Cadence Bank NA v. Commonwealth Partners LLC et al
MEMORANDUM OPINION. Signed by Magistrate Judge T Michael Putnam on 12/7/15. (MRR, )
2015 Dec-07 AM 11:54
U.S. DISTRICT COURT
N.D. OF ALABAMA
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ALABAMA
CADENCE BANK, a national
LLC; and JOHN L. YOUNG;
Case No. 2:14-cv-768-TMP
This cause is before the court on the plaintiff’s motion to confirm the award of
arbitration entered in this matter. (Doc. 22). The defendant, John L. Young,1 has
filed a response in opposition (doc. 25), and the plaintiff, Cadence Bank, has filed a
reply (doc. 26). Also pending is the defendant=s motion to vacate the arbitration
award issued by the American Arbitration Association ("AAA") on March 6, 2015.
Plaintiff has filed a response (doc. 28), and a hearing was held on the
After the complaint was filed commencing this action, the other named defendant,
Commonwealth Partners LLC, initiated bankruptcy proceedings in the Northern District of
Georgia. The parties do not dispute that all claims against Commonwealth Partners LLC are thus
subject to the automatic stay. AS such they are due to be severed and dismissed without prejudice
to the right of the plaintiff to refile this action in the event any claims remain against
Commonwealth Partners after the bankruptcy proceedings are completed.
Thereafter, the Trustee in Bankruptcy for Commonwealth
(acting through the same attorney representing defendant Young) filed a motion to
extend the § 362 bankruptcy stay to this action against Young, which the Trustee
later sought to withdraw. (Docs. 34, 35). The Trustee filed a second motion to
extend the bankruptcy stay to the reopening this case (doc. 36), supported by a brief
The parties have consented to the exercise of dispositive jurisdiction by
the undersigned pursuant to 28 U.S.C. ' 636(c).
This action was commenced on April 24, 2014, when Cadence Bank
(ACommonwealth@) and John L. Young, asserting that the defendants had defaulted
on a promissory note and guaranty agreement. (Doc. 1). The complaint alleged
that Commonwealth had borrowed money from Cadence, evidenced by promissory
notes, and that defendant had signed two personal guaranties of the payment of the
notes. Both Commonwealth and defendant Young responded to the complaint by
filing a motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(1),
asserting that the district court had no jurisdiction over the claims because the
promissory notes contained a valid and enforceable arbitration clause.
Cadence Bank then consented to arbitration. (Doc. 13). The parties filed a joint
motion to compel arbitration and stay proceedings. (Doc. 14). The joint motion
recited that the promissory notes contained an arbitration clause and that the parties
agreed to ask the court to enter an order compelling arbitration and staying
proceedings pending arbitration.
The court, by order dated July 17, 2014, granted the motion to compel
arbitration, found the previous motion to dismiss moot, directed the parties to
commence the process of arbitration within 15 days, and ordered the parties to file a
joint status report within 90 days. (Doc. 17). As directed in the order, Cadence 2
filed a status report on October 15, 2014, reciting that the proceedings had been
initiated but the arbitration had not yet concluded. (Doc. 18). On January 13,
2015, Cadence filed a second status report, reciting that an evidentiary hearing had
been conducted before the arbitrator on January 6, 2015, and that post-hearing briefs
were being filed. (Doc. 19). Cadence also reported that Commonwealth had filed
a Chapter 7 bankruptcy petition in the United States Bankruptcy Court for the
Northern District of Georgia, and that Cadence was now seeking an award in
arbitration against Young only, based upon the fact that claims against
The report recites that plaintiff sent a copy of a proposed status report to the
defendants before filing it, but that no response had been received before the 90-day deadline
Commonwealth were subject to an automatic stay pursuant to Section 362 of the
Bankruptcy Code. (Doc. 19).
