journal

Promissory Estoppel Can Be a Defense to Enforcement of a Promissory Note

Article excerpt

ON AUGUST 10, 2015, the United States Court of Appeals for the Seventh Circuit decided Firestone Financial Corp. v. Meyer, No. 14-3075. The issue was whether the obligor on certain loans made by Firestone could invoke a defense known as promissory estoppel when sued on unpaid loans.

Firestone was a Massachusetts finance company. Through a holding company known as JHM Equipment Leasing Company, John R. Meyer owned two companies: JH Meyer Enterprises Inc. and Dolphin Laundry Services Inc. Each company leased commercial laundry machines to Chicago-area apartment building owners.

Between June 2012 and June 2013, Firestone made four loans to JHM Equipment Leasing totaling $254,114.99. Each loan was secured by the laundry equipment it financed and was guaranteed by Meyer and his two operating companies.

By August 2013, the loans were in default and Firestone sued Meyer and his companies to collect the debt. Meyer's answer and counterclaim against Firestone contended that in November 2012, after the first two loans had been made, a Firestone officer stated that Firestone wanted to expand its loans to the laundry business and that it would create a $500,000 line of credit to fund Meyer's equipment purchases in 2013.

Relying on that representation, Meyer allegedly purchased equipment that he would not have otherwise purchased. When Firestone did not fund the $500,000 line, Meyer could not pay for the new equipment. Thereafter, Maytag, Meyer's equipment supplier, refused to sell Meyer's company any more equipment, and significant losses were alleged to have been incurred. …

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