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Green Tree Servicing, LLC v. Duncan — Navajo Supreme Court September 7, 2008

Posted by rezjudicata in Navajo Supreme Court, Tribal Courts.
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Navajo Supreme Court says federal Bankrupcy Code does not protect assignees of debtor; invalidates arbitration clause under Navajo Fundamental Law.

Green Tree Servicing, LLC v. Duncan, No. SC-CV-46-05 (Nav. Sup Ct. Aug. 18, 2008)

Issues: Federal Law > Bankruptcies >> Automatic Stays; Navajo Fundamental Law > Contracts >> Arbitration Clauses

After Conseco filed for bankruptcy, Green Tree purchased Conseco’s loan servicing contracts. This included Duncan’s loan for the purchase of a mobile home. Sometime later Green Tree filed a repossession action against Duncan. Duncan counterclaimed for fraud, harassment, and assault. Does the “automatic stay” provision of the Bankruptcy Code bar Duncan’s counterclaims? If not, did an arbitration clause in the original contract bar the counterclaims?

No, answered the Navajo Supreme Court. Under the Bankruptcy Code, litigation and lien enforcement against the debtor are automatically stayed once the debtor files for bankruptcy. This provision is broad, but protects only the debtor. Here, Green Tree itself did not file for bankruptcy; it simply purchased Conseco’s contracts. But, even assuming Green Tree were a debtor, the Code does not shield debtors who affirmatively file lawsuits from counterclaims. Therefore, the Code does not bar Duncan’s counterclaims against Green Tree.
Although the Navajo Nation Code encourages arbitration, any contract containing such a provision must be consistent with Navajo Fundamental Law. The Court discussed several tenets of Fundamental Law in analyzing the arbitration clause. Hazho ogo, the Court explained, requires “patient, respectful discussion before a waiver is effective.” Iislyimi adooniil requires that things be made clear and obvious. Lastly, Navajo thought accords great importance to the home. The clause here purported to strip Duncan’s right to judicial enforcement of her rights, but did not reciprocally bar Green Tree from utilizing the court system. The contract neither explained why the burden was “one way,” nor indicated that Duncan understood that the clause impaired her rights. Therefore, the Court held that the clause failed under Navajo Fundamental Law. Thus, the arbitration clause did not bar Duncan’s counterclaims against Green Tree.

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Comments»

1. ThreeBrothers - February 4, 2009

I have my own reasons for siding against Green Tree in nearly every situation, but that is a different story and certainly not based on the merits of any one case. Looking at this one, only through what is written here, perplexes me. Maybe I am reading it wrong, but I am not sure how, or more appropriately why, they even brought this argument before the court. The bankruptcy of Conseco did not translate to either of these parties and trying to argue the arbitration clause barred Duncan from his options in the litigation was quite a stretch. I have my fair share of direct experience with very similar loans, along with great latitude in their creative resolution. I don’t think I would ever have recommended my company waste its money and resources to argue something that has little shot of prevailing in court. From the standpoint of the novice such as me, Green Tree reps would be well served to break these situations down into their simplest form and use logic to either proceed or back away. Like I said though, maybe I am reading it wrong.


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