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Durham, other guarantors must post collateral on bond

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The 7th Circuit Court of Appeals ruled Tuesday that Tim Durham and two other men who promised to indemnify and post collateral on a surety bond issued by Frontier Insurance Co. must post collateral on that bond.  

Durham, Terry Whitesell and J. Roe Hitchcock were the principals of CT Acquisition. The company agreed in 1999 to buy Evans Trailers and John Evans Sales Co., with the price to be paid over time. The sellers insisted on a surety bond, which was put up by Frontier, but also demanded personal guarantees from the three principals.

CT didn’t pay up and the guarantors failed to keep their promise, leaving the sellers to turn to Frontier. But Frontier couldn’t pay on the bond because it was in financial distress and placed in “rehabilitation” by the New York Superintendent of Financial Services. Frontier then sought funds from the guarantors to honor their commitment to the sellers, demanding Durham, Whitesell and Hitchock post collateral under their agreement with Frontier. The men didn’t pay up.

After the sellers sued Frontier and earned a judgment of more than $1.5 million, plus post-judgment interest in the 4th Circuit Court of Appeals, Frontier sued the guarantors. Judge Tanya Walton Pratt in the Southern District ordered the three men to deposit $1,559,256.78 with the clerk.

The guarantors argued based on their agreement with Frontier they didn’t have to post collateral until Frontier paid the sellers and that their only obligation is to indemnify Frontier after the fact. They hope that the ongoing rehabilitation will prevent Frontier from paying or reduce the amount it owes.

“Paragraph 3 says that a demand for collateral may occur ‘before [Frontier] may be required to make any payment thereunder.’ The Guarantors must keep their promise to post collateral,” Chief Judge Frank Easterbrook wrote in Frontier Insurance Company v. J. Roe Hitchcock, Timothy S. Durham and Terry G. Whitesell, 11-3510.

“If the existence of a fund in the registry of the district court permits Frontier to pay the Sellers 100 cents on the dollar, the Guarantors have no legitimate complaint. There is no reason why Frontier’s financial troubles should benefit the Guarantors at the expense of the Sellers,” he continued. “If, however, New York’s insurance authorities instruct or permit Frontier to pay the Sellers less than the face value of the surety bond, then the Clerk of the district court will return the excess to the Guarantors. The final disposition of these funds thus depends on the outcome of Frontier’s rehabilitation. Until then, however, Frontier is entitled to the security that the Guarantors promised to provide.”

Durham was convicted last year in federal court in Indianapolis of 12 felony fraud charges and sentenced to 50 years for his role in a Ponzi scheme that defrauded Ohio investors out of $250 million. The charges stemmed from the collapse of Fair Finance Co. in Akron, Ohio. His law license in Indiana has been suspended, and his appeal in that case is being handled pro bono by a Chicago firm.

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  1. A traditional parade of attorneys? Really Evansville? Y'all need to get out more. When is the traditional parade of notaries? Nurses? Sanitation workers? Pole dancers? I gotta wonder, do throngs of admiring citizens gather to laud these marching servants of the constitution? "Show us your billing records!!!" Hoping some video gets posted. Ours is not a narcissistic profession by any chance, is it? Nah .....

  2. My previous comment not an aside at court. I agree with smith. Good call. Just thought posting here a bit on the if it bleeds it leads side. Most attorneys need to think of last lines of story above.

  3. Hello everyone I'm Gina and I'm here for the exact same thing you are. I have the wonderful joy of waking up every morning to my heart being pulled out and sheer terror of what DCS is going to Throw at me and my family today.Let me start from the !bebeginning.My daughter lost all rights to her 3beautiful children due to Severe mental issues she no longer lives in our state and has cut all ties.DCS led her to belive that once she done signed over her right the babies would be with their family. We have faught screamed begged and anything else we could possibly due I hired a lawyer five grand down the drain.You know all I want is my babies home.I've done everything they have even asked me to do.Now their saying I can't see my grandchildren cause I'M on a prescription for paipain.I have a very rare blood disease it causes cellulitis a form of blood poisoning to stay dormant in my tissues and nervous system it also causes a ,blood clotting disorder.even with the two blood thinners I'm on I still Continue to develop them them also.DCS knows about my illness and still they refuse to let me see my grandchildren. I Love and miss them so much Please can anyone help Us my grandchildren and I they should be worrying about what toy there going to play with but instead there worrying about if there ever coming home again.THANK YOU DCS FOR ALL YOU'VE DONE. ( And if anyone at all has any ideals or knows who can help. Please contact (765)960~5096.only serious callers

  4. He must be a Rethuglican, for if from the other side of the aisle such acts would be merely personal and thus not something that attaches to his professional life. AND ... gotta love this ... oh, and on top of talking dirty on the phone, he also, as an aside, guess we should mention, might be important, not sure, but .... "In addition to these allegations, Keaton was accused of failing to file an appeal after he collected advance payment from a client seeking to challenge a ruling that the client repay benefits because of unreported income." rimshot

  5. I am not a fan of some of the 8.4 discipline we have seen for private conduct-- but this was so egregious and abusive and had so many points of bad conduct relates to the law and the lawyer's status as a lawyer that it is clearly a proper and just disbarment. A truly despicable account of bad acts showing unfit character to practice law. I applaud the outcome.

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