PAB BANSHARES, INC. Successor in       )

Interest to First Community Bank of            )

Southwest Georgia,                                        )


Plaintiff                                   )


v.                                                                     )                       Case No. 2003CV70543


DANNY DAY,                                                )


Defendant                               )






Procedural History


On May 30, 2003 Plaintiff filed a suit against Defendant with no notice that such suit was being anticipated and despite the fact that there were both disputes and clear legal irregularities in the matter.  In a prior conversation with Plaintiff attorney, Bill Holland on August 11, 2002, (This was an error, August 1, 2002 is correct- Court Notified by fax 8/2/2003) Defendant was told that Bank and Counsel were recommending to the USDA, the Federal guarantor to the loan, that they not proceed with a claim against Defendant. 


On June 3, 2003 Plaintiff had papers served to 4523 Runnemede Rd, Atlanta, Georgia.  Defendant was out of town when he received word that papers had been served.


Beginning on June 9, 2003 Defendant began contacting several law firms. The response from those firms were in sharp contrast to the Plaintiff’s counsel offered the court that the case is a simple and straightforward claim.  The fact, as disclosed on July 25 to the Defendant by Plaintiffs counsel that the Bank is suing the USDA for non-payment of their guarantee portion tells volumes about the complexity of the case.  As this complexity has increased so has the number of hours which will be required to prepare for trial, along with projected attorney fees, the Defendant is without the financial means to retain legal representation before the Court.  The Defendant appreciates the opportunity to relate details of the pro se to the Court and seeks to assure that every effort will be made to meet requirements and procedures as required by the Court.


On June 12, Defendant contacted the Court and requested the procedure to get approval from the Court for an extension to file an answer as extensive business travel was scheduled for June. Defendant explained the situation was told to contact Court Counsel, Alycia Anderson when she returned from vacation.


On June 19, Defendant caused a request for an extension to be sent to the Court by certified mail requesting a 30 day extension until August 3rd.


On June 27 Defendant spoke with the Court’s office and found that the paperwork had been received but was deficient as no motion for the order had been included.  In clarifying the date required to answer, Defendant was told the date received by the Court was June 13 and that should be the date to be used to calculate answer filing requirements.  


On July 2nd Defendant contacted the Justice Center and requested that they contact the Plaintiff to arrange a face-to-face meeting as soon as possible to discuss arbitration.  Contact information was sent to the email address that was given.


On July 3rd, at the request of a potential legal counsel, Defendant called the Office of Inspector General for the USDA and spoke with Charles Reese.  Defendant asked if Reese could fax paperwork needed by the counsel and he said that he would search for the paperwork and if he could find it he would send it out.  This paperwork was never faxed or sent to the Defendant. Reese also indicated that their office did not wish to release the physical documents, however the Defendant could come and copy the requested files.


On July 3rd, while on travel, Defendant prepared a revised request including a motion for the order and mailed by it overnight mail with notice to the Plaintiff.


On July 7th, while still on travel, Defendant contacted Jeremy Cole at the Justice Center, who said that the email Defendant was given was incorrect and had Defendant send it again.


On July 9th, while still on travel, Defendant was told by the Justice Center that the Plaintiff Counsel saw no need to meet to discuss arbitration and told the Justice Center to have the Defendant call her.  Defendant called but was unable to reach Plaintiff’s counsel and left a voice mail offering to have a acquaintance, Bill O'keefe, familiar with USDA programs and Georgia’s USDA Director, speak to counsel while Defendant was out of town and see if he could help resolve what was appearing to be a complex case.


On July 10th, O’Keeffe, spoke with the Bank’s Counsel, Candice Smith, at length and asked for a meeting to help resolve the situation.  He reported that she asked to see a power of attorney but that no meeting was scheduled.  No mention was given of the extension request.


On or about July 17th, while still on travel, Defendant contacted court’s counsel, Alycia Anderson, who said that a hearing could be conducted for the extension request but offered that typically the extension request was negotiated with opposing counsel.  The Defendant was unaware that thus was the normal procedure and relayed that he would call personally Smith since a face to face meeting was not possible until the last week in July.


On or about July 17th, while still on travel,  Defendant contacted Smith and requested that an extension until August 13th, which would allow Defendant to get back and copy selected files from the USDA and prepare an answer. Smith said she would check with the Bank. Smith never contacted the Defendant with an answer to this request. Defendant also told Smith that her firm was conflicted in the case should withdraw since the Defendant had financial activities with members of the firm including, Martin Elgison and Charles Waters in two firms founded by Defendant and that the two individuals had access to confidential company information.. This and other activities by a senior partner had compromised their law firm’s position.


On July 21th, while still on travel,  Defendant sent a request to Michael Ricketson, President of the Bank, to request a meeting and determine any course of action that would be equitable.  No response came from that request.


On July 25th, while still on travel, Defendant contacted Alycia Anderson and asked for a time that the Court could approve to file an answer given the circumstances of the case and was told that the Court had approved an extension until August 1, 2003.  