On March 12, 2015, Cadence filed a report stating that the AAA had issued an
award against Young, a copy of which was attached. (Doc. 20). On March 18,
2015, defendant Young filed a report reciting that the arbitrator had issued an
arbitration order against him in the amount of $447,632.96, which included
attorney=s fees and costs in the amount of $85,622.47. (Doc. 21). Young further
stated that he planned to file a motion to vacate the award, based on the contentions
that the award of fees and costs was not supported by sufficient evidence and that
continuing the arbitration in the absence of Commonwealth provided grounds for
vacating the award. (Doc. 21). Thereafter, the plaintiff filed a motion to confirm
the arbitration award. (Doc. 22). Young filed a response in opposition, and the
plaintiff filed a reply. (Doc. 25, 26). About six weeks later, Young filed a motion
to vacate the arbitration award (doc. 27), to which plaintiff filed a response, and
defendant Young filed a reply. (Docs. 28, 29). The court held a hearing on the
motion to vacate on July 15, 2015. On July 16, 2015, Young sent a letter to the
court, and on July 17, 2015, Cadence filed a response to the letter, which was
followed by an amended response. (Docs. 32, 33).
On July 21, 2015, the bankruptcy trustee for Commonwealth, appearing
through the same attorney representing Young in this action, filed a motion to stay
the entry of a final judgment in this matter until the bankruptcy claims involving
Commonwealth are resolved in the United States Bankruptcy Court for the Northern
District of Georgia. The motion also asked this court to extend the stay to cover the
claims against Young. (Doc. 34). The motion was accompanied by a brief.
(Doc. 36). The trustee then filed a motion to withdraw the motion. (Doc. 35).
The same day, he filed a similar motion, asking that the stay be extended to Young,
which motion also was accompanied by a brief. (Docs. 36, 37).
The next day,
Cadence filed a motion for an order confirming the arbitration award and seeking to
strike the motion to extend the automatic stay. (Doc. 38). A response to the
motion to confirm the arbitration award was filed July 30, 2015.3 (Doc. 39).
The motions present the court with three issues: (1) should the automatic stay
in Commonwealth’s bankruptcy be extended to stay proceedings against defendant
Young, and (2) should the arbitration award be confirmed, or (3) should it be
The response recites that it was being filed by “the defendants,” presumably
including Commonwealth, even though it is in bankruptcy. The trustee in bankruptcy also seems
to join in it.
On March 6, 2015, the AAA issued an award in favor of Cadence Bank and
against Young, finding that Young breached his personal guaranties of the
promissory notes executed by Commonwealth in favor of Cadence,4 and finding
him liable for the unpaid balance due under the notes of $447,632.96, which
included principal, late fees, and interest, and which also included $85,622.47 in
attorney=s fees and collection costs. (Doc. 21-1, p. 6). In spite of the fact that there
have been a half-dozen motions filed, the central issue presented is whether the court
should confirm the arbitration award.
The motion to stay, the motion to vacate,
and motion to strike are essentially alternate attacks on the validity of the arbitration
award, which the plaintiff’s motion seeks to have confirmed.
A. Should the Bankruptcy Stay Extend to Defendant Young?
A threshold issue the court must address is the contention by the trustee in
bankruptcy and defendant that the automatic stay should be extended to stay
proceedings against Young until Commonwealth’s bankruptcy case (including the
Specifically, the arbitrator found that Commonwealth had borrowed money from
Cadence’s predecessor-in-interest (Superior Bank) to finance a real estate development and had
executed two promissory notes and a mortgage to secure the loan. Also, “Respondent [Young]
signed Guaranty Agreements on July 30, 2004 and September 29, 2005 guaranteeing the payment
of the Notes. The Guaranty Agreements were absolute, continuing, and unconditional guarantees
by the Respondent for repayment of the Notes.” (Doc. 21-1, p. 2).
litigation of its counterclaims against Cadence) is completed. For at least two
reasons, the court finds that the stay cannot be extended in this action.
