990 F.2d 780 (3rd Cir. 1993), 92-3417, Bhatla v. United States Capital Corp.

Docket Nº:92-3417, 92-3555.
Citation:990 F.2d 780
Party Name:Monmohan BHATLA; Shabnam Bhatla; Larry Ayrers; Anthony Read; John E. Barden; Elizabeth Ann Barden; James Sourwine; Annette Sourwine; Frank Binder; Edward Collier; Jeanne Collier; Joseph Curcio; Mary Curcio; John A. Maxin; Patricia Maxin; Frances Maxin; Judith Maxin; Samuel H. Depew, Marilyn Depew (d/b/a Depew Investment Group); Glenn Dolfi; Martha
Case Date:April 12, 1993
Court:United States Courts of Appeals, Court of Appeals for the Third Circuit
 
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Page 780

990 F.2d 780 (3rd Cir. 1993)

Monmohan BHATLA; Shabnam Bhatla; Larry Ayrers; Anthony

Read; John E. Barden; Elizabeth Ann Barden; James

Sourwine; Annette Sourwine; Frank Binder; Edward Collier;

Jeanne Collier; Joseph Curcio; Mary Curcio; John A.

Maxin; Patricia Maxin; Frances Maxin; Judith Maxin;

Samuel H. Depew, Marilyn Depew (d/b/a Depew Investment

Group); Glenn Dolfi; Martha F. Dolfi; John Driscoll and

Eileen M. Driscoll; Ronald Elin; Susan M. Elin; Jack

Farls (d/b/a J. Foster Associates); George Fenzl; Roxana

Fenzl; Gregg Fogg; James P. Grinham; Keith R. Holbrook;

and Richard W. Oliver (d/b/a Quadco); William Fox and Myra

Fox; Harvey Gutman; Beverly Gutman; Martin Karasick;

Joan Karasick; Martin Gang; Judith Gang; Mark Hayden;

Greg Hayden; Mike D'Avanzo; Randy Vilford; Joseph Hanzel;

Judy M. Bedell; Frank Hryshko; Michael Hettleman;

Barbara Hettleman; Thomas L. Hoivik; Judith Lisa Hoivik;

Edward Lewis; Sally Lewis; Donald Peterson; Rebecca

Peterson; Marcelo Politi; Mariana Politi; Raul Truffat;

Soffia Truffat; Dennis Richardson; Virginia Richardson;

Ferdinand C. Rodriguez; Maelecora Rodriguez; Victor C.

Rivera; Milagros G. Rivera; Gordon Seccombe; Joan

Seccombe; Raymond Smith; Joy Mottel; Donald Swenson;

Elizabeth Swenson; Michael Ternisky; Jerry Totten; Ellen

Totten; William Walker, Appellants

v.

U.S. CAPITAL CORPORATION; Resort Development Corporation

(a/k/a Resort Investment Corporation); Capital Acceptance

Corporation; First Capital Finance Corporation; U.S.

Capital Mortgage Corporation; Mellon Financial Services

Corporation No. 7 (formerly Carruth Mortgage Corporation);

Mellon Financial Services Corporation No. 11; Mellon

Financial Services Corporation No. 1 (d/b/a Mellon National

Mortgage Group and National Mortgage Group); Mellon Bank

N.A.; Billy J. Bobo; Donald J. Tomlin; Patrick L. Tomlin;

Robert E. Sease; Richard W. Payton and Jeffrey B. Wheeler.

MELLON BANK, N.A.

v.

Marcelo PASQUALIS-POLITI and Mariana Pasqualis-Politi, Appellants.

MELLON BANK, N.A.

v.

John BARDEN and Elizabeth A. Barden and James Sourwine and

Annette Sourwine, Appellants.

MELLON BANK, N.A.

v.

John A. DRISCOLL and Eileen M. Driscoll, Appellants.

MELLON BANK, N.A.

v.

Donald M. SWENSON and Elizabeth M. Swenson, Appellants.

MELLON BANK, N.A.

v.

James B. GRINHAM, Gregg Fogg, Keith R. Holbrook and Richard

W. Oliver, Appellants.

MELLON BANK, N.A.

v.

Martin KARASICK and John Karasick and Harvey M. Gutman and

Beverly J. Gutman, Appellants.

MELLON BANK, N.A.

v.

Martin KARASICK and John Karasick and Harvey M. Gutman and

Beverly J. Gutman and Martin L. Gang and Judith

Gang, Appellants.

MELLON BANK, N.A.

v.

Raul E. TRUFFAT and Sofia A. Truffat and Marcelo

Pasqualis-Politi and Mariana Pasqualis-Politi, Appellants.

MELLON BANK, N.A.

v.

Michael K. HETTLEMAN and Barbara G. Hettleman, Appellants.

MELLON BANK, N.A.

v.

Edward M. COLLIER and Jeanne L. Collier, Appellants.

MELLON BANK, N.A.

v.