On July 25th, Defendant called the Bank but was unable to reach the Plaintiff’s CEO, Mike Ricketson and left a message that the filing would take place on August 1st.  Furthermore, that the Answer would include a request to disqualify the Bank’s counsel since it appeared that involvement by attorneys at the firm had compromised the firm.


On July 25th, Defendant called Smith and notified her of the Court’s decision.  Smith told the Defendant that she had gotten a copy of the letter he sent to Ricketson and that she did not understand the Defendants attempts to settle since the USDA had refused to honor and pay the government’s guaranteed portion of the loan and the Bank and already filed suit against the USDA.  This was the first time that the Defendant had been told that the USDA had refused to honor its guarantee and that the Bank was in litigation with the USDA.


Answer to Complaint



  1. Defendant is without sufficient information regarding statements in paragraph 1, and leaves Plaintiff to his proof.
  2. Defendant is without sufficient information regarding statements in paragraph 2, and leaves Plaintiff to his proof.
  3. Denies:  The Defendant was never the president of Scientific Ag Industries, LLC
  4. Defendant is without sufficient information regarding statements in paragraph 4, and leaves Plaintiff to his proof.
  5. Defendant is without sufficient information regarding statements in paragraph 5, and leaves Plaintiff to his proof.
  6. Admits his residence was at the time of the complaint 4523 Runnemede Rd, Atlanta, Georgia but does not acknowledge proper service and leave Plaintiff to his proof.
  7. Defendant is without sufficient information regarding statements in paragraph 7, and leaves Plaintiff to his proof.
  8. Admits that Bank agreed to lend $5 million to Scientific Ag Industries, LLC based on conditions as negotiated between SAI, the Bank and the USDA.
  9. Defendant is without sufficient information regarding statements in paragraph 9, and leaves Plaintiff to his proof.
  10.  Defendant is without sufficient information regarding statements in paragraph 10, and leaves Plaintiff to his proof.
  11. Defendant is without sufficient information regarding statements in paragraph 11, and leaves Plaintiff to his proof.
  12. Defendant is without sufficient information regarding statements in paragraph 12, and leaves Plaintiff to his proof.
  13. Defendant is without sufficient information regarding statements in paragraph 13, and leaves Plaintiff to his proof.
  14. Defendant is without sufficient information regarding statements in paragraph 14, and leaves Plaintiff to his proof.
  15. Defendant is without sufficient information regarding statements in paragraph 15, and leaves Plaintiff to his proof.
  16. Defendant is without sufficient information regarding statements in paragraph 16, and leaves Plaintiff to his proof.
  17. Defendant is without sufficient information regarding statements in paragraph 17, and leaves Plaintiff to his proof.
  18. Defendant is without sufficient information regarding statements in paragraph 18, and leaves Plaintiff to his proof.
  19. Defendant is without sufficient information regarding statements in paragraph 19, and leaves Plaintiff to his proof.
  20. Defendant is without sufficient information regarding statements in paragraph 20, and leaves Plaintiff to his proof.
  21. Defendant is without sufficient information regarding statements in paragraph 21, and leaves Plaintiff to his proof.
  22. Defendant is without sufficient information regarding statements in paragraph 22, and leaves Plaintiff to his proof.
  23. Defendant is without sufficient information regarding statements in paragraph 23, and leaves Plaintiff to his proof.
  24. Defendant is without sufficient information regarding statements in paragraph 24, and leaves Plaintiff to his proof.Defendant is without sufficient information and leaves Plaintiff to his proof.
  25. Defendant is without sufficient information regarding statements in paragraph 25, and leaves Plaintiff to his proof.
  26. Defendant is without sufficient information regarding statements in paragraph 26, and leaves Plaintiff to his proof.
  27. Defendant is without sufficient information regarding statements in paragraph 27, and leaves Plaintiff to his proof.
  28. Defendant is without sufficient information regarding statements in paragraph 28, and leaves Plaintiff to his proof.
  29. Defendant is without sufficient information regarding statements in paragraph 29, and leaves Plaintiff to his proof.
  30. Denies. The Bank was deficient in its sale of secured assets, did not notify Defendant of the sale, did not secure assets for proper valuation/appraisal and did not pursue prudent nor commercially reasonable methods for recovery.
  31. Denies. Defendant is not liable to the Bank and is unable to confirm what “ant” Sci-Ag made a demand on as referenced in paragraph 31.
  32. Denies. Defendant is not liable to the Bank.


Count One

Answering Breach of Contract Claim


  1. Defendant is without sufficient information regarding statements in paragraph 33, and leaves Plaintiff to his proof and denies allegation or any liability imputed in this paragraph and leaves his answers as detailed in the Answers 1-32.
  2. Defendant is without sufficient information regarding statements in paragraph 34, and leaves Plaintiff to his proof but denies any assertion that there are funds owed by the Defendant to the Bank.
  3. Defendant denies this claim in paragraph 35 in its entirety.
  4. Defendant denies this claim in paragraph 36 in its entirety.

