One of the remedies that a party holding a judgment in its favor gets paid is the attachment of bank accounts. In a rare piece of good fortune, a judgment creditor was able to identify a bank account of the judgment debtor which at one point had over $450,000.00 in it. The creditor promptly issued the pleadings necessary to have the bank account attached and the proceeds paid to it. Unfortunately, it found out that the bank that held the deposit account was also a lender to the judgment debtor. Further, not only did the bank have common law setoff rights for its loan against the account, it also had a security agreement that covered the account. Even though the bank allowed other monies to come out of the account after the attachment pleadings were received, the Court of Appeals held that the lender could safely do this without waiving its security interest. (The Court did not address whether or not this action would have waived the common law right of setoff. Lenders need to keep that in mind when reviewing this case.) 
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Posts Tagged ‘creditors’ rights’
Court Clarifies Priorities Between Mechanic’s Lienholders and Construction Lenders on Subdivision Improvements
Tuesday, January 3rd, 2012Under our current mechanic’s lien statute, a construction lender who records its mortgage prior to the recording of a mechanic’s lien takes priority over the mechanic’s lien. There are three exceptions to this rule. The first exception is in the case of the construction of houses. The second is in the construction of improvements auxiliary to houses. The third is constructing property which is property controlled by a utility. (more…)
A Guarantor Makes an Ingenious Argument to Try to Wiggle Off the Hook
Wednesday, February 23rd, 2011Guaranties of debt are a funny thing under the law. Generally speaking, the law is deliberately biased in favor of protecting the rights of a guarantor against the creditor holding the guaranty. Guarantors are sometimes called the “darlings of the law” because of their preferred position. As a result, guaranties have to be very carefully drafted in order to make sure that the guarantor is held to its contract. You are literally drafting against the bias of the law in attempting create an enforceable guaranty. (more…)
A Few Years Ago We Thought Receiverships Were Dead
Wednesday, February 16th, 2011Over the past few years, a number of amendments to the Bankruptcy Code have made bankruptcy a less flexible tool for debtors dealing with real estate related debt problems. As a result, state law receiverships are on the rise. Where before we rarely, if ever, saw receivership action initiated by a lender, they are now quite common. (more…)
The Case for Demand Letters
Tuesday, December 21st, 2010It is not at all uncommon for loan documentation to waive the necessity of any notice or demand prior to filing suit. However, in a recent case dealing with the date for starting the statute of limitations, the Indiana Court of Appeals indicated that evidence of acceleration may be difficult to establish where a demand letter is not sent notifying the debtor that acceleration has occurred. Acceleration is the right that allows the lender to declare an entire loan due when payments are missed. Sometimes a situation is so emergent that the time for a demand letter cannot be tolerated by the creditor. However, where there is time to send out a demand letter, this step can be beneficial. The demand letter itself is enough to get a reasonable response from the debtor. Additionally, if there are defenses to the claim, the demand letter will often allow this to be determined by way of a response from the debtor before suit is actually filed. Then, if necessary, the case can be settled without the expense and risk of litigation. (more…)
Court of Appeals Answers Unaddressed Questions Regarding Credit Card Accounts
Thursday, December 2nd, 2010The Indiana Court of Appeals was recently faced with establishing the appropriate statute of limitations for the collection of credit card balances. In this particular instance, the credit card agreement provided that New Hampshire law would apply. While generally the law of the state of an issuer of a credit card can apply to agreements, the statute of limitations is not a part of the substantive law of the state. It is considered procedural law. The Court began by pointing out that while New Hampshire controlled for substantive purposes, Indiana law would control for procedural purposes. (The Court did hold open the possibility that the procedural laws of another state could be incorporated in the contract but seems to be indicating that this must be done by a very specific provision to that effect.) (more…)
Court Clarifies Priorities Between Mechanic’s Lienholders and Construction Lenders on Subdivision Improvements
Tuesday, November 9th, 2010Under our current mechanic’s lien statute, a construction lender who records its mortgage prior to the recording of a mechanic’s lien takes priority over the mechanic’s lien. There are three exceptions to this rule. The first exception is in the case of the construction of houses. The second is in the construction of improvements auxiliary to houses. The third is constructing property which is property controlled by a utility.
In a recent case, subdivision improvements were constructed. However, there were two important factors that impacted the analysis. First, no houses whatsoever had been built in the subdivision. Therefore, the court found that the exceptions for houses and improvements auxiliary to houses could not apply. Second, the utilities that had been constructed had not yet been accepted by the relevant public utilities. Since ownership of utilities does not transfer until the time of acceptance, the third exception did not apply.
Thus, in this case, the mechanic’s lienholders were junior to the debt of the construction lender. Given the depressed real estate values, it is doubtful that the mechanic’s lienholders received any payment because of a lack of equity to support their lien position.
Author: Terry G. Farmer (bio)
Phone: 812.452.3543
Email: tfarmer@bamberger.com
Bamberger Seminar – Getting Your Fair Share
Wednesday, November 3rd, 2010Join the attorneys at Bamberger on November 17, 2010 from 11:30 am to 1:00 pm for a complimentary seminar covering credit and collections issues facing businesses today. (more…)
Bamberger Seminar – Getting Your Fair Share
Wednesday, October 20th, 2010Join the attorneys at Bamberger on November 17, 2010 from 11:30 am to 1:00 pm for a complimentary seminar covering creditors’ rights issues facing businesses today. (more…)