SALT LAKE CITY – A bill introduced in the state legislature would have lawmakers intervene in a legal dispute between America First CU and local developers over tens of millions of dollars of defaulted loans.
The bill would overturn a ruling by the state Supreme Court by setting new rules on how lenders can collect on defaulted debt.
The dispute centers on $36.4 million that Anderson Development, one of the state’s leading developers, borrowed from America First in 2007 to buy 320 acres adjacent to the former Geneva Steel Mill in Vineyard in Utah County. As part of the deal, the two principals in Anderson Development – Gerald Anderson and Michael Hutchings – personally guaranteed payment, acting as co-signers for the loan.
When Anderson Development defaulted, America First filed a notice of default, but instead of going through foreclosure and liquidating the land, the credit union sought to collect on the $19 million loan balance from the guarantors – Anderson and Hutchings. The two parties have been engaged in a lawsuit over the claims since 2009.
The state Supreme Court ruled in 2004 that credit unions and banks are allowed to try to collect from guarantors while simultaneously foreclosing on the property.
But a bill introduced in the Utah state Senate earlier this month would unwind that decision and require that creditors – only credit unions are specifically named in the bill – take the underlying property, whether it is land, a home or a car, then pursue the guarantors for the difference between the value and the amount owed.
