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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. It is amazing how selectively courts can read cases and how two very similar factpatterns can result in quite different renderings. I cited this very same argument in Brown v. Bowman, lost. I guess it is panel, panel, panel when one is on appeal. Sad thing is, I had Sykes. Same argument, she went the opposite. Her Rooker-Feldman jurisprudence is now decidedly unintelligible.

  2. November, 2014, I was charged with OWI/Endangering a person. I was not given a Breathalyzer test and the arresting officer did not believe that alcohol was in any way involved. I was self-overmedicated with prescription medications. I was taken to local hospital for blood draw to be sent to State Tox Lab. My attorney gave me a cookie-cutter plea which amounts to an ALCOHOL-related charge. Totally unacceptable!! HOW can I get my TOX report from the state lab???

  3. My mother got temporary guardianship of my children in 2012. my husband and I got divorced 2015 the judge ordered me to have full custody of all my children. Does this mean the temporary guardianship is over? I'm confused because my divorce papers say I have custody and he gets visits and i get to claim the kids every year on my taxes. So just wondered since I have in black and white that I have custody if I can go get my kids from my moms and not go to jail?

  4. Someone off their meds? C'mon John, it is called the politics of Empire. Get with the program, will ya? How can we build one world under secularist ideals without breaking a few eggs? Of course, once it is fully built, is the American public who will feel the deadly grip of the velvet glove. One cannot lay down with dogs without getting fleas. The cup of wrath is nearly full, John Smith, nearly full. Oops, there I go, almost sounding as alarmist as Smith. Guess he and I both need to listen to this again: https://www.youtube.com/watch?v=CRnQ65J02XA

  5. Charles Rice was one of the greatest of the so-called great generation in America. I was privileged to count him among my mentors. He stood firm for Christ and Christ's Church in the Spirit of Thomas More, always quick to be a good servant of the King, but always God's first. I had Rice come speak to 700 in Fort Wayne as Obama took office. Rice was concerned that this rise of aggressive secularism and militant Islam were dual threats to Christendom,er, please forgive, I meant to say "Western Civilization". RIP Charlie. You are safe at home.

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