 Count Two

Answering Claim for Attorneys’ fees

  1. Defendant is without sufficient information regarding statements in paragraph 33, and leaves Plaintiff to his proof and denies allegation or any liability imputed in this paragraph and leaves his answers as detailed in the Answers 1-32.
  2. Defendant denies that Plaintiff claim that it is entitled to reasonable attorney fees.
  3. Defendant denies the Plaintiff claim that Defendant pay attorney fees as detailed in paragraph 39.
  4. Defendant denies the assertion and claim in paragraph 40 that the Bank is entitled to any and all awards for its attorney fees.


1-4 Bank Demands: Defendant denies that Bank is entitled to any judgment or award from the Court related to all the Banks claims.


Affirmative Defenses


  1. Defendant affirmatively alleges that plaintiff’s Complaint fails to state claims upon which relief can be granted.


  1. Plaintiff has no standing to assert claims against the Defendant.


  1. Defendant affirmatively alleges that he has acted in good faith at all times material hereto.


  1. Defendant affirmatively alleges that plaintiff’s claim is barred, or the amount of recoverable damages should be reduced by plaintiff’s own comparative fault.


  1. Defendant affirmatively alleges that plaintiff’s claim may be barred by doctrines of waiver, estoppel, latches and plaintiff’s unclean hands.


  1. Defendant affirmatively alleges that the plaintiff did not satisfy the conditions precedents pursuant to the documents executed by the parties and as such the Defendant is not liable for the amount claimed by the Plaintiff in the complaint.


  1. Defendant affirmatively alleges that the Plaintiff did not conduct a commercially reasonable sale of the collateral for the loan and as such the Defendant is not obligated for the alleged deficiency.


  1. Defendant affirmatively reserves the right to assert affirmative defenses as they become known in discovery.


Counter Claims


  1. Upon information and  belief, Plaintiff engaged in predatory lending practices and conspired to deprive SAI and Defendant of the collateral of the loan without adequate compensation.


  1. Upon information and  belief, Plaintiff willfully disclosed confidential information and trade secrets to third parties. As a result Defendant has suffered damages pursuant to the Georgia Trade Secrets Act of 1990 (O.C.G.A. sec.10-1-760 through 10-1-767).


  1. Plaintiff acted in bad faith in the sale in their attempt to pursue the Federal guarantee and acted with negligence in the sale while knowing that certain unspecified equipment was missing.


  1.  Plaintiff acted in bad faith in the sale in their attempt to pursue the Federal guarantee by not protecting assets which were secured by another lender of which Defendant was also a guarantor. The destruction of a forklift secured by the SWGRDC and damage of assets of that loan effect the ability to recover the economic value.



WHEREFORE, having fully answered plaintiff’s Complaint, the Defendant request the following:


  1. That plaintiff’s Complaint be dismissed , with prejudice, and that plaintiff take nothing thereby;


  1. That plaintiff counsel be disqualified;


  1. A judgment for attorney fees’ as allowed under O.C.G.A 9-15-1 which such expenses occurred in representing the Defendant or where such attorneys were hired to provide counsel for the Defendant filing pro se.


  1. That judgment for loses incurred by the Defendant be accessed against the Plaintiff.


  1. For Defendants’ costs and attorneys’ fees occurred herein, together with interest thereon the highest rate interest provided by law from the date of entry of judgment until paid, and


  1. For such other and further relief as the Court deems just and proper.



Background Briefing and Authorities



  1. Defendant would move to the have the Plaintiffs law firm disqualified, because  two of the attorneys from the firm had written checks to invest in SAI and had access to confidential information concerning the company.


Marty Elgison, a highly respected senior partner of Alston bird contacted Defendant within an hour of signing an equity purchase agreement and writing a check for SAI equity to say that another senior partner at the firm had received a call from a knowledgeable party providing details of the unannounced and confidential Elgison and Charlie Water’s investment and was given confidential information concerning SAI’s third party audit that had not been released to SAI management.  The two attorneys of Alston Bird had simultaneously invested in WorldWideTesting (WWT), another firm founded by the Defendant and Elgison served on WWT Advisory Board for two years and offered advice and counsel to the Defendant who was CEO and Chairman of WWT. While the attorney’s are not working on this case, the Alston Bird has demonstrated unique access to the most private and confidential information of SAI and therefore should be removed from the case.


2.      The Plaintiff has presented the case to the Court as a simple loan.  With a reasonable amount of discovery, the Court will begin to see one of the most unique and complex cases of our time.  SAI was incorporated in May 1995, after receiving verbal notification that the team of researchers, which had come together to commercialize a technology developed in part at Georgia Institute of Technology, would be approved for an equity investment from the USDA. The formal approval letter was issued in July of 1995.  SAI raised $300,000 in matching funding and was given $300,000 by the Alternative Agricultural Research and Commercialization Agency AARC within the USDA.  This government owned venture fund’s task was to develop new non-food uses for agricultural products while helping to rebuild rural America.  Its received direct Congressional funding to be invested in new companies such as SAI. 


