Regions Bank v. Thomas

Thomas D. Thomas (defendant) owned LGT Aviation, Inc., which borrowed money from the predecessor in interest of Regions Bank (the bank) (plaintiff) for the purchase of an airplane. LGT executed several loan documents in connection with the purchase that required LGT to keep insurance on the airplane, which was used as collateral. Thomas and others (defendants) personally guaranteed the loan. Under the agreement, a failure to fully insure the airplane was a default event. In 2006 LGT permitted the insurance to lapse. Thomas planned to secure a new policy but did not, and he stopped responding to the bank’s communications and demands for proof of insurance. Thomas did not respond when the bank communicated to notify him that (1) LGT was in default, (2) the loan was being accelerated, (3) litigation had commenced, (4) the bank had placed insurance on the aircraft at Thomas’s expense, or (5) the plane may be repossessed. The bank repossessed the plane in February 2008 and moved for default judgment in 2009. Thomas filed no pleadings and did not appear. Nevertheless, the trial court declined to grant default judgment, and Thomas filed an answer and a counterclaim. Thomas argued that the bank had unlawfully repossessed the aircraft given that LGT made all payments on time, and that the bank’s placement of insurance on the aircraft with premiums billed to LGT had cured any breach. The trial court ruled in the bank’s favor. Thomas appealed, arguing that the trial court erred in finding LGT had materially breached the agreement and that the bank failed to act in good faith in repossessing the aircraft, for which monthly payments were current and the insurance matter had been resolved as permitted under the agreement.