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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. wow is this a bunch of bs! i know the facts!

  2. MCBA .... time for a new release about your entire membership (or is it just the alter ego) being "saddened and disappointed" in the failure to lynch a police officer protecting himself in the line of duty. But this time against Eric Holder and the Federal Bureau of Investigation: "WASHINGTON — Justice Department lawyers will recommend that no civil rights charges be brought against the police officer who fatally shot an unarmed teenager in Ferguson, Mo., after an F.B.I. investigation found no evidence to support charges, law enforcement officials said Wednesday." http://www.nytimes.com/2015/01/22/us/justice-department-ferguson-civil-rights-darren-wilson.html?ref=us&_r=0

  3. Dr wail asfour lives 3 hours from the hospital,where if he gets an emergency at least he needs three hours,while even if he is on call he should be in a location where it gives him max 10 minutes to be beside the patient,they get paid double on their on call days ,where look how they handle it,so if the death of the patient occurs on weekend and these doctors still repeat same pattern such issue should be raised,they should be closer to the patient.on other hand if all the death occured on the absence of the Dr and the nurses handle it,the nurses should get trained how to function appearntly they not that good,if the Dr lives 3 hours far from the hospital on his call days he should sleep in the hospital

  4. It's a capital offense...one for you Latin scholars..

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