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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. Please I need help with my class action lawsuits, im currently in pro-se and im having hard time findiNG A LAWYER TO ASSIST ME

  2. Access to the court (judiciary branch of government) is the REAL problem, NOT necessarily lack of access to an attorney. Unfortunately, I've lived in a legal and financial hell for the past six years due to a divorce (where I was, supposedly, represented by an attorney) in which I was defrauded of settlement and the other party (and helpers) enriched through the fraud. When I attempted to introduce evidence and testify (pro se) in a foreclosure/eviction, I was silenced (apparently on procedural grounds, as research I've done since indicates). I was thrown out of a residence which was to be sold, by a judge who refused to allow me to speak in (the supposedly "informal") small claims court where the eviction proceeding (by ex-brother-in-law) was held. Six years and I can't even get back on solid or stable ground ... having bank account seized twice, unlawfully ... and now, for the past year, being dragged into court - again, contrary to law and appellate decisions - by former attorney, who is trying to force payment from exempt funds. Friday will mark fifth appearance. Hopefully, I'll be allowed to speak. The situation I find myself in shouldn't even be possible, much less dragging out with no end in sight, for years. I've done nothing wrong, but am watching a lot of wrong being accomplished under court jurisdiction; only because I was married to someone who wanted and was granted a divorce (but was not willing to assume the responsibilities that come with granting the divorce). In fact, the recalcitrant party was enriched by well over $100k, although it was necessarily split with other actors. Pro bono help? It's a nice dream ... but that's all it is, for too many. Meanwhile, injustice marches on.

  3. Both sites mentioned in the article appear to be nonfunctional to date (March 28, 2017). http://indianalegalanswers.org/ returns a message stating the "server is taking too long to respond" and http://www.abafreelegalasnswers.org/ "can't find the server". Although this does not surprise me, it is disheartening to know that access to the judicial branch of government remains out of reach for too many citizens (for procedural rather than meritorious reasons) of Indiana. Any updates regarding this story?

  4. I've been denied I appeal court date took a year my court date was Nov 9,2016 and have not received a answer yet

  5. Warsaw indiana dcs lying on our case. We already proved that in our first and most recent court appearance i need people to contact me who have evidence of dcs malpractice please email or facebook nathaniel hollett thank you

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