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Storytelling in Court

New Peoples Bank isn’t interested in the International Storytelling Center’s remaining cash, but it does want the pledged money it was promised in a security agreement.
“We have no claim to the current cash,” said bankruptcy attorney Dave B. Jordan, representing the bank, following a Jan. 18 hearing in the Bankruptcy Courtroom of the James H. Quillen United States Courthouse in Greeneville.
“Our security interest is in the pledges, and we are trying to get this resolved,” Jordan said, referring to future payments from specific individual donors. “We only want the pledges made to pay off this loan.”
As part of a universal note and security agreement, New Peoples Bank made a single advance of $250,025 to the ISC on Dec. 7, 2007, for the purposes of “cash flow” and to “develop and market other products.”
At a fixed rate of 8 percent, the ISC agreed to make 19 quarterly interest payments ranging from $4,932 to $8,358 beginning April 1, 2008, and one lump sum payment of $255,068 on Jan. 1, 2013.
Additional terms of the security agreement state, “principal will be paid on an irregular basis through the pledges of Scott Niswonger, James Reel, Rab Summers and Thomas McGlothlin. Also will be obtaining (future collateral) life insurance on Jimmy Neil Smith with New Peoples Bank as beneficiary.”
Attorney Mark S. Dessauer, who represents the ISC, said he has never encountered such a security agreement.
Dessauer also said New Peoples Bank has not told him about the request for pledged funds.
During the second hearing related to the ISC’s filing for Chapter 11 bankruptcy at the end of December, Judge Marcia Phillips Parsons gave her preliminary ruling on whether the $56,011 in cash held by the ISC at the time of its bankruptcy filing constitutes security interests of New Peoples Bank or Bank of America, which also holds a security agreement with the organization.
Jordan appeared in court last week to state New Peoples Bank does not claim interest in the ISC’s cash collateral.
No representative appeared on behalf of Bank of America.
The cash in-hand at the time of filing was estimated by the ISC in the following breakdown: 75 percent is the remainder of a grant from the Tennessee Arts Commission; 10-15 percent is registration fees for the 2011 festival; and 10-15 percent is a combination of gift shop sales, teller-in-residence tickets and rental income.
The ISC stated in its motion that because the cash is not the proceeds of either bank’s collateral, it is not subject to the banks’ security interests.
Parsons agreed the grant from the Tennessee Arts Commission and any donations or pledges made during 2011 would not be considered cash collateral.
She took a different stand on the portion of funds from gift shop sales and registration fees for the 2011 Storytelling Festival, stating she believes both would constitute cash collateral that Bank of America could have an interest in.
When Dessauer argued, Parsons said her research on the registration fees is not complete and she may reconsider including the fees. Gift shop sales, however, will go toward paying off the debt.
The next hearing is scheduled for Feb. 1, which will follow a meeting of the creditors on Jan. 31.