Supreme Court Affirms 7th Cir. in Mortgage Value Restitution Case - U.S. Seventh Circuit
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Supreme Court Affirms 7th Cir. in Mortgage Value Restitution Case

On Monday, the Supreme Court decided a case that had circuit court of appeals split, that is, whether property, as defined by the Mandatory Victims Restitution Act of 1996 ("Act"), is "'returned' when a victim takes title to collateral securing a loan that an offender fraudulently obtained from the victim."

The Supreme Court clarified its stance, and affirmed the Seventh Circuit's opinion.

Background

In 2005, Benjamin Robers fraudulently obtained a loan for $470,000 from two banks, and purchased two homes. He failed to make payments, and one year later the banks foreclosed on the properties. When the banks took title to the homes in 2006, the combined value of the homes was $280,000; the decrease in value resulted from the burst of the real estate market bubble.

Robers was convicted of conspiracy to commit fraud in 2010, and the court ordered him to pay restitution of $220,000 (roughly the value of the loans less the value of the homes when the banks took title and miscellaneous fees). Robers appealed, arguing that the court miscalculated the amount of restitution, urging the court to reduce the amount of restitution awarded by $280,000 -- the value of the homes. In essence, Robers was arguing that "property" under the Act was the collateral, not the cash.

Supreme Court Decision

The Supreme Court disagreed. Under a plain reading of the statue, the "property" that was "lost" in this case was cash -- the money lent -- not the collateral (the homes). Justice Breyer stated, "if the 'property' that was 'damage[d],' 'los[t],' or 'destroyed,' was the money, then 'the property ... returned' must also be the money."

Justices Sotomayor and Ginsburg Concur

Justice Sotomayor authored a concurring opinion, in which Justice Ginsburg joined, to clarify that she agreed with the outcome of the case, she disagreed with its application in very limited circumstances. Instead, if a victim held on to the property for investment purposes, and there was a delay in selling the collateral, then "it would be wrong for the court to make the defendant bear that loss." She stated that unreasonable delay in selling the property breaks the chain of causation, and would "place on the defendant the burden to show -- with evidence specific to the market at issue -- that a victim delayed unreasonably in selling collateral, manifesting a choice to hold the collateral."

With the circuits squarely split, and the regularity that this issue arises, circuit courts now have more clarity in determining restitution.

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