Central Bank, N.A. v. Baldwin
| Decision Date | 28 August 1978 |
| Docket Number | No. 9250,9250 |
| Parties | CENTRAL BANK, N.A., Appellant and Cross Respondent, v. Donald W. BALDWIN, Nova J. Baldwin, William A. Teipner, Martha S. Teipner, Jack S. Sargent, Gwen W. Sargent, Robert M. Stampfli, and Patricia Stampfli, Respondents and Cross Appellants. |
| Court | Nevada Supreme Court |
Charles E. Springer, Reno, for appellant and cross respondent.
John J. McCune, Reno, for respondents and cross appellants.
Respondents were various purchasers of several apartment complex projects located in Arizona and appellant Central Bank was successfully sued by respondents as a joint venturer in these projects. Appellant claims no joint venture existed and urges reversal of the judgment.
Testimony indicated that Sam J. Harris, a California building contractor, was approached by James Nichols, then vice-president and mortgage officer of Central Bank, to "joint venture" some construction projects. The action of Nichols was approved by Michael Rafton, president and chairman of the board of Central Bank. Central Bank was precluded by law from loaning money to any entity in which it had a stock equity interest. Appellant Bank therefore arranged to have its wholly owned subsidiary Bankers SBIC form with Harris a new construction corporation, Greater Sierra Construction Company. The stock of Greater Sierra was divided equally between Harris and SBIC. The majority of the directors on the SBIC board were also directors of Central Bank and at least one director of Greater Sierra was also a director of SBIC and either a director or legal counsel for Central Bank.
Testimony indicated that the principal motivation for forming Greater Sierra was to enable Central Bank to share profits of the venture in addition to the customary bank earnings pursuant to outstanding loans.
Central Bank, Greater Sierra, SBIC, and Harris engaged in several construction projects. Harris and Greater Sierra were required to obtain construction loans from no other source than Central Bank, and their applications for financing always bypassed the conventional loan processing at Central Bank and were given special attention. Greater Sierra had only one bank account at Central Bank in which it deposited all down payments received from the various projects.
Greater Sierra and Harris entered into construction contracts with the various respondents for two large apartment complexes in Arizona. Harris refused to sign the substitute contract submitted by the respondents but complied after an officer of Central Bank reviewed the contracts and ordered Harris to sign. During negotiations, this bank officer assured respondents that Central Bank would assure quality of construction through its inspections. The title company documents, however, specified that the respondents would inspect the construction projects themselves. Central Bank nevertheless conducted inspections, but neither the respondents, Harris, nor Greater Sierra ever saw those inspection reports.
During the course of several construction projects, Greater Sierra took a large number of promissory notes issued incidental to second trust deeds. These "seconds" constituted the assets and represented the profits of Greater Sierra. When operating capital became short and Harris wanted to discount some of the "seconds" to obtain necessary cash, it was Central Bank which prohibited Greater Sierra from so obtaining the cash. Eventually Central Bank established a line of credit for Greater Sierra and demanded delivery of the "seconds" to it. The line of credit was approximately two million dollars, but the value of the "seconds" and some real property deeded to Central Bank approximated seven million dollars.
The Comptroller of the Currency requested Central Bank to have SBIC reduce its ownership in Greater Sierra because it appeared under new regulations that Central Bank was loaning money to an affiliate in violation of law. SBIC, with four of its six directors also sitting as directors of Central Bank and another SBIC director being an employee of the Bank, reduced its shareholding in Greater Sierra from fifty percent to twenty-five percent. Testimony indicated that the Comptroller of the Currency had no jurisdiction over SBIC which could have refused to reduce its holding but for the control of Central Bank.
Eventually the apartment complexes purchased by respondents proved to be defective in construction, and Harris, Greater Sierra, and Central Bank were sued as joint venturers....
To continue reading
Request your trial
- Bridges v. Baca
-
Kennedy v. Columbia Lumber and Mfg. Co., Inc.
...practice for a lender. In such a situation, the lender might be said to be a joint venturer. See generally Central Bank v. Baldwin, 94 Nev. 581, 583 P.2d 1087 (1978). The lender may be liable if it is so amalgamated with the developer or builder so as to blur its legal distinction. See gene......
-
Gibson v. Credit Suisse AG
...statutory provision protecting lenders from defective property claims was enacted in response to Connor. See Central Bank, N.A. v. Baldwin, 583 P.2d 1087, 1089 (Nev. 1978). Plaintiffs assert the facts concerning the bank in Connor are the same as the facts regarding Credit Suisse. Plaintiff......
-
International Industries, Inc. v. United Mortg. Co.
...withhold rent without suffering a default. We need not consider this issue because it was not raised at the trial. Central Bank v. Baldwin, 94 Nev. 581, 583 P.2d 1087 (1978); Penrose v. O'Hara, 92 Nev. 685, 557 P.2d 276 (1976). Nevertheless, the argument is without merit. International was ......