After SAI began construction of a small facility for producing and demonstrating the technology, it was approached by Bruce Crain, Executive Director of AARC.  In this meeting, Crain discussed that the AARC board was looking to support its existing investments and would look favorably on an expanded investment in SAI. Crain also notified the members in attendance that Congress had granted SAI and other board members preferential set aside status for their products.  Crain presented an offer that AARC would invest additional funds and that they would offer SAI a marketing agreement to sell its preferential set-aside products through a professional third party marketing company to the Federal government and that a five (5%) percent commission would be earned by AARC and go back into the venture fund for other investments. It was a no-brainer.  As we discussed the size and capacity of our construction, Crain offered that the USDA would look favorably on a loan to allow us to expand to serve the large government sales opportunity.


Crain put us in touch with Ed Bell, a B&I loan packager, familiar with AARC companies and the USDA.  A loan package was put together and Bell had it approved by Harborton Insurance Company of California. A request to allow our current bank, First Federal Savings Bank (FFSB) of Donaldsonville, to act as the servicing agent was approved by Harborton. At this same time, Robert McDaniel of First Community Bank (FCB) asked if he could submit the package to his board for approval, which was approved at terms more favorable to SAI.  The Defendant told McDaniel he would go with FCB, if FFSB could share in the loan.   A verbal agreement was reached and the loan processing began in earnest.  The USDA was a multi faceted partner in helping to fund the start-up, to marketing the company’s products, to help in arranging loan financing, to assisting in research and development of new applications of SAI’s products.  The synergies and collaborations seemingly were excellent until 1999 when SAI was finishing construction of its manufacturing operations and were notified that Congress had terminated funding for AARC and its marketing efforts.  The Defendant had been developing a concept for a new company in support of analytical testing of chemical commodities being sold through automated brokerages and delivery of quality transaction data into the global exchanges. As allowed under SAI operating agreements, Defendant was allowed to develop separate interest and companies. 


While not required, the Defendant gifted 50% of his ownership in a new company, WorldWideTesting, Inc. (WWT) to SAI. Within 14 months the company had grown to almost 50 employees and had investment valuations up to $45 million.  Required to resign from participation and management in SAI by the WWT board, SAI began to seek to sell some of its WWT stock to raise needed cash.  By middle of 2000, SAI had negotiated a sale of $1 million of its WWT stock back to WWT.  As the sale closed, those funds went into a lockbox managed by the Plaintiff.  The Defendant does not have access to the paperwork showing how the funds were dispersed, but after the funds had been applied mostly to interest, the Defendant discovered that the many current bills and obligations were not paid, though the interest and obligations to the Bank had been brought current.  This preferential payment arrangement by the holder of the funds, succeeded in reducing debt to the bank but unsecured creditors debt grew dramatically, and the construction company, Days Industrial Construction Company, Inc, which had agreed to build the plant at cost, was owed many hundreds of thousands of dollars.


This lead to the halt of projects oriented to allow SAI to sell higher value added specialty lines.  The company sought support from the Bank for funding but was declined, and the Defendants parents and CFO borrowed on land and other assets to raise funding to bring in a buyer.  The Bank declared the company in default and the unsecured creditors requested bankruptcy protection so that a buyer for SAI could be found. About this time a meeting was arranged with the Bank and USDA Rural Development.  In that meeting, the Howard Franklin, the USDA B&I program manager told the Bank and the Defendant and Doug Erwin, that the AARC marketing Agreement was used to issue the credit approval for the company.  Defendant asked Franklin to relate how much the AARC agreement was relied upon in order to issue the loan guarantee.  He replied that the approval was based entirely on the AARC Agreement. He said, “You did not have a plant. You did not have any customers. You had no sales. You had no prior experience.  We relied entirely on the AARC marketing to sell your product (to the government).”


 A potential buyer was located and a contract was extended to test plant capabilities.  A few days after September 11, 2001 World Trade Center Disaster, a phone call notified SAI that the purchase consideration was being shelved.


The admission that the USDA and the Bank relied on the performance of an internal agency and wholly owned corporation of the US government to perform, and when Congress cut funding for the AARC program, the house of cards fell, revealing a web of conflicts of interest that could never be allowed under normal banking laws.  The largest cash investor in SAI (AARC),  was able to influence the credit decision of a bank and the national guarantee banking program by offering a contract of performance.  A member of AARC sat on the USDA National Office Executive Loan Committee which voted not only on the approval for the loan guarantee but also recommendation by the State Director, Laura Meadows, for an exemption to Rural Development regulations which took the guarantee from 80% to 90% of the total amount.   The Committee voted to extend a guarantee which violated its own rules for conflicts of interest (see Exhibit A, RD Instruction 4279-b, 4279.114 (q), Effective 12-23-1996) which defines loan guarantees for ineligible purposes:


(q) The guarantee of loans where there may be, directly or indirectly, a conflict of interest or an appearance of a conflict of interest involving any action by the Agency. An example of a conflict of interest would be where guaranteed funds are used to finance a Federal office building where one of the tenants leasing the space is a USDA agency or organization.