The first reason is that the trustee and defendant Young seek to have this court
extend the stay to Young, not the bankruptcy court in which Commonwealth’s
bankruptcy proceedings are pending. This court is the wrong forum for making that
determination. Just as the bankruptcy court explained in In re Jefferson County,
491 B.R. 277 (Bkrtcy. N.D. Ala. 2013), whether the § 362 stay extends to
non-debtors is a determination to be made by the bankruptcy court in which the
bankruptcy proceedings are pending, not the courts where proceedings against the
non-debtor may be pending. That court said:
Generally, the automatic stay of § 362(a)(1) applies only to certain
actions taken or not taken with respect to a debtor, and not with respect
to such action or inaction affecting other parties. See A.H. Robins Co.,
Inc. v. Piccinin, 788 F.2d 994, 999 (4th Cir. 1986). However, courts
have recognized that certain ‘‘unusual circumstances’’ warrant
applying the § 362(a)(1) stay to proceedings against a non-debtor
defendant where such an application furthers the purposes behind the
stay. See id.; Queenie, Ltd. v. Nygard Int’l, 321 F.3d 282, 287 (2d Cir.
2003) (‘‘The automatic stay can apply to non-debtors, but normally
does so only when a claim against the non-debtor will have an
immediate adverse economic consequence for the debtor’s estate.’’).
Such unusual circumstances have been found (1) when an
indemnification or contribution relationship creates an identity of
interests between the debtor and the non-debtor defendant; (2) when the
proceeding imposes a substantial burden of discovery on the debtor; or
(3) when the proceeding would have a potential preclusive effect that
forces the debtor to participate in the proceeding as if the debtor were a
party. See, e.g., A.H. Robins, 788 F.2d at 999; Queenie, Ltd., 321
F.3d at 287; Johns–Manville Corp. v. Asbestos Litig. Grp. (In re Johns–
Manville Corp.) (Johns–Manville I), 40 B.R. 219, 223–26 (S.D.N.Y.
1984); Lesser v. A–Z Assocs. (In re Lion Capital Grp.), 44 B.R. 690,
702–04 (Bankr. S.D.N.Y. 1984).
Id. at 284. In In re Jefferson County, it was the bankruptcy court that extended the
§ 362 stay to actions pending in New York state courts. By analogy, if the trustee
and defendant Young believe the stay in Commonwealth’s bankruptcy should
extend to Young as well, they should seek that determination in the bankruptcy court
where the Commonwealth proceedings are pending, not here.
But even if this court is the proper forum in which to determine whether the
bankruptcy stay in a pending bankruptcy case should cover a non-debtor defendant
in this court, it would not be appropriate to do so in this case. The bankruptcy stay
ordinarily does not extend to non-debtors (i.e., persons or entities who have not
sought the protection of bankruptcy). In re Jefferson County, 491 B.R. 277, 284
(Bkrtcy. N.D. Ala. 2013). If any of three “unusual circumstances” exists, the stay
may be extend to non-debtors “(1) when an indemnification or contribution
relationship creates an identity of interests between the debtor and the non-debtor
defendant; (2) when the proceeding imposes a substantial burden of discovery on the
debtor; or (3) when the proceeding would have a potential preclusive effect that
forces the debtor to participate in the proceeding as if the debtor were a party.” Id.
Notwithstanding defendant Young’s claim that Cadence’s claims against him and
those involved in the Commonwealth bankruptcy are “intertwined,” none of these
“unusual circumstances” exists in this case. The claims litigated against Young in
the arbitration proceeding are not so intertwined with those involved in the
Commonwealth bankruptcy that the stay should extend to Young as well.
The language of the personal guaranties executed by Young, which are the
legal foundation of the claims against him, clearly make his obligation to pay the
Cadence loan absolute and unconditional. His duty to pay the loan is simply not
intertwined with that of Commonwealth. The two guaranty agreements executed
by defendant are essentially identical, except for the dates and amounts involved.5
Both contain the following provisions:
The guaranty provided for in this Section 1 is an absolute,
unconditional, present and continuing guaranty of payment and not of
collectibility and is in no way conditioned upon or limited by any
attempt to collect from the Borrower or any other Obligor (as
defined below) or the exercise of any other remedies the Bank may
have against any other person, firm or corporation (including, without
limitation, any other guarantors and any other maker, endorser, surety
The Guaranty Agreements are annexed to the complaint as exhibit 3. (Doc. 1).
of, or other party to, any of the Loan Documents, all of the same being
hereinafter collectively referenced to as the "Obligors" and individually
as an "Obligor") or the resort to any other security, guaranty or
collateral held by the Bank, or any other action, occurrence or
circumstance whatsoever…. ; and that the Bank will not be required
first to proceed against the Borrower or resort to the security,
guaranty or collateral, pledged or granted to it by any instrument
or agreement (including, without limitation, the Loan Documents), or
otherwise assigned or conveyed to it, but in case of default in the
payment of any of the Guaranteed Payments, the Bank may forthwith
look to the Guarantor for payment under the provisions hereof.