Raul E. TRUFFAT and Sofia A. Truffat, Appellants.

MELLON BANK, N.A.

v.

Frank M. BINDER, Appellant.

MELLON BANK, N.A.

v.

Edward G. LEWIS and Sally E. Lewis, Appellants.

MELLON BANK, N.A.

v.

William A. WALKER, Jerry Totten, a/k/a Jerry D. Totten and

Ellen Totten, a/k/a Ellen M. Totten, Appellants.

MELLON BANK, N.A.

v.

Joseph A. HANZEL, Jr. and Judy M. Bedell, Appellants.

MELLON BANK, N.A.

v.

William Z. FOX and Myra E. Fox, Appellants.

MELLON BANK, N.A.

v.

Ferdinand C. RODRIGUEZ, Maelecora P. Rodriguez, Victor C.

Rivera and Milagres Rivera, Appellants.

Nos. 92-3417, 92-3555.

United States Court of Appeals, Third Circuit

April 12, 1993

Argued March 3, 1993.

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Donald F. Mintmire (argued), Vaness M. Moore, Mintmire, Alagia, Day, Trautwein & Smith, Palm Beach, FL, for appellants.

Ira S. Lefton (argued), Henry F. Reichner, Reed Smith Shaw & McClay, Philadelphia, PA, for Mellon Bank, N.A.

Eric Breslin (argued), Hannoch Weisman, A Professional Corp., Roseland, NJ, for appellees Billy J. Bobo, Donald J. Tomlin, Patrick L. Tomlin, Robert E. Sease, Richard W. Payton, and Jeffrey B. Wheeler.

Before BECKER and GREENBERG, Circuit Judges, and ROBINSON, District Judge. [*]

OPINION

GREENBERG, Circuit Judge.

I.

BACKGROUND

These cases, consolidated on appeal, arise in the aftermath of purchases of condominium units in Phase I of a development known as the Blue Knob Ski and Country Club in Bedford County, Pennsylvania (Development). 1 Some of the purchasers of these units contend, inter alia, that they were fraudulently induced into buying these units based on misrepresentations made to them by sales persons of Resort Investment Corporation (now

Page 783

known as Resort Development Corporation). These purchasers appeal from judgments and orders in two separate district court cases, both of which involved Mellon Bank. While there were other purchasers in the Development not involved in this litigation, as a matter of convenience we will refer to the appellants as the purchasers. 2 Mellon has a twofold involvement in these disputes. First, pursuant to a Commitment Letter of August 12, 1982, in which it agreed to lend Resort slightly over $3 million, it made loans for use in the acquisition of the land and the construction of part of the Development. Second, Mellon became the indenture trustee for bonds secured at least in part by the notes and mortgages used to purchase the Phase I condominium units.

In the first case, Bhatla v. Resort Development Corp., No. 92-3417 (Bhatla), the purchasers sued Resort, Mellon, and certain other entities and individuals we describe below for losses suffered as a result of the alleged fraud. In the second case, Mellon Bank, N.A. v. Pasqualis-Politi, No. 92-3555 (Mellon Bank), Mellon sued some of the purchasers, seeking judgments on the notes and foreclosures on the mortgages used to finance their purchases of the condominium units. We have consolidated the cases on appeal because they involve related factual and legal issues.

  1. Factual History

    In the early 1980s, Resort sought to build a condominium development on a 32-acre parcel of land in the Allegheny Mountains of Western Pennsylvania. The initial Public Offering Statement, dated November 25, 1981, stated that the Development would be built in four phases. Phase I was to consist of 96 units, 72 two-bedroom units and 24 one-bedroom units. Phase II was to consist of 54 two-bedroom units. The make-up of the other two phases is not relevant to these appeals. The purchasers all acquired units in Phase I.

    According to the purchasers, in marketing the Development, Resort's sales persons made several material misrepresentations, the principal ones being (1) that Phase II would be built even though the initial Public Offering Statement stated that Phase II "Need Not Be Built" and (2) that the developer had arranged for a major hotel chain to handle the rentals of the units. Furthermore, Resort's sales persons allegedly told prospective purchasers that each phase of the development would be marketed at higher prices than the earlier phases, thereby enhancing the investment value to Phase I purchasers by enabling them to get in on the ground floor.

    Because sales in Phase I were slower than expected, construction did not begin until the summer of 1982, when enough purchase agreements were signed to trigger the financing provision in the Mellon loan. This delay led to the division of Phase I into Phase IA and Phase IB, which was accomplished by an amendment, dated November 16, 1982, to the Public Offering Statement. Significantly, from the purchasers' point of view, the amended statement made no mention of any change in plans for Phase II, though it continued to indicate that Phase II "Need Not Be Built." The amended statement, which was mailed to prospective purchasers, stated that they had 15 days from its receipt to cancel their purchase agreements. The purchasers settled on their purchases between December 4, 1982, and February 15, 1983.

    According to the purchasers...

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