The Bank and the USDA violated the regulations through joint negligence and perhaps unwitting participation with AARC to create a loan guarantee for ineligible purposes.   This action by AARC, NOEL Committee, USDA Rural Development and the Bank violated the USDA regulations and allowed a conflict of interest loan and loan guarantee to be created which rested on the performance of AARC. 


3.      This action placed the USDA in the commercial position of creating a contract with the Bank which contained no clauses of relief in the case of non-appropriations yet was dependent of the continued funding by Congress. Furthermore the USDA negotiated contract terms with the Defendant in active participation of the loan document and guarantee. (see Exhibit B) When Congress cut funding for AARC it created actual economic damages for the Defendant and a host of small rural investors in which they lost retirement funds, incurred debts, and suffered harm from the actions.  Furthermore that action prevented performance by AARC of its obligations to SAI, Defendant and other agencies within the USDA, including Rural Development which relied on AARC’s performance to protect the USDA’s 90% guarantee. As such, the Defendant has filed a third party complaint against the USDA and AARC, a copy is attached hereto.


4.      First Community Bank breached the terms of the loan agreement and increased the risk to the Guarantor and Defendant without his consent. Under OCGA § 10-7-22, "[a]ny act of the creditor . . . which injures the surety or increases his risk or exposes him to greater liability shall discharge him.” At the loan closing, the Bank signed an agreement in which they agreed to participate 50% of the loan to another lender. The Defendant had agreed to utilize First Community Bank loan services only if the bank participated the loan to a bank chosen by the Defendant and under commercially reasonable terms.  The Defendant wanted participation of a bank with whom SAI shareholders already had a working loan relationship and which had experience in managing a USDA guarantee loan. This additional bank would also offer a greater pool of funding available for the company. In consideration of the sizable fees the Bank earned upfront,Robert McDaniel, signed the agreement at the loan closing for the Bank and a copy was forwarded to First Federal Savings Bank of Southwest Georgia. (FFSB).   It is interesting that the Bank did not include this paperwork in its filing to the Court. FFSB had provided construction loans prior to the Plaintiff’s loan and even with notice to the Plaintiff, this agreement was never fulfilled.  At a midpoint in the loan, the Defendant approached Diane Thomas of FFSB and asked about their participation.  She indicated that the Bank had not complied with that agreement and that her bank was interested and would like to participate. The Bank never participated the loan to FFSB and never contacted the Guarantor, SAI nor FFSB to renegotiate the terms of the loan.  This breach put a small Bank in southwest Georgia as the sole supplier of credit to SAI.  This action significantly increased the risk to the Defendant, reduced SAI’s ability to obtain additional credit that would have allowed it flexibility as AARC’s funding was cut by Congress and ultimately affected SAI’s ability to repay the loan. The failure to honor the contract is a material breach of the terms of the loan by the Bank and significantly increased the risks to the Guarantor without his approval. A copy of this document can be found through discovery in the files of the USDA auditors, as well as the Bank and FFSB.


5.      First Community Bank did not adequately secure the assets of the company.  The 90% loan guarantee offered by the USDA required that the Bank secure all assets of the borrower.   The bank did not include security in the intellectual property of the borrower.  SAI had been flown by dealers to meet buyers in Chile, and had prospective licensors come from South Africa, Australia, and Syria. The technology was not allowed to be sold to companies in Iran due to its sensitive nature. SAI held licensable trade secrets and other intellectual property (IP) which were demonstrated in parts of the manufacturing systems and would have significantly increased the value of the property if it could have been sold with the equipment.  Unfortunately the bank could not sell the equipment for its true value since they had not secured intangible property as part of the loan.  The Bank never requested to license the technology, which would have been viewed favorably by the management of the company and its investors.  Instead, even after SAI filed suit to protect its IP, the Bank ignored this important component of the market value of the assets.  One of its appraisers had many years of experience in the field yet the Bank made no request to include his evaluation of the value of the technology if the Bank had licensed it from the borrower.  As such, his appraisal returned a value for the plant that estimated the cost of removing all equipment, resulting in a negative value. 


The Defendant contested the valuation methods at the confirmation of the sale by offering expert testimony in process technologies by Dr. James F. Benzel Professor Emeritus of the Georgia Institute of Technology.  He presented his opinions to the Court detailing that it was a unique and valuable technology and certain heavy industries such as steel processing could utilize the IP and equipment. These are industries accustomed to paying millions of dollars for technologies that can improve the bottom line. While the Court ruled in favor of the real estate confirmation after almost 3 months of deliberation, its did not dispute the basic tenets that the value was in the IP. The Bank was negligent in not including IP in its establishment of liens necessary to recovery value in a commercially reasonable manner.