2. Nature of Obligations. The obligations and liabilities of
the Guarantor under this Agreement are primary obligations of the
Guarantor, are continuing, absolute and unconditional, are joint and
several with the obligations and liabilities of all other guarantors (if
any) now or hereafter guaranteeing the Guaranteed Payments, or any of
them, shall not be subject to any counterclaim, recoupment, set-off,
reduction or defense based upon any claim that the Guarantor may have
against the Borrower, the Bank, any of the Obligors or any of their
respective affiliates, and shall remain in full force and effect until all of
the Guaranteed Payments have been paid in full, without regard to,
and without being released, discharged, impaired, modified or in
any way affected by, the occurrence from time to time of any event,
circumstance or condition (whether or not the Guarantor shall
have any knowledge or notice thereof), including, without
limitation, any one or more of the following, whether or not with
notice to, or consent of, the Guarantor:
(a) any term or provision of any instrument or agreement
(including, without limitation, the Loan Documents) applicable to
the Borrower or any of the Obligors;
(b) any invalidity or unenforceability of any such instrument
or agreement (including, without limitation, the Loan Documents);
(f) the compromise, settlement, release or termination of any
or all of the obligations, covenants or agreements of the Borrower,
any of the Obligors or any other party under any such instrument or
agreement (including, without limitation, the Loan Documents);
(l) the death of, or voluntary or involuntary liquidation or
dissolution of, sale or other disposition of all or substantially all of the
assets of, or the marshaling of assets and liabilities, receivership,
insolvency, bankruptcy, assignment for the benefit of creditors,
reorganization, arrangement, composition or readjustment of, or other
similar proceeding affecting, the Borrower or any of the Obligors or
any of their respective assets, or any action taken by any trustee or
receiver or by any court in any such proceeding, or the disaffirmance,
rejection or postponement in any such proceeding of any of the
Borrower’s, any Obligor’s or any other party's obligations or
undertakings set forth in any such instrument or agreement
(including, without limitation, the Loan Documents);
(n) the release or discharge (by operation of law or otherwise)
of the Borrower, any of the Obligors or any other party from the
performance or observance of any obligation, covenant, agreement,
undertaking or condition to be performed by the same under any such
instrument or agreement (including, without limitation, the Loan
(o) any limitation on the liabilities or obligations of the
Borrower, any of the Obligors or any other party under any such
instrument or agreement (including, without limitation, the Loan
Documents), or any termination, cancellation, frustration, invalidity or
unenforceability, in whole or in part, of any such instrument or
agreement (including, without limitation, the Loan Documents) or any
limitation on the method or terms of payment thereunder that may now
or hereafter be caused or imposed in any manner whatsoever;
(s) any other matter that might otherwise be raised in avoidance
of, or in defense against an action to enforce, the obligations of the
Guarantor under this Agreement.
