Can a waiver of rights ever be beneficial to the person granting the waiver? Yes. In In re Adamson Apparel, the Court of Appeals for the Ninth Circuit held, in a 2-1
The Ninth Circuit Court of Appeals in In Re Adamson Apparel, Inc. became the first appellate court to address the validity of “Deprizio waivers.” In Adamson, the court held that because the Deprizio waiver was not a “sham” provision, the insider was not a creditor of the debtor that could be subject to a preference action.
The debtor made claims against a surety that issued a performance bond in connection with a construction contract. The surety contended that it was not liable for the consequential damage claims.
As many areas continue to rebound slightly from the real-estate downturn, much litigation still exists related to the exposure of guarantors for corporate-entity real estate loans. In many instances a corporation or Limited Liability Company (LLC) may have filed for Chapter 11 in an effort to stave off a foreclosure and restructure the secured debt. However, it is well settled that a corporate bankruptcy case does not operate to discharge a guaranty from a guarantor who is not in bankruptcy.
A recent New York trial court decision upheld a common full recourse trigger in a non recourse carve-out guaranty by holding that a voluntary bankruptcy filing by the borrower enabled the lender to seek immediate full repayment from the guarantor under the terms of the guaranty, even though the loan was subject to New York State's "one action rule" and the lender had pursued a foreclosure action against the property securing the loan.
One of the ironic issues for failing banks has been the fact that banks that they have had to continue to deal with their borrowers and depositors in the ordinary course of business even though they are already in the queue for resolution by the FDIC. So for example, loans continue to get renewed and documents executed. What happens if you renew a loan shortly before the bank fails, do you have some sort of defense to enforcement of the loan when the successor bank or the FDIC makes demand on you?
Overview
Last year in this space we reported on a pair of Michigan court decisions (51382 Gratiot Avenue Holdings, Inc. v. Chesterfield Development Company (Chesterfield) and Wells Fargo Bank, N.A. v.
The U.S. Court of Appeals for the Fifth Circuit held on Feb. 28, 2013, that a secured lender’s full credit bid for a Chapter 11 debtor’s assets at a bankruptcy court sale barred any later recovery from the debtor’s guarantors. In re Spillman Development Group, Ltd., ___ F.3d ___, 2013WL 757648 (5th Cir. 2/28/13). A “credit bid” allows a creditor to “offset its [undisputed] claim against the purchase price,” a right explicitly granted by Bankruptcy Code (“Code”) § 363(k). 3 Collier, Bankruptcy, ¶ 363.06[10], at 363-59 (16th rev. ed. 2010).
A new troubling case from California allows borrowers to present evidence of prior oral statements of a lender which contradict the terms of the written agreement between the parties with a standard integration clause. Marsha Houston of our Los Angeles office writes more about the case below.