Woodsville Guaranty Savings Bank v. Passumpsic Savings Bank, 020317 NHSUP, 2014-CV-18

Docket Nº:2014-CV-18
Opinion Judge:Richard B. McNamara, Presiding Justice.
Party Name:Woodsville Guaranty Savings Bank v. Passumpsic Savings Bank
Case Date:February 03, 2017
Court:Superior Court of New Hampshire
 
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Woodsville Guaranty Savings Bank

v.

Passumpsic Savings Bank

No. 2014-CV-18

Superior Court of New Hampshire, Merrimack

February 3, 2017

UNPUBLISHED OPINION

ORDER

Richard B. McNamara, Presiding Justice.

This case arises out of a 2008 loan made to Isaacson Structural Steel, Inc. ("Isaacson") by Woodsville Savings Bank ("Woodsville"), Passumpsic Savings Bank ("Passumpsic"), and Ledyard Savings Bank ("Ledyard"). This case is set for trial on February 6, 2017. Passumpsic has filed a number of Motions in Limine.

For the reasons set forth in this Order: (A) Passumpsic's Motion to Preclude Plaintiff from Soliciting Expert Testimony From Wayne Geher is DENIED; (B) Passumpsic's Motion in Limine to Preclude Woodsville from Soliciting Testimony or Offering Argument relating to Bishop Being a Certified Public Accountant ("CPA") is GRANTED; (C) Passumpsic's Motion to Preclude Woodsville from Arguing that the Passumpsic Board's Discussion About Whether to Approve the Loan Was Chilled Due to the Presence of David Driscoll is DENIED subject to reconsideration based upon the evidence introduced at trial; (D) Passumpsic's Motion in Limine to Preclude Plaintiffs' Expert Douglas Branson from Offering Opinions on Accounting Issues is DENIED; (E) Passumpsic's Motion in Limine to Preclude Evidence of Settlement Agreements Entered Into By David J. Driscoll is GRANTED; and (F) Passumpsic's Request for a Ruling That There Is No Per Se Rule that Driscoll's Actions as Isaacson's Accountant Can Be Imputed To Passumpsic Merely Because Driscoll Was Also On Passumpsic's Board of Directors is DENIED.

I

The following facts are taken from the parties summary judgment papers and are undisputed. Pursuant to the terms of a Loan Participation Agreement ("LPA"), Passumpsic, Woodsville, and Ledyard loaned Isaacson Structural Steel, Inc. ("Isaacson") $10 million. Passumpsic loaned $5 million, Woodsville loaned $3 million, and Ledyard loaned $2 million. Under the LPA, Passumpsic was the lead bank. Arnold Hanson and Steven Griffin, respectively the President and CFO of Isaacson, falsified Isaacson's financial data in order to obtain the loan. Isaacson subsequently defaulted on the loan. David J. Driscoll ("Driscoll"), the principal of Driscoll & Co., an accounting firm, was a member of Passumpsic's Board of Trustees and was also the outside accountant for Isaacson.

Woodsville sued Passumpsic, alleging that it is liable for its losses. Woodsville's Complaint contained seven counts: Count I alleges a Breach of Warranty; Count II alleges Gross Negligence in Passumpsic's execution of its duties under the LPA; Count III alleges Breach of Contract; Count V alleges Intentional or Negligent Misrepresentation by Passumpsic; Count VI alleges a breach of the Implied Covenant of Good Faith and Fair Dealing; and Count VII alleges Breach of Fiduciary duty owed to Woodsville by Passumpsic as a result of the LPA.1 The Court granted summary judgment to Passumpsic on Woodsville's breach of fiduciary duty claim and has held that this case will proceed to trial solely on the allegations of breach of contract and breach of warranty based upon the LPA.

The rights and obligations of the parties therefore flow solely from the LPA. The LPA is a contract and the interpretation of a contract is a question of law. Baker v. McCarthy, 122 N.H. 171, 174-75 (1982). The LPA provides for liability in the event that the lead bank acted with gross negligence or willful misconduct. This means that Woodsville agreed to exculpate Passumpsic2 from ordinary negligence but not from gross negligence or willful misconduct. See Official Comm. of Unsecured Creditors v. Donaldson, Lufkin & Jenrette Sec. Corp., No. 00 Civ. 8688(WHP), 2002 WL 362794, at *15 (S.D.N.Y. Mar. 6, 2002).

The LPA provided that "Passumpsic, as Lead Bank, shall act for the benefit of Woodsville to the extent of Woodsville's undivided interest in the [loan]." (LPA ¶ 15.) Passumpsic was required to collect the payments, interest, and other charges and fees on the loans for the benefit of itself and the other lenders. (LPA ¶ 18.) In addition, the LPA contains what is known as an "antidiscrimination" provision: Passumpsic shall . . . (ii) endeavor to exercise the same care as [it] exercises in the care of loans in which it alone is interested . . .

***

Passumpsic, in performing obligations hereunder, will endeavor to exercise the same care that it exercises in the making and handling of loans and security for its own account, but Passumpsic does not assume any further responsibility.

(LPA ¶¶ 17, 33.)

Passumpsic also affirmatively represented that as of the date of execution of the agreement there was no default existing under any of the loan documents or under the terms of any other credit relationship now existing between Passumpsic and the Borrower or the Guarantors, nor was Passumpsic aware of any facts or circumstances that constitute or would result in such a default. (LPA ¶ 14.) The LPA acknowledged that each participant "reasonably relied on information furnished to it by Passumpsic regarding the Borrower, the Guarantors and the collateral." (LPA ¶ 35.) Passumpsic expressly agreed to: [I]ndemnify and hold harmless each of the Participants for any loss or damage, costs and expenses (including reasonable attorney's fees) resulting directly or indirectly from Passumpsic's gross negligence or willful misconduct in administering, servicing or enforcing the Participated Loan and Passumpsic agrees that in performing such duties it shall be acting on behalf of each of the Participants as well as itself. Passumpsic will use reasonable efforts to ascertain the occurrence of any default under the Loan Documents and will take such other actions as are reasonably necessary in order to monitor and administer the Participated Loan. (Emphasis supplied).

(LPA ¶ 17.)

In April 2011, Passumpsic reported to Woodsville that there were significant and material irregularities and inconsistencies in Isaacson's financial statements. Isaacson's business was to fabricate steel commercial construction. This...

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