The Guam Supreme Court last week overturned a controversial ruling that could have made it more difficult for banks to extend credit in states and territories where they do not have offices.
In a unanimous decision, a panel of three justices ruled that Long Term Credit Bank of Japan could foreclose on a loan even though it lacks a license to do business in Guam.
The court said Guam specifically exempted asset-based lending from a requirement that banks making loans in the territory get business licenses. More than 40 states have similar laws.
"This is an important victory," said Jacqueline Aaron, a partner in the New York law firm Shearman & Sterling, who represented Long Term Credit. "We are very pleased with the decision."
The case began in the 1980s when EIE Guam Corp. borrowed $253 million to build a Hyatt hotel. The company stopped making interest payments in January 1995, and the bank started foreclosure proceedings. The company sued to stop the bank. A lower court sided with the developer, ruling the bank had forfeited its right to the collateral because it lacked a Guam business license.
- Jaret Seiberg