In Re: Charles Alcock Betty Alcock, Debtors. Charles Alcock Betty Alcock v. Small Business Administration

Charles and Betty Alcock appeal an order of the Bankruptcy Appellate Panel (“BAP”) in a Chapter 11 proceeding allowing the Small Business Administration’s (“SBA”) claim for the deficiency on a loan upon which Charles Alcock signed as a guarantor. The bankruptcy judge rejected Alcock’s arguments that he should be discharged from his guaranty obligation because the SBA and its participating lender, Crocker Bank (“Crock-er”), unjustifiably impaired the collateral, disposed of the collateral in a commercially unreasonable manner, and failed to give him notice of the disposition. The BAP affirmed the order of the bankruptcy judge in an unpublished memorandum opinion. We now reverse.

BACKGROUND

On September 27, 1983, Top Pac Growers and Shippers (“Top Pac”), a tomato packing and shipping company, borrowed $600,000 from Crocker secured by a note guaranteed by the SBA for seventy-five percent of the amount due (“SBA Note”). On the same day, Crocker extended Top Pac an additional $500,000 line of credit (“Crocker Line”). The SBA was secured by a first deed of trust to the real property at one of Top Pac’s plant locations. Crocker was secured by a deed of trust on the real property,…