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Comment by whatok | Hacker News Reader

There's a lot of comments in here saying that it was the amount Brigade was owed so they probably just thought it was prepayment. There is no chance on earth prepayment of a loan was made without any sort of communication beforehand. Brigade very well knows that they weren't supposed to receive the $ (at this point in time) but it's a cheaper option to take this to court and potentially keep the money (low probability event) than give it back and see a potentially much smaller sum in restructuring (high probability event).

Anyone familiar with distressed situations knows that these things are knife fights so this kind of behavior is not surprising. Brigade is big enough that banks aren't going to refuse to do business with them because of something like this.

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Everything you say is correct if it was Revlon's money, but it wasn't. So even if Brigade delay long enough for a restructuring, Brigade still won't be able to keep the money. They are independent events: 1) unjust enrichment is Citibank vs. Brigade. 2) restructuring is Brigade vs. Revlon's other creditors/investors.

Yes, they are independent events involving different parties but that does not matter for Brigade's purpose. By making the incorrect payment, there is a non-zero chance that Brigade will have 175mm that previously did not exist. If they are able to keep that money, all else equal, their position as a creditor is unaffected but they've effectively cashed out a portion of their position ahead of other creditors. I don't think it's likely that they will be able to keep the money but their returns change quite a bit if they're able to.

Per the article you're over-simplifying what is going on, to the point of making it seem clearer cut than it actually is.

Citibank actually has a business relationship with Brigade Capital, they're Brigade's contractor essentially, and they essentially COULD owe Brigade money themselves via this arrangement:

> As the administrator of the gargantuan arrangement, it was incumbent on Citibank to collect payments from Revlon and transfer it to the lenders, including Brigade Capital. The company was expected to transfer $1.5 million in interest payments to the hedge fund a few days back.

Brigade are claiming that his is Citibank paying money they owe, and has nothing to do with Revlon.

PS - I think Brigade will ultimately lose the court case. I think their arguments are easily unwound, but I suspect the court case will take a while because the argument isn't as black/white as it may first appear, there's actually a three-way relationship here.

> Brigade still won't be able to keep the money.

What about the interest accrued from keeping the money for a time?

That's probably why the courts agreed to freeze the funds completely.

I missed that very obvious point, thanks.

Right, but under the definition of Unjust Enrichment as laid out in the article, it requires both a mistake + not being liable to pay.

So there's a difference between "whoops I paid money to the wrong person" and "whoops I prepaid my loan back in full", which is that the latter fails to satisfy one of the two criteria of unjust-ness.

Perhaps there's more nuance in the legal definition that this article missed, though.

Citibank is not liable to pay Brigade. The fact that someone is liable to pay Brigade does not entitle them to Citibank's money.

Citibank has agreed to be the paying agent for the borrower. Literally every other payment received from the borrower came from citibank. Those checks can and should be cashed.

Similarly, the company servicing your mortgage may not own it. Doesn't matter, if you pay to them they need to reduce the mortgage balance (even though you didn't owe them specifically the money) and then carry out their responsibilities with lender.

I would think facilitating payment would only leave you liable for the amount given to you to transfer, not the amount of your assets that total the amount of debt between the parties you are facilitating for.

If Alice owes Bob $500, and I've agreed to take Alice's $5 bill to Bob, and I accidentally give Bob my own $500 bill, Bob doesn't get to keep it. The liability I took on in that transaction is for the amount of money I accepted from Alice for the purpose of delivering to Bob, not Alice's total debt.

That’s a technicality. In the case of a loan payment, it isn’t Citibank’s money they are wiring, so you cannot just say “this was a loan payment, it’s just they keep it”.

Of course it’s acceptable that this caused confusion with the receiving party, but it does not mean they can keep it. It’s not the money from the party that was supposed to pay back the loan.

Please cite a law here. The money was owed, it may have been distressed and in default (so due immediately) the balance was paid.

Seriously, no lender is responsible for investigating at the level you are talking about - seriously, they do not need to figure out if you used your own money, the paying agent used their money, a title company paid out a title claim and used their money, an insurance company settled the debt as a result of a loss event etc.

Paying agents in other areas (securities / bonds) pay trillions a year - the system would not work if everyone was always having to worry that the "good funds" being used to pay debts were not good funds.

Citibank literally did make a loan payment - of the exact amount due in principal plus interest. That means that Citibank calculated the amount due, and sent the payment.

It can mean a computer calculated that (like some dashboard with multiple buttons and one that says “pay everything” which was accidentally pressed) and it did not take any conscious action for that to happen, so that doesn’t say anything about intent.

This isn't going to be decided on some theoretical dashboard with a "pay everything" button but on something more concrete.

That doesn’t seem relevant to me. If you and I both have accounts at a particular bank and they draw from yours instead of mine, generally I’d expect the bank to take the money from me and give it to you to right the situation. However, are you just SOL if I don’t have the cash to make you whole again? Just because we both use the same bank?

Bank error in your favour. Collect $175mm.

And hold onto it for dear life while the bank attempts to reclaim it when they realise their error.

but, Citibank IS liable to pay Brigade, on behalf of Revlon.

that is how loan servicing works.

No, I don't believe it is. The loan servicer for my mortgage is not liable to pay it on my behalf. If they accidentally transferred money to the bond holders for the loan, they would of course be able to retrieve it. I would be shocked if this is not reversed in court, unless there are some significant missing details from the story.

It's not as specious as you believe. Your bank can almost certainly call your mortgage loan at any time. From the other side, prepayment of a loan, even without communication, happens all the time.

In the US at least mortgage loans are not callable.

Most mortgages in the US contain a provision that allows the lender to call the loan under certain conditions.

It's been a while since I read my mortgage note, but I believe the only condition under which it is callable is a default. Unless I've misunderstood what callable means in this context.

You've got the right of what callable means. After researching more about this, I have learned that some mortgages also have additional callable acceleration provisions to lower the bank's risk - such as when a borrower's credit score falls.

Not only that, but it’s citi’s money, not revlons. It’s revlons debt, not citi’s. In my mind, it’s as simple as that.

And I better hope the court thinks like this as well, otherwise the whole legal safety net of the banking world just became more like Bitcoin (and even they can just fork the whole blockchain in case of an error, like they did with Ethereum).

> There is no chance on earth prepayment of a loan was made without any sort of communication beforehand.

I just paid off my mortgage recently. The lender (Wells Fargo) had absolutely no clue I was doing that. I never told them, and I never took permissions from them. They just got a check for the outstanding amount. Mortgage closed.

So you just placed a check in an envelope and mailed it to the bank with no other documents? What did you write in the "memo" field on the check?

Edit: looking into WF's website below, you sent a check with your account number to an address specifically set up to receive mortgage payments—you are being disingenuous with your "comparison".

https://www.wellsfargo.com/mortgage/manage-account/payments

They didn't claim to send an anonymous check - they were responding to the idea that you need pre-clearance to overpay.

What's your point? This isn't a mortgage. Mortgages are much more standardized and don't involve as many parties. Everyone involved with a corporate loan is going to want to have a discussion if there are unscheduled prepayments made. Even more so given that this is a distressed situation.

I imagine there is somewhat more formality around payments of 175MM than there is for 175K.

> There is no chance on earth prepayment of a loan was made without any sort of communication beforehand

Surely this is a contract detail? I had a variable mortgage, if I wanted to make an over-payment I just paid the money into the account, no communication needed.

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