Celtic Development Corp. v. FDIC
| Decision Date | 12 November 1993 |
| Docket Number | Civ. A. No. 92-10607-GN. |
| Citation | 836 F. Supp. 926 |
| Parties | CELTIC DEVELOPMENT CORPORATION, Celtic Equipment Company, Inc., Celtic Concrete Form Company, Inc., Kenneth S. Racicot and Thomas D. Racicot, Trustees of Pavilion Realty Trust, Plaintiffs and Defendants in Counterclaim, v. FEDERAL DEPOSIT INSURANCE CORPORATION, as Receiver for Merchants National Bank of Leominster, Defendant, Plaintiff in Counterclaim and Third Party Plaintiff, Lynn L. MESSIER and Robert P. Gallo, Defendants, v. Kenneth S. RACICOT, Individually, Russell W. Racicot, Individually, Thomas D. Racicot, Individually, Celtic International, Ltd., Celtic Construction Company, Inc., Celtic Realty, Inc., Kenneth S. Racicot and Thomas D. Racicot, Trustees of Racicot Realty Trust, Third Party Defendants. |
| Court | U.S. District Court — District of Massachusetts |
COPYRIGHT MATERIAL OMITTED
Bernard P. Rome, Rome, George & Klein, Boston, MA, for Celtic Equipment Co. et al. and Kenneth M. Russell and Thomas Racicot.
Bill N. Jacob, James F. Coffey, Boroff & Associates, Robert J. Hoffer, Barron & Stadfeld, Boston, MA, for F.D.I.C.
Leonard F. De Paola, Kleinfeld & De Paola, Boston, MA, for Lynn S. Messier.
Report and recommendation accepted and adopted.
REPORT AND RECOMMENDATION RE: FEDERAL DEPOSIT INSURANCE CORPORATION, AS RECEIVER FOR MERCHANTS NATIONAL BANK'S (sic), MOTION FOR SUMMARY JUDGMENT (DOCKET ENTRY # 15)
October 13, 1993.
On June 30, 1993, the Federal Deposit Insurance Corporation ("FDIC"), receiver for Merchants National Bank of Leominster and defendant, plaintiff in counterclaim and third party plaintiff in the instant action, filed a motion for summary judgment. (Docket Entry # 15). The FDIC seeks summary judgment with respect to all claims filed against the FDIC in the verified complaint. In addition, the FDIC moves for summary judgment with respect to counts I and II of the FDIC's counterclaim and third party complaint as to third party defendants Celtic Development Corporation, Celtic Equipment Company, Inc., Celtic Concrete Form Company, Inc., Thomas D. Racicot, individually and as trustee of the Racicot Realty Trust, Russell W. Racicot, individually, Celtic International, Limited, Celtic Construction Company, Inc. and Celtic Realty, Inc. (collectively: "third party defendants").1
Plaintiffs, defendants in counterclaim and third party defendants filed a three page opposition to the motion for summary judgment and attached their verified complaint.2 (Docket Entry # 17). On August 9, 1993, this court held a hearing and took the motion for summary judgment (Docket Entry # 15) under advisement.
In May 1990 plaintiffs Celtic Development Corporation, Celtic Equipment Company, Inc., Celtic Concrete Form Company, Inc., and Thomas and Kenneth Racicot, as trustees of Pavilion Realty Trust, (collectively: "plaintiffs") filed this action in Massachusetts Superior Court against Merchants National Bank of Leominster ("the Bank"), Lynn L. Messier ("Messier"), Senior Vice President of the Bank, and Robert P. Gallo ("Gallo"), Assistant Vice President of the Bank (collectively: "defendants"). The two count verified complaint alleges deceit and violation of Massachusetts General Laws chapter 93A ("chapter 93A") stemming from certain loan transactions in connection with the development of the Pavilion Shopping Center ("the shopping center") in Bellingham, Massachusetts in 1986, 1987 and 1988. .
In March 1990 the Bank filed an answer as well as a counterclaim and third party complaint against Celtic Development Corporation; Celtic Equipment Company, Inc.; Celtic Concrete Form Company, Inc.; Kenneth and Thomas Racicot, as trustees of Pavilion Realty Trust; Kenneth, Thomas and Russell Racicot, individually; Celtic International, Limited; Celtic Construction Company, Inc.; Celtic Realty, Inc.; and Kenneth and Thomas Racicot, as trustees of Racicot Realty Trust (collectively: "third party defendants"). The eight count counterclaim includes the following two counts: (1) Count I seeking $351,169.07, including interest, costs and attorneys' fees, as a result of the failure of trustees of Pavilion Realty Trust to pay amounts due and owing under a note dated March 18, 1987; and (2) Count II seeking $351,169.07 against third party defendants as a result of an alleged default under the March 18, 1987 note. In October 1990 the third party defendants filed an answer to the counterclaim.
