Bank Leumi-Le-Israel, BM v. Sunbelt Industries

• Citation: 485 F. Supp. 556
• Decision Date: 18 March 1980
• Docket Number: Civ. A. No. 380-06.
• Parties: BANK LEUMI-LE-ISRAEL, B. M., PHILADELPHIA BRANCH, Plaintiff, v. SUNBELT INDUSTRIES, INC., Telfair Farm Center, Inc. and J. W. Griggs, Defendants.
• Court: U.S. District Court — Southern District of Georgia

485 F. Supp. 556

BANK LEUMI-LE-ISRAEL, B. M., PHILADELPHIA BRANCH, Plaintiff, v. SUNBELT INDUSTRIES, INC., Telfair Farm Center, Inc. and J. W. Griggs, Defendants.

Civ. A. No. 380-06.

United States District Court, S. D. Georgia, Dublin Division.

March 18, 1980.

Frank B. Wilensky, Sheldon R. Wittner, Macey & Zusmann, Atlanta, Ga., for plaintiff.

E. Herman Warnock, McRae, Ga., for defendants.

ORDER ON PLAINTIFF'S APPLICATION FOR PRELIMINARY INJUNCTION

BOWEN, District Judge.

The plaintiff, Bank Leumi-Le-Israel, B.M., Philadelphia Branch Bank Leumi, filed a suit against the defendants, Sunbelt Industries, Inc. Sunbelt, Telfair Farm Center, Inc. Telfair and J. W. Griggs, seeking multiple forms of legal and equitable relief. Among the prayers in the complaint were those seeking injunctive relief and the appointment of a receiver. Prior to the filing of any responsive pleadings, but after service of the complaint upon the defendants, the Court conducted a hearing on the application for a preliminary injunction pursuant to Fed.R.Civ.P. 65(a) in Augusta, Georgia, on March 12, 1980. At the outset, counsel for the plaintiff announced that it sought only the injunctive relief, temporarily abandoning its application for the appointment of a receiver.

There is little in financial fiction which is stranger than the truth presented in this unfortunate series of financial transactions. It is clear that the plaintiff and the defendant Telfair have suffered injury. However, it is not clear that Bank Leumi's stunning losses were caused solely and directly by the conduct or misdeeds of Telfair and Griggs.

This was only a hearing on a preliminary injunction. There have been no responsive pleadings. There has been no discovery. Other parties may be added. Final findings of fact cannot be entered at this time, but according to the evidence adduced at the day-long hearing, here is what happened.

J. W. Griggs of Telfair County, Georgia, is the principal of Telfair. Telfair is a feed and farm supply outlet in Helena, Georgia. Telfair and Griggs sold large quantities of chicken feed, and at one time, they owned over 200,000 laying hens. In his business, Mr. Griggs came to know Julius Tauber who also owned laying hens. At some point, Griggs and Telfair sold their birds to Tauber. The problem began with this sale.

Tauber gave Griggs and Telfair a note, or at least the sale was on credit. Griggs and Tauber began to talk about going in business together to sell eggs, chicken feed, and other types of feed and farm supplies. There was some discussion that Tauber would become involved with Telfair, but that was discarded. It was decided that a new corporation, Sunbelt, would be organized. These discussions were never quite finalized.

Griggs and Tauber decided to capitalize the new corporation (Sunbelt) with $100,000.00. Tauber was temporarily short of cash so Griggs and Telfair put up a total of $95,000.00 to capitalize the corporation. Tauber was to obtain the financing for the new operation. He was handling that "up north." Griggs met Tauber in New Jersey on August 20, 1979. There, Griggs signed several papers in blank. Among those papers were two promissory notes, a security agreement, a corporate resolution, and an unlimited guaranty, all on forms of the Bank Leumi.

In arranging financing for Sunbelt, Tauber contacted a Mr. Feldman with the Bank Leumi in Philadelphia. He talked to Mr. Feldman by telephone and explained that he wanted to borrow $300,000.00 for the Sunbelt operation. This was the first financial transaction which Tauber had taken to Bank Leumi or Feldman. It must have been impressive. Mr. Feldman received from Tauber a "pro forma" balance sheet on Sunbelt, and got verbal committee approval on the $300,000.00 loan. It was to be made under two separate promissory notes in the respective amounts of $125,000.00 and $175,000.00.

On August 21, 1979, Tauber took all of the forms that Griggs had signed on the preceding day to Feldman and the loan was funded. An account was opened by Sunbelt with the Bank Leumi on that day. Somehow, Tauber had gotten hold of a list and appraisal of all of the "fixed assets" of Telfair. He gave that to Feldman. Feldman and Bank Leumi intended to make a loan to Sunbelt which was secured by tangible personal property known generally as "equipment." Feldman assumed that much of this was included in the appraisal of Telfair's property.

In fact, it appears that Bank Leumi took a security agreement which purports to convey to the lender all of the property of Sunbelt (which may well be nothing). It appears that nothing was ever transferred to Sunbelt except some accounts receivable and, of course, its $100,000.00 capitalization. Within the first few days of its opening the bank account at Bank Leumi, Sunbelt deposited $490,000.00. Three hundred thousand dollars of this came from the bank's own loan.

One can only assume that since Feldman had never met Griggs, no UCC-1 financing statements were recorded by the bank, and no certificate, affidavit, or appraisal of any collateral security was ever given to the bank, the loan was on the basis of great confidence in Tauber's financial strength and ability to pay.

The rest of the story is disappointing but not at all surprising. Predictably, the money is no longer in Sunbelt's account with Bank Leumi ($101,000.00 went to one of Telfair's creditors). In fact, bank overdrafts started appearing on the October bank statements and were frequent thereafter. The honeymoon between this bank and the Tauber-Sunbelt interests was brief indeed.

Even while portents of problems...