6.      A suit was filed by SAI in December 2001, requesting the Court grant recognition and protection to SAI IP and trade secrets, which had been protected by extensive confidentiality agreements from contractors, site visitors, and employees. This IP was an asset, which could have benefited all creditors including the bank and which the Bank negligently ignored. This may have been in order to dismiss any claim other creditors may have had in a major portion of the value of the company or to continue on with a path that would allow them to dispose of the assets and move against the guarantee offered by the USDA.  In any case the result was a public disclosure which caused a serious loss in value (A*) to all assets of SAI. 


(A*) The property right in a trade secret ceases to exist after the secret has become public property through general disclosure. If a trade secret is patented there is no further right to secrecy. The patent is a legal disclosure with the right to a limited, temporary monopoly granted as the reward for disclosure. Sandlin v. Johnson, 141 F.2d 660 (8th Cir. 1944); Newport Industries, Inc. v. Crosby Naval Stores, Inc., 139 F.2d 611, 612 (5th Cir. 1944). See Grant v. Raymond, 31 U.S. 218, 242, 8 L. Ed. 376 (1832).


This negligence and the resulting reduction in the saleable asset values, reduced the ability for the Bank to recover full market value and recover the value from company assets to everyone’s benefit.  The Bank chose the easiest path to sell and not to achieve a true fair market value.  This high tech center needed more than a simple auction announcement in rural south Georgia.  The USDA itself valued the facility, its utilization and capabilities. (see Exhibit C).


  1. Under the terms of the AARC investment, the USDA held march-ion ownership rights in the IP (See Exhibit D, pp14-20) and could have offered the Bank the rights to utilize the IP in order to realize the maximum value for the assets.  The Bank chose to ignore this avenue for recovery, instead it chose a path that has lead it into litigation with the USDA.


  1. The Defendant has tried in good faith to help all parties achieve a reasonable solution without significant costs.  The Defendant spoke with many parties at the USDA, including Howard Franklin, the B&I program manager, for a path to resolve the defaults prior to the Bank foreclosing on the sale. Franklin offered that the USDA would consider any request that the Bank may have in resolving the issue of the loan and the property.   The requirement was that the Bank simply had to put the request to the USDA for consideration.  To the knowledge of this Defendant, that was never done. The Defendant, US Representative Bishop (See Exhibit E) and Senator Zell Miller’s offices were coordinating to have the USDA take ownership of the facility, and paying off the loan guarantee to the Bank. Extensive phone conversations by the Defendant and Representative Bishop’s Office to get the Bank to work with the Defendant in requesting a win-win solution failed at the starting block due to the Bank’s unwillingness to seek alternate solutions.  These solutions were an attempt to save the jobs and opportunities that this facility represented to the poorest area of the state of Georgia. The Bank provided no assistance in seeking an alternative resolution and contacted the USDA General Counsel, Mark Steven, to seek a ruling that would allow them to sell the property even though we had active engagement of our Congressmen who were seeking a win-win solution.  In the Bank’s request for a ruling they did not disclose relevant details to the case, such as that the Government was the largest investor.  After a conversation with Mark Stevens, on July 23, 2003, he said he would not have ruled the way he did and he requested that I submit a request for him to reexamine his ruling. (see Exhibit F, submitted to Mark Stevens, USDA General Counsel and USDA State Director Stone Workman,).   On July 30th, I was able to reach him by phone, as I had not heard any response to my write up.  He said that he had been told by his superiors that he could not review his ruling and suggested I seek a federal injunction to let the Court hear what damages would occur to Federal interests should the sale go through.  At that point it was too late and the sale proceeded.


  1. First Community Bank conducted a public sale of the assets of SAI including the real property, attached property of SAI, various equipment and rolling stock/vehicles.  The Plaintiff gave the Defendant no notice of the sale of these assets.  The Plaintiff was in breach of the agreement with SAI and prudently should have properly notified the Defendant. 


  1. In the process of conducting a public auction off the assets, the defendant became aware of irregularities and notified the Plaintiff and Plantiff’s counsel that they were conducting a commercially unreasonable sale.  Defendant gave them official verbal notice in the presence of witnesses and bidders, including Anthony Howard vice president of First State Bank, and other witnesses. The reason for that notice was the following: 


The Bank on August 1, 2003 at 10 am began the auction of the assets of SAI. 


The instructions to the potential auction buyers, held on site at 255 N Bay St. was announced by the Bank’s auction company taking several minutes.


As Defendant listened to the instructions, they did not include any reference to assets owned by Southwest Georgia Regional Development Center (SWGRDC) which had a loan secured by many assets in and on the property.  Defendant approached the Bank president Jeff Hanson & Bill Holland and asked had they arranged for a purchase agreement with SWGRDC to sell their assets as those specific assets were not part of the SAI assets covered by the Bank loan and the bank had given lien waver’s to SWGRDC which had separate liens. 


