In re Adana Mortgage Bankers, Inc.

Adana Mortgage Bankers, Incorporated (Adana) (debtor) was a mortgage bank that purchased mortgage loans and formed them into pools. Adana contracted with the Government National Mortgage Association (GNMA), whereby Adana issued mortgage-backed securities and the securities were guaranteed by GNMA. As part of this arrangement, Adana and GNMA entered into guaranty agreements for each transaction. The guaranty agreements set forth Adana’s responsibilities as the issuer of the securities and GNMA’s responsibilities as the guarantor of the securities. The guaranty agreements contained a default provision that required Adana to provide GNMA with advance notice of a bankruptcy filing or GNMA would have the option to declare Adana in default. In February 1981, Adana filed for Chapter 11 bankruptcy without first notifying GNMA. In March, GNMA sent written demands to the line banks to turn over all of Adana’s funds. GNMA did not provide notice to Adana or the bankruptcy court regarding its demands to the line banks. The line banks refused GNMA’s demands without an order from the bankruptcy court. Adana filed a motion for contempt against GNMA, alleging that GNMA’s actions violated the stay imposed by the bankruptcy court. GNMA argued that Adana’s petition for relief in the bankruptcy action was void because Adana did not provide GNMA with advance notice of its intent to file for bankruptcy as required by the guaranty agreement.