The debtors’ president signed a guaranty on a loan made to the debtors. He filed a proof of claim based on subrogation rights for the amount he paid on the guaranty. Available funds were insufficient to pay in full his claim and the lien claims of other creditors. In overruling the objections of the lien creditors, the court ruled that the claim for equitable subrogation was valid and had not been waived or subordinated by language in the guaranty or in a composition agreement. It also had priority over the claims of holders of second liens, and the court approved as fair, reasonable, and adequate a settlement agreement among the debtors, the guarantor, and the creditors’ committee calling for payment of the subrogation claim in full with a waiver of the guarantor’s $1 million unsecured claim.
Tuesday, October 15, 2013