In December 1991 the United States Office of Comptroller of the Currency declared the Bank insolvent and appointed the FDIC as the Bank's receiver. By Endorsed Order of April 9, 1992, the district judge allowed the FDIC's motion to substitute itself as a party in lieu of the Bank.
Before detailing the record for purposes of summary judgment, it is necessary to determine the contents of the record. The FDIC filed numerous and appropriate documents and affidavits in support of summary judgment as well as a statement of facts in accordance with LR. 56.1. Plaintiffs, however, simply filed a copy of the verified complaint.
Rule 56(c) details the matters which this court can consider on a summary judgment motion. The rule states that summary judgment should be rendered "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue of material fact and that the moving party is entitled to a judgment as a matter of law." Rule 56(c), Fed.R.Civ.P.
In the event a complaint is verified, it is appropriate to consider factual averments based on personal knowledge therein as the equivalent of an affidavit for purposes of summary judgment. Sheinkopf v. Stone, 927 F.2d 1259, 1262-1263 (1st Cir.1991). An unverified complaint, however, primarily shows "the nature of the cause of action ... and the opposing party can take advantage of any admissions in it." Ratner v. Young, 465 F.Supp. 386, 389 & n. 5 (D.V.I.1979). Accordingly, plaintiffs' verified complaint, to the extent based on personal knowledge as opposed to conclusory factual and/or legal allegations, forms a part of the summary judgment record. Based on the pleadings, excerpts of depositions and admissions on file, this court finds the following facts.
In November 1986 Celtic Equipment Company, Inc. ("Equipment") executed a promissory note to the Bank in the principal amount of $650,000 ("November 1986 note"). . In return for the loan, the Bank received a security interest in the equipment and inventory of Equipment ("November 1986 loan"). The security agreement, entitled All Asset Security Agreement, included "all personal property and fixtures." (Docket Entry # 16, Ex. B). In conjunction with these transactions and in consideration for the Bank's loan to Equipment, the following individuals and entities executed guaranties in the event of default on the part of Equipment: Kenneth, Russell and Thomas Racicot; Celtic Construction Company, Inc. ("Construction") and Celtic Concrete Form Company, Inc. ("Concrete").3 (Docket Entry # 16, Ex. C).
In September 1987 Kenneth, Russell and Thomas Racicot applied to the Bank for additional funding on behalf of Pavilion Realty Trust ("Pavilion") in order to make certain improvements to the shopping center. After receiving financial statements from the above individuals,4 the Bank and Pavilion executed a Construction Loan Agreement dated October 6, 1987 ("October 1987 loan"). . In accordance with the agreement, the Bank loaned Pavilion $300,000. .
To secure the loan, Pavilion executed a promissory note on October 6, 1987, to the Bank in the principal amount of $300,000 secured by a second mortgage on the shopping center ("October 1987 note"). The October promissory note had a three year term with interest payments to commence on December 31, 1987, and interest and principal payments to commence on January 1, 1988. . First Service Bank for Savings5 held a first mortgage on the property in the original amount of $1,200,000.6 .
As additional security for the October 1987 loan to Pavilion, the following individuals and entities executed guaranties on October 6, 1987: Construction; Russell, Kenneth and Thomas Racicot; Equipment; Celtic Development Corporation ("Development"); Celtic International, Limited ("International"); Celtic Realty, Inc. ("Celtic Realty"); and Racicot Realty Trust ("Racicot Realty"). (Docket Entry # 16, Ex. G). The Bank also received "clouds" on the personal residences of Russell, Kenneth and Thomas Racicot in conjunction with the loan. A "cloud" constitutes an agreement whereby the maker agrees not to refinance or otherwise encumber certain property absent agreement of the recipient of the cloud. (Docket Entry # 16, Ex. K).
In December 1987, as averred by Gallo, Equipment sought to amend the November 1986 note. The Bank agreed to permit Equipment to make interest only payments from December 1987 through February 1988 rather than the originally agreed interest and principal payments. (Docket Entry # 16, Ex. K & L). Gallo further attests that in January 1988 plaintiffs advised the Bank that the "Celtic companies" expected to report a loss of $500,000 for the fiscal year ending June 30, 1987.7 (Docket Entry # 16, Ex. K). The FDIC argues that the above financial status of the companies was contrary to representations made in the financial statements8 provided to the Bank prior to its approval of the October 1987 loan and therefore constitutes a default. (Docket Entry # 16, pp. 6-7). Under the terms of the Construction Loan Agreement, the following event constitutes a default:
The occurrence of any material adverse change in the financial condition...
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