The auction had already begun and had climbed to 110k… As Defendant and Plaintiff were talking the amount raised to 120K.  Holland consulted the auctioneer.


The auctioneer, paused and announced a special separate instruction to the bidders, saying “There is another lender who has equipment on the property. We are only selling today those items that the bank actually owns.”  A prior bidder asked “Do we know what those items are?”  The Plaintiffs attorney shook his head, No.


Another bidder asked: “How can we bid if we do not know what we are buying?”


Auctioneer shrugged his shoulders but continued the auction.


“This is nuts!” replied the bidder “How can you bid on something that you don’t know what you’re buying.”  The team of the auction company was soliciting bids but no bidders were interested in bidding for what they did not know they were getting for their purchase..


At that point, the Defendant gave verbal notice to Bill Holland & Jeff Hanson, who stood in front of a group of bidders, and told them that the sale was being conducted in a commercially unreasonable manner.”


This verbal notice was never responded to by the Plaintiff or their counsel, nor did the Bank arrange to halt the auction until a list of equipment which  SWGRDC had financed could be faxed to the sale.


The plaintiff never corrected the error nor tried even the simplest method of calling the SWGRDC or its counsel and getting a copy of their equipment and pausing the sale for an hour.



175 Ga. App. 445; 333 S.E.2d 373; 1985 Ga. App. LEXIS 2116; 42 U.C.C. Rep. Serv. (Callaghan) 602

O.C.G.A. § 11-9-504 et seq. establishes a special procedure which governs the right of a secured party to dispose of collateral after default. This Code section states in pertinent part that: "Disposition of the collateral may be by public or private proceedings and may be made by way of one or more contracts. Sale or other disposition may be as a unit or in parcels and at any time and place and on any terms but every aspect of the disposition including the method, manner, time, place, and terms must be commercially reasonable." O.C.G.A. § 11-9-504 (3). Compliance with this section is a condition precedent to recovery of any deficiency between the sale price of the collateral and the amount of the unpaid balance. Citizens State Bank v. Hewitt, 158 Ga. App. 238, 241 (279 SE2d 531); C & S Nat. Bank v. Dorsey, 159 Ga. App. 784, 786 (1) (285 SE2d 242).

Farmers Bank, Union Point v. Hubbard, 247 Ga. 431 (276 SE2d 622), sets forth the burden which must be carried by a party seeking a deficiency judgment as relating the reasonableness of the price received. In Hubbard, supra, the Supreme Court held that "a creditor who fails to prove that notice of sale was given the debtor . . . or fails to prove that the disposition (sale), including its method, manner, time, place and terms, was commercially reasonable, is barred from obtaining a deficiency judgment, . . . except where the sole defect is the adequacy of the sale price, in which event the creditor is not barred from recovery but must overcome the presumption that the value of the collateral equals the debt on it . . . . This presumption is overcome by proving the fair and reasonable value of the collateral, whereupon the creditor is entitled to a deficiency judgment in the amount of the debt (plus or minus any payments or charges properly applicable to the disposition) less the fair and reasonable value of the collateral proved by the creditor (if the resale price is less than the fair and reasonable value proved)." Farmers Bank, Union Point v. Hubbard, 247 Ga. 431, 436-437, supra. See Comment, Adequacy of Sale Price: A Secured Party's Burden of Proof in Seeking a Deficiency Judgment after Resale of Collateral, 33 Mercer L. Rev. 397 (1981).


  1. On July 23, Days Industrial Construction Company Inc,  DICC  having been notified that certain items where missing from the list of assets.  DICC notified the Bank by certified mail that certain assets were not on site as they were part of construction operations and were not on site for inspection nor there during the valuation. Furthermore, certain assets had been purchased by DICC and the Bank claimed that those assets were the property of SAI.  DICC offered the Bank that upon receiving proof of ownership of specific items in question it would return any assets paid for by SAI with documented proof of ownership as it also sought the return of assets it had paid for, and providing what proof it had in Blakley. (See Exhibit G).


The plaintiff never inspected nor arranged for the inclusion of those assets at the sale therefore compromising the completeness of the system that would be viewed by potential buyers.  The Bank did not adequately discover the value of the collateral.