3. Covenant and Waiver by Guarantor. The Guarantor
unconditionally waives, insofar as such Guarantor's obligations
hereunder are concerned:
(e) any right to the enforcement, assertion or exercise of any
right, power or remedy under or in respect of any such instrument
or agreement (including, without limitation, the Loan Documents); and
(f) any requirement that the Borrower, any of the Obligors or
any other person be joined as a party to any proceeding for the
enforcement of any term of any such instrument or agreement
(including, without limitation, the Loan Documents), any requirement
of diligence on the part of the Bank and any requirement on the part of
the Bank to mitigate any damages resulting from any non-payment of
any Guaranteed Payment or any default or event of default under any
such agreement or instrument (including, without limitation, the Loan
4. Subordination, Assignment, Relinguishment by the
(c) Guarantor's Relinquishment. In the event that the
Guarantor now is or hereafter becomes an insider, as defined in
11 U.S.C. §101 or any amendment or replacement thereof or successor
thereto, of the Borrower, the Guarantor hereby WAIVES AND
RELINQUISHES ANY AND ALL RIGHTS, WHETHER AT LAW,
IN EQUITY, OR OTHERWISE, THAT THE GUARANTOR NOW
OR HEREAFTER MAY HAVE (INCLUDING WITHOUT
LIMITA'I'ION ANY RIGHTS OF INDEMNITY, CONTRIBUTION,
REIMBURSEMENT OR SUBROGATION) TO RECOVER FROM
THE BORROWER OR FROM ANY PERSON, FIRM OR
CORPORATION THAT MAY NOW OR HEREAFTER HAVE
SUCH A RIGHT TO RECOVER FROM THE BORROWER, ANY
AMOUNTS PAID BY THE GUARANTOR TO SATISFY, IN
WHOLE OR IN PART, THE GUARANTEED PAYMENTS. This
subsection is for the benefit of the Borrower as well as the Bank and
may be enforced by the Borrower.
19. Security. The Guaranteed Payments are secured by that certain
Mortgage, Security Agreement and Assignment of Rents and Leases
between the Borrower and the Bank. Guarantor hereby agrees that the
Bank may exercise its rights hereunder and under any Loan Document
concurrently or successively, in any order selected by the Bank, and
that it shall not be necessary for the Bank to exercise any remedy
under the Note, the Mortgage or any other Loan Document, or any
of them, in order to be entitled to exercise any remedy hereunder,
and vice versa.
“Guaranty Agreement,” dated July 24, 2004, annexed as Exhibit 3 to the Complaint
(bolding added for emphasis.
The court has set out these terms of the guaranty agreements at some length to
emphasize the extent to which Cadence’s claim against Young for payment of the
loan amount is not limited by or contingent upon any claim against Commonwealth
or any remedy or defense available to Commonwealth. Young contracted to pay
the outstanding loan balance regardless of why Commonwealth did not or could not
be made to pay the balance. That is precisely the purpose of a guaranty. If the
debtor cannot or will not pay back the loan, the guarantor will. In paragraph 3(f),
Young explicitly waived the right to insist that Commonwealth be made a party to
any suit making a claim against him. He acknowledged that his guaranty remained
effective even if the provisions of the Loan Documents were invalid or violated by
Cadence. Under paragraph 2(o), no limitation or defense that could be invoked by
Commonwealth precludes collection of the loan balance from him. What happens
in the Commonwealth bankruptcy proceeding, or with respect to its counterclaim
against Cadence, does not affect the guaranty obligation of the defendant. It simply
is not true that the guaranty claim against Young is so intertwined with the debt
owed by Commonwealth that the “unusual circumstances” contemplated in In re
Jefferson County require extension of the bankruptcy stay to defendant. The
motion for extension of the stay will be denied.
B. Affirm or Vacate the Arbitrator’s Award?
Federal judicial review of an arbitration decision is Aextremely narrow,@ and
arbitration awards are given a Astrong presumption@ of finality. Sullivan, Long &
Hagerty, Inc., v. Local 559, 980 F.2d 1424 (11th Cir. 1993). The standard of
review has been deemed "among the narrowest known to the law." AIG Baker
Sterling Heights, LLC, v. American Multi-Cinema, Inc., 508 F.3d 995, 1001 (11th
Cir. 2007). The limited review of arbitration awards is in keeping with the strong
public policy favoring arbitration as a means of dispute resolution. See, e.g.,
ButterKrust Bakeries v. Bakery, Confectionery and Tobacco Workers Int=l Union,
726 F.2d 698 (11th Cir. 1983).
The standard for review of an arbitrator=s award was developed by the
Supreme Court in 1960 as a product of the ASteelworkers Trilogy@ of cases. United
Steelworkers v. American Mfg. Co., 363 U.S. 564, 80 S. Ct. 1343, 4 L. Ed. 2d 1403;
United Steelworkers v. Warrior & Gulf Navigation Co., 363 U.S. 574, 80 S. Ct.
