Whitney National Bank v. Air Ambulance by B & C Flight Management, Inc.

Air Ambulance (defendant) borrowed millions of dollars from Whitney National Bank (Whitney Bank) (plaintiff). Roy Horridge (defendant) personally guaranteed the loans. Additionally, as security, Air Ambulance pledged multiple aircraft owned by B & C Flight Management, Incorporated (B & C) (defendant). The Federal Aviation Administration (FAA) required all aircraft to meet certain standards supported by accurate records to maintain airworthiness certificates. Unbeknownst to Whitney Bank, the FAA had begun investigating the collateral for poor maintenance and documentation. Nevertheless, upon Horridge’s request, Whitney Bank loaned Air Ambulance another $1 million and refinanced the existing loans. The security agreements for the loans required B & C to maintain the airworthiness certifications for the collateral. Thereafter, the FAA suspended the airworthiness certificates for many of the aircraft for deceptive and false record keeping. Accordingly, Whitney Bank notified Air Ambulance that Air Ambulance had defaulted on the loans, and Whitney Bank accelerated the debt owed. Thereafter, Whitney Bank sued Air Ambulance, B & C, and Horridge seeking a temporary restraining order to prevent Horridge from disposing of the collateral, which the court granted. B & C subsequently reached a settlement agreement with the FAA without Whitney Bank as a party. Per the agreement, the certifications were to remain suspended until B & C revised the records for the FAA’s reconsideration. The agreement also acknowledged Whitney Bank’s lawsuit and stated that B & C was attempting to sell the aircraft to a buyer that would cooperate with the FAA to regain the certifications. Notwithstanding, Whitney Bank obtained relief from the bankruptcy stay and sold the collateral in a private sale. After the sale, Whitney Bank was still owed almost $5 million. Consequently, Horridge argued that the sale had not been commercially reasonable, because Whitney Bank did not regain the airworthiness certificates for the aircraft before the sale.