Collecting from Guarantors
To Sue and continue to Trial or to Settle - That is the $100.00 Question
I. Introduction
My topic is dear to the hearts of all credit officers, especially those in the special loans groups of our major financial institutions. I do not have a magical answer but hopefully my practical suggestions gained through my experience in numerous guarantee actions will be of assistance.
II. Move Quickly
It is imperative that once the decision is made to demand on a guarantee certain matters be addressed expeditiously. From my experience it is unusual for the credit officer making the decision to commence enforcement proceedings on the guarantee to have any personal knowledge of the circumstances under which the guarantee was given. Any knowledge of those circumstances, if it exists at all, can only be found from a review of the financial institution’s credit file. In many instances the individuals having personal knowledge of the circumstances under which the guarantee was given are no longer employed by the financial institution. Thus, it is imperative that the credit file be reviewed in depth either by the credit officer or the legal counsel retained to handle the collection from the guarantor(s).
I know many of you believe such a review would be a wasted effort and an unnecessary expenditure of money on legal fees. However, I can assure you that such a review will in the long run lessen the burden of the financial institution’s legal retainer. It is far better to know the weaknesses of one’s legal position prior to engaging in legal combat than to be ambushed with an unanticipated legal position advanced by defence counsel. In the absence of success in securing a summary judgment, a financial institution’s entire file will be made available to defence counsel through the discovery process and as such if there are time bombs in that file, it is better to know about it prior to making the decision to proceed with an action. From my experience, no criticism intended, there is always ammunition for the defence contained within a bank’s file as credit officers, when putting pen to paper, tend to be overly optimistic and use the English language somewhat loosely. The monthly or quarterly credit reports going up the chain of command are, from my experience, usually a gold mine for defence counsel. It is thus imperative that a financial institution’s file be completely reviewed prior to the commencement of an action.