1347, 4 L. Ed. 2d 1409; United Steelworkers v. Enterprise Wheel & Car Corp., 363
U.S. 593, 80 S. Ct. 1358, 4 L. Ed. 2d 1424. The Supreme Court held that where the
parties provide for arbitration, the interpretation of a collective bargaining
agreement is a question for the arbitrator, and Acourts have no business weighing the
merits of the grievance, considering whether there is equity in a particular claim, or
determining whether there is particular language in the written contract which will
support the claim.@ American Mfg., 363 U.S. at 568. An arbitrator has the power
to decide facts and to interpret the contract governing those facts; even where an
arbitrator misreads a contract, the court should not reject the arbitrator=s award.
United Paperworkers Int=l Union v. Misco, 484 U.S. 29, 37-38, 108 S. Ct. 364, 98 L.
Ed. 2d 286 (1987). An arbitration is given "considerable leeway" by the court that
undertakes a review. First Options of Chicago v. Kaplan, 514 U.S. 938, 948, 115 S.
Ct. 1920, 131 L. Ed. 2d 985 (1995).
The Eleventh Circuit Court of Appeals has noted that "a federal district court
can vacate an arbitration award, but only in extremely narrow circumstances."
Gianelli Money Purchase Plan and Trust v. ADM Investor Servs., Inc., 146 F.3d
1309, 1311 (11th Cir. 1998).
One of those grounds is "evident partiality or
corruption in the arbitrators." 146 F.3d at 1311. This ground is not alleged by
Young, who is attacking the award.
The other statutory grounds for vacation are
(1) where the award was procured by corruption, fraud, or undue means, (2) where
the arbitrator was guilty of misconduct, or (3) where the arbitrator exceeded his or
her power. 9 U.S.C. § 10. Only if the arbitrator has failed to recite a rationale for
the award, and the reviewing court cannot find a rational basis for the award, may
the award be vacated on the non-statutory bases that (1) that the award is arbitrary
and capricious; (2) that enforcement of the award is contrary to public policy; and
(3) that the award was entered in manifest disregard of the law.
Prudential Ins. Co., 307 F.3d 1277, 1289 n.9.
It is the party seeking vacation of the
award that bears the burden of setting forth sufficient grounds to do so. Scott v.
Prudential Sec., Inc., 141 F.3d 1007, 1014 (11th Cir. 1998).
Young first asserts that the arbitrator was "guilty of misconduct" and acted "in
direct violation of the automatic stay under Section 362 of the Bankruptcy Code"
because he failed to postpone the hearing in light of Commonwealth's pending
bankruptcy. (Doc. 27, p. 4). However, it is clear that the arbitration proceedings
against Commonwealth, the debtor, were stayed, and the arbitration continued only
as to Young on the independent legal claims arising from his guaranty agreements.
As already explored above, the claim against the defendant arises from the guaranty
agreements he executed, which are in no way continent upon or limited by the
claims or proceedings involving Commonwealth. While it may have been within
the power of the Bankruptcy Judge to extend the stay to include Young (and this
court expresses no opinion about that), the bankruptcy court did not do so; failing
that, this court cannot say that the arbitrator committed any misconduct or violated
the automatic stay. 6
The court presumes that Commonwealth has filed motions in the bankruptcy court
seeking to have the stay extended to Young, and that the motions have been denied. There is no
support for the contention that this court is the proper forum for seeking the extension of the stay;
accordingly the motion to stay (doc. 36) is due to be and hereby is DENIED. The motion to
withdraw the first-filed motion to stay (doc. 35) is GRANTED. The first motion to stay (doc. 34)
is thus MOOT.
Young further asserts that the arbitrator was guilty of misconduct in that he
failed to hear evidence of Commonwealth's counterclaim for breach of duty, fraud,
and wrongful foreclosure.
(Doc. 27, p. 6-7).
