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The Guarantor Chronicles – Can a guarantor waive its right to a foreclosure confirmation proceeding?

Editor’s Note #1: This post first appeared last week on Bank Bryan Cave, a top blog on regulatory, M&A, and litigation issues for those in the banking world, located at http://www.bankbryancave.com/. Given the close relationship of this post’s topic to the world of distress, we are cross-posting it here.

Editor’s Note #2: For prior posts of interest to those involved in guarantor litigation, see Ninth Circuit Decides Issue of First Impression, Protects Insider Guarantor from Preference Liability, located at http://bankruptcycave.com/ninth-circuit-decides-issue-of-first-impression-protects-insider-guarantor-from-preference-liability/.

Can a guarantor waive his right to a confirmation proceeding under Georgia law, after a non-judicial foreclosure results in a deficiency still owing? Yes.  Last week, in case closely watched by Georgia commercial real estate lenders, borrowers, and guarantors, the Supreme Court of Georgia issued its opinion in PNC Bank, N.A.  v. Smith, 2016 Ga. LEXIS 169 (Ga. Sup. Court Feb. 22, 2016). The case was

11th Circuit Holds Consumer Lenders Can’t Include Estimated Expenses In Pre Closing Reinstatement or Payoff Letters; What You Should Do About This Remarkable Opinion

Editor’s Pre- / Post-Script:  The original post about this case was, frankly, a bit sarcastic toward the consumer borrower, and made light of a serious matter.  (Your author Mark Duedall is to blame for that.)  When the post found its way to the borrower’s counsel, he was kind enough to let us know, as Paul Harvey would say, “the rest of the story.”  And that was this – the borrower was down on his luck, a hard working public servant, but eventually managed to come up with the funds needed to pay his bills (including this loan) in full.  Truly, an individual deserving to be treated fairly in all respects.  But when he paid the loan in full, including the estimated future charges, the lender then refused to refund the estimated future charges that the borrower had paid in full (and that the lender did not incur).  Yikes; the consumer had

It Ain’t Over ‘Til It’s Over: Circuits are Limiting the Use of Equitable Mootness

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Over the summer, four appellate court decisions addressed the doctrine of equitable mootness: In re Tribune Media Co., 799 F.3d 272 (3d Cir. 2015); In re One2One Commc’ns, LLC, No. 13-3410, 2015 WL 4430302 (3d Cir. July 21, 2015); In re Sagamore Partners, Ltd., No. 14-11106, 2015 WL 5091909 (11th Cir. Aug. 31, 2015); and In re Transwest Resort Props., Inc., 801 F.3d 1161 (9th Cir. 2015). These decisions indicate a trend away from the doctrine’s application, or at least the presumption that it should be determinative.

“‘Equitable mootness’ is a narrow doctrine by which an appellate court deems it prudent for practical reasons to forbear deciding an appeal when to grant the relief requested will undermine the finality and reliability of

What Do You Mean the Trust Is Not Asset Protected?

In a recent bankruptcy case, Richard Lewiston unsuccessfully attempted to shelter his assets in the Lois and Richard Lewiston Living Trust (the “Trust”) from inclusion in his bankruptcy estate based on the Trust’s spendthrift provision. Here, the bankruptcy court looked to Michigan state law in applying the provisions of the Bankruptcy Code and concluded the Trust property was part of Lewiston’s bankruptcy estate.

Facts about the Trust:

  • Richard and his wife created the Trust in 1986.
  • Richard and Lois were the only beneficiaries of the Trust for as long as either of them were alive.
  • Richard and Lois served as the Trustees, and either Richard or Lois were designated to act as the Managing Trustee with the power to manage the Trust assets.
  • The Trust contained a Spendthrift Provision protecting all beneficiaries from claims by creditors.
  • The Trust also contained a provision allowing it to be “amended, modified

Click To Appeal: Recent Second Circuit Decision A Cautionary Tale Regarding Electronically Filed Notices Of Appeal

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A recent Second Circuit Court of Appeals decision, Franklin v. McHugh, 2015 WL 6602023 (2d Cir. 2015), illustrates the dire consequences of failing to comply fully with all electronic filing requirements for a notice of appeal. Although appellant’s counsel in that case attempted to file a timely notice of appeal, properly initiated the electronic filing process, paid the filing fee, and received payment confirmation, the Second Circuit dismissed the appeal for lack of appellate jurisdiction due to the technical failure of appellant’s counsel to “click all the buttons” required to complete the filing. In jurisdictions that require electronic filing, counsel must be mindful not only of the applicable procedural rules but also of the electronic filing requirements.

The Applicable Rules Minefield

Appeals

10th Circuit Holds That First Time Transactions Fall Within 11 U.S.C. 547(c)(2), Ordinary Course of Business Defense

In a decision that surprised many, the United Stated Circuit Court of Appeals for the Tenth Circuit (the “10th Circuit Court of Appeals”) affirmed decisions finding that a payment made on account of a first time transaction between a debtor and creditor can qualify for the ordinary course of business defense under 11 U.S.C. § 547(c)(2).

C.W. Mining Company (the “Debtor”) entered into an equipment agreement with a new contractor, SMC Electric Products, Inc. (“SMC”), in an attempt to increase the Debtor’s coal production. This agreement was reached several months before the filing of an involuntary bankruptcy petition. Within 90 days of the involuntary bankruptcy filing, the Debtor made the first payment under the agreement in the amount of $200,000 to SMC via wire transfer. The Trustee filed an adversary proceeding seeking to avoid and recover the $2000,000 payment under 11 U.S.C. §§ 547(b) and 550, as an alleged preferential

Earth to Creditors: Triangular Payment Arrangements May Constitute “Reasonably Equivalent Value”

Satellite Orbiting Earth.

The Eleventh Circuit Court of Appeals recently clarified the meaning of “reasonably equivalent value” in a complex fraudulent transfer case.  Its decision in In re PSN USA, Inc., Case No. 14-15352 (11th Cir. Sept. 4, 2015), provides particular insight on fraudulent transfers in the context of parent-subsidiary and other triangular payment arrangements.  The Eleventh Circuit held that even though the debtor, a cable television channel, was not a party to the underlying satellite services contract at issue, payments made from the debtor to the satellite services company pursuant to its parent company’s contracts constituted “reasonably equivalent value” and could not be avoided as constructive fraudulent transfers.

PSN USA, Inc. (the “Debtor”) operated the PSN Channel, a cable television station that broadcasted live and recorded sporting events throughout Latin America.  Pan

Bryan Cave’s Atlanta Office Files Amicus Brief for Georgia Bankers Association Regarding Guarantor / Deficiency Claims

September 14, 2015

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On September 11, 2015, three of Bryan Cave’s financial institution / banking litigators (Curtis Romig, Edwin Cook, and Leah Fiorenza McNeill) filed an amicus curiae brief on behalf of the Georgia Bankers Association in a case currently pending before the Georgia Supreme Court, PNC Bank, N.A v. Smith, Case No. S15Q1445.  The case is of great interest to banks operating in Georgia, as well as other states that reject the “single action” rule and allow pursuit of judgments after foreclosure.  The focus of the Supreme Court will be the Georgia Court of Appeals’ 2013 ruling in HWA Properties, Inc. v. Cmty. & S. Bank, 322 Ga. App. 877 (2013), holding that a lender was entitled to pursue a guarantor for any deficiency remaining on a debt after a foreclosure, regardless of whether the lender had confirmed the foreclosure sale, if the guaranty included language waiving all defenses to collection of

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