U.S. Rep. Tom Graves' attorney: Bank was at fault

U.S. Rep. Tom Graves' attorney: Bank was at fault

July 21st, 2011 by Andy Johns in News

U.S. Rep. Tom Graves.

U.S. Rep. Tom Graves' attorney says the disputed loan agreement between his client and a Northwest Georgia bank is not valid because the bank should have known the Georgia congressman couldn't repay the money and it cut the lawmaker some slack when his company couldn't make payments.

In court documents, attorney Simon Bloom contends Bartow County Bank never should have issued Graves and his business partner a loan, citing statements in a deposition in which a bank official admitted knowing the partners did not have the money to guarantee the loan.

Graves and state Senate Majority Leader Chip Rogers, R-Woodstock, took out a loan to go into the hotel business, running the Oglethorpe Inn off Interstate 75 in Calhoun. They were sued by the bank in January 2010, with the suit alleging that Graves' and Rogers' motel and hospitality company defaulted on a loan for $2.25 million.

The two filed a counterclaim in March 2010 stating that the bank had allowed Tich Hospitality to refinance the loan in November 2009, but then went back on its word. Documents indicate Tich Hospitality missed payments from June 4, 2009, until the bank formally declared default that December.

In the recent legal filings, Bartow County Bank's attorney said the default claim was based on Graves and Rogers selling the company without telling the lender. A hearing for summary judgment has been set for Aug. 11, but similar hearings in the past have been canceled.

Graves and bank attorney Edward Hine both declined to comment on the story Friday, in keeping with their practice of not doing so throughout the proceedings.

Bloom did not return messages, but in the court documents he says the bank is "simply wasting the court's time and resources in attempting to enforce personal guaranties against individuals it clearly knows to be unable to perform under those guaranties."

He argues that, based on legal precedents, if the loan is based on personal guarantees banks must ensure the borrowers are capable of repaying the money before agreeing on a loan. He argues the agreement never was valid to begin with because the bank knew that Rogers and Graves, a champion of fiscal responsibility in Washington, could not back up their personal guarantees. Bloom quotes the deposition from bank Vice President Alan Black in which Black acknowledges "I knew that they didn't have $2.2 million, no."

Bloom also contends that the bank's decision to let Graves and Rogers go a few weeks without paying on the loan constitutes a change of the terms and invalidates the agreement. After they missed their first payment, bank officials were lenient in letting them pay later. It was only after about five months of missed payments that the bank declared the account in default.

"If a party to a contract knows that the other party defaulted but does nothing to enforce the default, then the party's failure to enforce the default may waive the default," Bloom wrote.

Attorneys with Bartow County Bank assert Graves and Rogers defaulted on the loan when they sold Tich on Nov. 23, 2009, without notifying the bank. The loan documents required the borrowers to get written consent from the bank before selling the company, which gave the bank reason to declare a default, according to the filings.

In his deposition, Black said he and Graves spoke about the loan on Nov. 30 and Graves failed to mention that he and his partner had sold their interest in the company.

But in Black's deposition, he also said he talked to the bank president between Nov. 23 and Dec. 4 and was told the bank would not do the refinancing without more collateral from Graves and Rogers. Black says he and Graves spoke on Nov. 30 and Graves said neither he nor Rogers would be putting up any more collateral.