This assertion seems, at best,
nonsensical, because the stay does apply to Commonwealth; the claims made by
Commonwealth could not be heard precisely because Commonwealth had filed for
As pointed out above, Young had no right to assert
Commonwealth’s counterclaims in the arbitration, nor were the claims against him
limited by or contingent upon the counterclaims.
Even assuming that
Commonwealth’s counterclaims have some impact upon Cadence Bank’s ability to
collect the debt from Commonwealth, they have no such limiting effect on Young’s
absolute and unconditional guaranty of payment.
The Guaranty Agreements
explicitly provided that they are “in no way conditioned upon or limited by any
attempt to collect from the Borrower” and that “the Bank will not be required first to
proceed against the Borrower or resort to the security, guaranty or collateral,
pledged or granted to it by any instrument or agreement” before enforcing the
guaranty given by Young. Even assuming Commonwealth’s counterclaims could
have established some invalidity in the Note and Mortgage, making them
unenforceable, the Guaranty Agreement remained enforceable against Young
notwithstanding “any invalidity or unenforceability of any such instrument or
agreement (including, without limitation, the Loan Documents).” In sum, the
arbitrator’s decision to proceed with the arbitration as to Young’s guaranty without
hearing Commonwealth’s counterclaims worked no prejudice to the defendant. 7
Finally, Young asserts that the arbitrator "completely disregarded" the law of
Alabama "as it pertains to how the foreclosure was conducted."
The defendant=s argument that the sale was Acommercially
unreasonable@ is conclusory and unsupported by any case law that presents a
factually similar scenario. In essence, Young argues that because the price offered
at the foreclosure sale was low, that fact precludes any finding that the foreclosure
sale was commercially reasonable. Again, Young’s liability to Cadence under the
Guaranty Agreements was not contingent upon or limited by any invalidity in the
remedy invoked against Commonwealth. As already noted, neither an invalidity in
the original loan instruments nor in the foreclosure remedy used by Cadence limits
Young’s guaranty of payment of the loan. He explicitly agreed in the Guaranty
Agreements that “Guarantor hereby agrees that the Bank may exercise its rights
hereunder and under any Loan Document concurrently or successively, in any order
Nevertheless, it is clear from the arbitration decision that the arbitrator examined
the claims that the property foreclosure was violative of Alabama law, and found that there was
Ano wrongful foreclosure by the Claimant.@ (Doc. 21-1, p. 5). The court expresses no opinion
as to whether this finding has any effect on Commonwealth’s bankruptcy proceedings. It is
binding as to Young.
selected by the Bank, and that it shall not be necessary for the Bank to exercise
any remedy under the Note, the Mortgage or any other Loan Document, or any
of them, in order to be entitled to exercise any remedy hereunder, and vice
Further, the Guaranty Agreements remained
enforceable regardless of “any limitation on the liabilities or obligations of the
Borrower… under any such instrument or agreement (including, without limitation,
the Loan Documents), or any termination, cancellation, frustration, invalidity or
unenforceability, in whole or in part, of any such instrument or agreement
(including, without limitation, the Loan Documents) or any limitation on the method
or terms of payment thereunder that may now or hereafter be caused or imposed in
any manner whatsoever.” 8 Regardless of whether the mortgage foreclosure is
deficient as to Commonwealth, any such deficiency does not prevent Cadence from
calling upon Young for payment under his guaranties.
The arbitrator clearly considered the low price brought at the sale, and
found that the amount was not Aso inadequate as to raise a presumption of fraud, unfairness, or
culpable mismanagement.@ (Doc. 21-1, p. 5). The court expresses no opinion as to whether this
finding by the arbitrator has any effect on Commonwealth’s bankruptcy proceedings. It is
binding as to Young.
For all of these reasons, the court GRANTS the motion to confirm the
arbitration award (doc. 22) and, by separate document, will enter final judgment
against the defendant, John L. Young, in the amount awarded in the arbitration plus
daily interest thereafter. The court hereby DENIES the motion to vacate the
arbitration award (doc. 27). The motion for an order (doc. 38) also is GRANTED.
Done this the 7TH day of December, 2015.
T. MICHAEL PUTNAM
UNITED STATES MAGISTRATE JUDGE
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