A commercial debtor’s lawsuit against its bank was defeated by the debt workout agreement in effect when the bank took action against the debtor’s collateral after non-payment. The debtor also failed to state a claim for any fraud.
The agreement provides for “‘Friendly Foreclosure’ of Real Property Collateral Upon Expiration of Property-Specific Deadlines or Forbearance Default, obligating the debtor to cooperate with “any foreclosure action … against any of the parcels of real property” subject to the debt. This provision doesn’t state that the bank “shall” accept and record a deed in lieu of foreclosure. Nor does it expressly state or reasonably imply that the debtor, by merely offering such a deed, can extinguish the bank’s pre-existing right of foreclosure and thereby eliminate the legal protection that foreclosure gives the bank as a potentially under-secured, priority creditor.