Asian Journal- The Filipino-American Community Newspaper

FAMOUS singer and permanent Las Vegas entertainer and icon, Wayne Newton has major debt problems. Las Vegas Motor Speedway owner Bruton Smith who also owns several NASCAR racetracks across the country sued Newton in Nevada recently alleging that Newton approached Smith to have Smith execute a personal guaranty in favor of Bank of America to entice the bank to refinance a $3.35 million loan. In exchange for Smith’s guaranty, Smith alleges that Newton promised that he would sell personal and company assets to pay off the loan before allowing the bank to pursue Smith for repayment of the loan. Relying on Newton’s promise, Smith guaranteed the loan of $3.75 million in 2006 but was modified in 2007 to $3.35 million. Smith further alleges that the plan was to secure the loan with Newton’s Las Vegas residence called CASA DE SHENANDOAH RANCH and surrounding land, plus a private jet valued at $2 million. Apparently, the loan came due requiring full payment on May 30, 2009 but Newton failed to pay back all that was due. Thus, the loan has been delinquent since then. Because Newton has not repaid the loan, the bank will now enforce Smith’s personal guaranty and collect the entire amount of the loan from him.

Given this set of circumstances, can Smith foreclose on the residence of Newton? The ultimate answer is YES. If Smith is eventually out $3.35 million because he had to pay the bank that amount pursuant to the personal guaranty that he issued in favor of the bank, Newton would owe Smith at least $3.35 million. But Newton may end up owing Smith a lot more than $3.35 million. The reason is that Smith relied on a promise made by Newton to him that Newton would sell his personal assets before allowing the bank to pursue Smith for repayment of the loan. If the evidence shows that Newton never intended to sell his personal assets to repay the loan when he made that promise to Smith, Smith would have proven that Newton defrauded him into issuing his personal guaranty to the bank without any intention of selling his personal assets to pay off the loan. Fraud is a tort that carries punitive damages to punish Newton for what he did to Smith. The purpose of punitive damages is to deter Newton from doing the same thing in the future. The court may find that several hundred thousand dollars of punitive may not be enough to deter someone who makes several million dollars a year as Newton. Thus, Newton may face a hefty amount of punitive damages. I would not be surprised if the court slapped him with a $1.0 million punitive damage judgment, in addition to $3.35 million.

Smaller creditors have been hounding Newton for payment. An airport in Michigan says that Newton owes $60,000 in unpaid rent and maintenance for a private plane that he hasn’t used for a long time. One claims that Newton owes unpaid car payments on a Cadillac. Newton owing several thousand dollars for repairs done on his house is another claim. The existence of these creditors claims, whether true or not, or disputed, is evidence that Newton’s finances are in shambles despite his high income. Rumor has it that Newton will not face his debt problems and requires all his staff to not say anything to him about bill collectors.

The problem that Newton may not want to face is that Smith can actually foreclose on his residence once he obtains a judgment. A judgment creditor can easily put a judgment lien on his residence and eventually force the foreclosure sale of Newton’s residence to satisfy the judgment. Normally, judgment creditors do not take such a drastic action. But they have the legal right to do so. Smith will certainly want to foreclose on Newton’s house so he can get back his $3.35 million if he actually pays Bank of America that amount.

Face your debt problems now with Chapter 7 or 13.

***

Lawrence Bautista Yang specializes in bankruptcy, business, real estate and civil litigation and has successfully represented more than five thousand clients in California. Please call Angie, Barbara or Jess at (626) 284-1142 for an appointment at 1000 S. Fremont Ave., Bldg. A-1 Suite 1125 Unit 58, Alhambra, CA 91803.