In 2015, several of Michael Lockwood’s companies took on $90 million in revolving lines of credit from Wells Fargo and Trustmark National Bank. Lockwood Int’l. Inc. v. Wells Fargo, Nat’l Ass’n, 2021 WL 3624748 (5th Cir. Aug. 16, 2021). Within a year, some of the obligations had already been breached. As a result, the parties modified the loan obligations and reduced the debt to $72 million and required Lockwood to execute a personal guaranty of the debt. Lockwood was also required to hire a chief restructuring officer to turn the companies around. The companies’ situations did not improve, and the lenders required Lockwood to give the CRO full authority over the companies and to acknowledge that he owed the amended debt of $72 million, the debts were legal, valid and binding, and that he had no valid defense to the obligations. Faced with acceleration again, the parties signed a second forbearance agreement “recognizing their continued defaults” and Lockwood again acknowledged that he owed the debt and waived all defenses. The borrower’s default continued, and litigation ensued. Lockwood International sued Wells Fargo and Trustmark for $1.5 billion in damages “for negligence, fraud, conversion, and a host of other business torts.” The lenders countersued for breach of guaranty and breach of contract. The lenders eventually moved for summary judgement on their breach of guaranty claims. The court granted the summary judgement and ordered Lockwood to pay $58,710,456.26, plus interest, attorneys’ fees, and costs.
Lockwood sought to void the first guaranty of the debt, but the Court held that a voidable guaranty cannot be avoided once ratified. Lockwood also raised a defense of duress stating that “economic duress compelled him to enter into all three agreements.” The court ruled, however, that “…difficult circumstances do not alone give rise to duress,” and Lockwood’s duress defense failed to prove “that the lenders threatened to take any unauthorized action.” As Lockwood’s attempts to invalidate the three agreements failed through fraudulent inducement and duress failed, the judgment against him was affirmed.
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