ALI-ABA Course of Study Commercial Real Estate Defaults ...

86
Determine whether the jury trial waiver of a loan agreement may extend to
enforcement of other loan documents. 85 The 4th Circuit in Leasing
Service Corp. v. Crane, 86 placed the burden on the party seeking to enforce
waiver to establish that the waiver was knowing and voluntary, while in
K.M.C. Co. v. Irving Trust Co., 87 the burden is on the party opposing
enforcement of the jury trial waiver.
3.16 Casualty and Liability Insurance Policies, Certificates, Mortgagee
Endorsements.
If property is or may become vacant, check vacancy provisions of policies - does
coverage continue notwithstanding vacancy; is any notice required Are there any
Change of Risk clauses.
3.17 Prior Workout, Interim Forbearance and Collateral Enhancement
Arrangement Documents.
These documents may consist not only of those used to fully document prior
restructuring with the current lender of this or other loans with the same borrower
or an affiliate of such borrower, but may also consist, for instance, of
communications from a loan officer or of documents confirming interim
forbearance arrangements or even memorandum in the lender's files of phone
conversations and loan officer or asset manager originated interoffice memoranda.
The more formal documents will often contain wavers by the borrower of claims
based on prior acts or omissions of the lender and that workout negotiations do
not constitute a waiver of any of the lender's rights under the loan documents. 88
Economic duress may be an effective defense available to the borrower to resist
enforcement of a waiver in workout documents. 89 Failure of the lender to make a
85 In Hulsey v. West and Federal Deposit Ins. Corp. 966 F.2d 579 (10th Cir. Okla. 1992) the court, on the basis of the
language of the waiver provision, would not extend a waiver in a corporation's loan agreement that was signed by the
corporation's president to such individual's personal guarantee. The Georgia Supreme Court in Bank South, N.A. v.
Howard, 264 Ga. 339, 444 S.E. 2d 799, 42 A.L.R. 5th 763 (Ga. 1994) refused to enforce a jury waiver in a guarantee
holding that a pre-litigation waiver of jury trial cannot as a matter of law be sufficiently knowing and voluntary since the
guarantor cannot prior to the institution of litigation be aware of the basis and circumstances of any future claim on the
guarantee.
86 804 F.2d 828, 833 (4th Cir. N.C. 1986)
87 757 F.2d 752, 758 (6th Cir. Tenn. 1985)
88 In Travelers Ins. Co. v. Corporex Properties, Inc., 798 F.Supp. 423 (E.D. Ky 1992) the district court granted
summary judgment on the basis of a nonwaiver provision of a pre-workout letter against a borrower's claim that the
lender was obligated to continue with workout discussions.
89 See Freedlander, Inc Mortg. People. v. NCNB Nat'l Bank of N.C., 706 F.Supp 1211 (E.D. Va. 1988), aff'd. 921 F.2d
272 (4th Cir. Va. 1990).
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