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UNITED STATES DISTRICT COURT DISTRICT OF MAINE TD BANK, N.A., PLAINTIFF v. PHILIP SEWALL, ET AL., DEFENDANTS ) ) ) ) ) ) ) ) )

CIVIL NO. 09-307-P-H

DECISION AND ORDER ON DEFENDANTS' MOTION TO TRANSFER TO THE UNITED STATES BANKRUPTCY COURT This case presents the question whether a creditor's lawsuit against a debtor's guarantors is "related to" the debtor's bankruptcy and should therefore be transferred to the bankruptcy court. I conclude that here the creditor's lawsuit against the individual guarantors is "related to" the debtor's bankruptcy because, if successful, the lawsuit could reduce or eliminate the creditor's existing claim in the bankruptcy case and thus increase the amount of money available to other creditors participating in the bankruptcy. Thus, the lawsuit could affect the debtor's plan confirmation. The defendant guarantors' motion to transfer the case to the bankruptcy court is therefore GRANTED. FACTS From 1998 to 2008, the plaintiff TD Bank, which has its principal place of business in Delaware, made five loans to M.W. Sewall & Co. ("the company" or

"the debtor").1 This family business located in Bath, Maine, operates convenience stores, gas stations, carwashes, and service centers; sells and delivers heating oil and propane; and sells and services heating equipment.2 The TD Bank loans totaled $12 million.3 The defendants Mark Sewall and Philip Sewall are

shareholders and officers or directors of the company.4 In September 2007, in connection with a loan for $2.5 million, they signed guaranty agreements with TD Bank, individually promising "full and prompt payment and performance of all" the company's liabilities.5 As collateral for their guarantees, the Sewalls pledged their shares of company stock to TD Bank.6 The guaranty agreements include a provision by which the Sewalls, the guarantors, waived indemnification by the company, at least temporarily. It states, in relevant part:
The undersigned hereby expressly waives . . . any right to indemnity, contribution, exoneration or reimbursement of any kind by any other party directly or indirectly liable for any of the Liabilities, whether maker, endorser, guarantor or otherwise on account of any payment made hereunder, and any right of subrogation to the rights, remedies or security of the holder hereof on account of any payment made hereunder, such waiver applicable only until all of the Liabilities have been paid in full . . .7

Compl.

Download DBH_11202009_2-09cv307_TD_BANK_V_SEWALL.pdf

Maine Law