212 Ga. App. 459; 441 S.E.2d 908; 1994 Ga. App. LEXIS 315; 94 Fulton County DR 1237

The secured party must also prove the value of the collateral at the time of repossession and that the value of the goods does not equal the value of the debt." Richard v. Fulton Nat. Bank, 158 Ga. App. 595, 595-596 (281 S.E.2d 338) (1981)."When a creditor forecloses on secured property without the statutorily required notice to the debtor, or when the creditor conducts a commercially unreasonable sale, a rebuttable presumption is created that the value of the collateral is equal to the indebtedness. The creditor may rebut the presumption by introducing (1) evidence of the fair and reasonable value of the secured property, and (2) evidence that the value of the collateral was less than the debt. If the creditor rebuts the presumption, he may maintain an action against the debtor or guarantor for the deficiency (the difference between the fair and reasonable value of the collateral and the amount of the debt)." Business Dev. Corp. of Ga. v. Contestabile, 261 Ga. 886 (413 S.E.2d 447) (1992). "If the creditor conducts a commercially unreasonable sale and does not rebut the presumption . . ., he loses the right to recover the deficiency against the debtor and the guarantor." (Emphasis deleted.) Id. at 886-887. "Proof of the value of the collateral is required to be the value at the time of repossession. Granite Equipment Leasing Corp. v. Marine Dev. Corp., 139 Ga. App. 778 (230 S.E.2d 43) (1976).] " First Nat. Bank v. Rivercliff Hardware 161 Ga. App. 259, 260 (287 S.E.2d 701) (1982).



  1. During the sale certain assets which were supposedly purchased by the highest bidder included rolling stock and serial numbered and non attached assets that were never presented as specific assets of value.  The transference of that s/n rolling stock assets required notice to the guarantor under GA law, but no notice of the impending sale was given to the Defendant.


  1. Plaintiff represented that some of the assets which were represented as being sold to prospective buyers and when in fact were not part of the auction.  The evidence for this includes the disposition by scraping and cutting up of a forklift owned by another lender, without permission.  Completely devaluing said asset.  Therefore the plaintiff compromised the value of other assets and has not fully accounted for all the assets that were sold.


  1. As further evidence that lender had no regard for achieving a reasonably commercial sale, Tracy Dixon, former Bank President,  acknowledged under oath that there were probable specific buyers to be contacted and when calling them that he never spoke with any potential buyer, only left voice mail messages.  In the same hearing Defendant presented a expert witness who said that the technologies in the plant had value to specific vertical targets not only carbon companies but steel manufactures and the equipment represented technological innovations that would have been valued by such industries.  No attempt was made to contact the Defendant to identify the specific value that could be obtained, nor those industries to sell the equipment in those vertical markets.



  1. Plaintiff wantonly disregarded the value of the product in the warehouse and utilized the excuse of fire danger to destroy the entire inventory of the company part of which which had been sold.  Hillsborough County was waiting for transfer, of 20 thousand pounds of activated carbon (the purchase order number #DPSW02612033). The Bank had been told of the sale and could have made arrangements to fulfill the order yet took all of the product and placed it in a landfill.  Specific actions needed to manage those assets where offered to the bank in verbal exchanges with DICC but the bank declined.


  1. The Bank acted in a manner that caused the ultimate failure of SAI. In December 1998,  Defendant started a new company, which was allowed under the terms of the operating agreement.  Defendant left day to day management of SAI in January of 1999 in the hands of the CFO who became the Executive Manager in the spring of 1999. Defendant gave 1/2 of his ownership in the new company to SAI. Defendant developed & filed for patent which provided 3 party verification of quality transactions of bulk commodity internet chemical sales called Chemcertify, Inc. dba


The defendant gifted ½ of his equity ownership in the company to SAI which which then further became an asset securing the banks loan.    The Defendant resigned from SAI in 1999 as required by the Worldwidetesting board.


  1. The Executive Manager of SAI, Doug Erwin, also was a shareholder and officer in another company, Settles Ground Support, Inc. which had a loan with the Bank.  The Bank held a conflicting position in that its was negotiating the disposition of this loan with Erwin while also negotiating the SAI loan.


  1. The Bank used its its influence to with Erwin to take most of the sale of certain assets and apply those funds to the interest owed on the debt while preventing its use to pay other unsecured creditors and tax obligations. Approximately $1.+ million of the WWT equity under the direction and approval of the bank and funds were applied to the debts owed to the bank by SAI.  The defendant was relying upon the banks audit and verification services in order to insure that the appropriate of such funds would be applied to essential debts needed to keep the company operating until a buyer could be found.  Upon completion of the sale of these assets, the defendant discovered that the Bank had taken a majority of sold assets and did not distribute funds equitably among all creditors in order to insure that the company could continue as a going concern. The lender operated in bad faith. From our information and belief, conflicts of interest regarding negotiations concerning the loan with SGS and Erwin lead to a disregard of the Bank’s fiduciary responsibility resulting in fraudulent transfer in the distribution of funds from the sale of those assets to the benefit of the Bank, inequitably paying interest expense on the loan.


  1. The Bank’s disregarded prudent business practices by requiring SAI to pay interest on the loan during construction utilizing the same borrowed funds.  This reduced the amount available in the operating loan when the plant was finally constructed and began operations.


  1. The Bank’s pattern of mismanagement and loan oversight were not consistent with the terms required by the loan and other commitments required under the Federal guarantee program.



  1. Lender acted in bad faith in the sale in their attempt to pursue the Federal guarantee and acted with negligence in the sale while knowing that certain unspecified equipment was missing and there was another entity with liens against the property who had not been consulted.







Defendant hereby demands a jury trial as to all issues triable by a jury.


Respectfully submitted,





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