Chrysler Credit Corp. v. BJM, Jr., Inc.

• Decision Date: 14 October 1993
• Docket Number: Civ. A. No. 91-CV-6996.
• Parties: CHRYSLER CREDIT CORPORATION v. B.J.M., Jr., INC., Justin Gambone, Carol J. Gambone and Joseph A. Lashinger. B.J.M., Jr., INC., Justin Gambone, Carol J. Gambone and Joseph A. Lashinger v. CHRYSLER CREDIT CORPORATION, George Tallant and Edward Muscara.
• Court: U.S. District Court — Eastern District of Pennsylvania

834 F. Supp. 813

CHRYSLER CREDIT CORPORATION v. B.J.M., Jr., INC., Justin Gambone, Carol J. Gambone and Joseph A. Lashinger.

B.J.M., Jr., INC., Justin Gambone, Carol J. Gambone and Joseph A. Lashinger v. CHRYSLER CREDIT CORPORATION, George Tallant and Edward Muscara.

Civ. A. No. 91-CV-6996.

United States District Court, E.D. Pennsylvania.

October 14, 1993.

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Peter S. Bejsiuk, Kevin L. Flanagan, John C. Penberthy, III, Capehart & Scatchard, P.A., Mount Laurel, NJ, for Chrysler Credit Corp., George Tallant and Edward Muscara.

Nicholas M. De Vito, Nicholas M. De Vito & Associates, Cleveland, OH, Joseph A. Lashinger, Jr., Fox, Differ, Callahan, Sheridan, O'Neill & Lashinger, Norristown, PA, Peter C. Paul, Tina L. Nugent, W.J. Winterstein, Jr., Rawle & Henderson, Philadelphia, PA, Stanley Morganstern and Christopher M. De Vito, Nicholas M. De Vito & Associates, Cleveland, OH, for B.J.M., Jr., Inc., Justin Gambone, Carol J. Gambone and Joseph A. Lashinger.

DECISION

JOYNER, District Judge.

This consolidated civil action involving claims for debts arising out of a security agreement and master credit arrangement and counterclaims for bad faith, lender liability and negligence was tried before this Court without a jury between June 3 and June 9, 1993. The parties thereafter submitted their proposed findings of fact and conclusions of law in July, 1993 and the matter is now ripe for adjudication. Accordingly, pursuant to Fed.R.Civ.P. 52(a), this Court now renders the following:

FINDINGS OF FACT

1. Chrysler Credit Corporation is a Delaware corporation with offices located at 901 Wilshire Drive, Troy, Michigan and 200 Tournement Drive, Horsham, Pennsylvania and is engaged in the business of providing wholesale financing for the acquisition of new and used motor vehicle inventory for motor vehicle dealerships. It is a subsidiary of the Chrysler Financial Corporation which is, in turn, a subsidiary of Chrysler Corporation. (N.T. 6/3/93, 47-48; 6/04/93, 4; Exhibits P-13, P-21)

2. B.J.M., Jr., Inc. is a Pennsylvania corporation which had, at all relevant times, a principal place of business at 2431 West Main Street, Norristown, Pennsylvania and was engaged in the business of selling new and used Jeep/Eagle and other motor vehicles to the general public under the name "All-Star Jeep/Eagle." (Exhibits P-13, P-27)

3. Joseph Lashinger is an adult individual residing at 129 Stable Road, Norristown, Pennsylvania. (N.T. 6/7/93, 92)

4. Justin and Carol Gambone are adult individuals, husband and wife, who reside at 2130 Wentz Church Road, Lansdale, Pennsylvania. (N.T. 6/8/93, 212)

5. Prior to 1989, one-hundred percent (100%) of the stock of B.J.M., Jr., Inc. was owned by one Benjamin J. Marchese, Jr. (N.T. 6/7/93, 98-100)

6. In October, 1989, Joseph Lashinger and Justin and Carol Gambone purchased 66 2/3 of the stock of B.J.M., Jr., Inc. for $850,000 from Mr. Marchese. One of the provisions of that buy-sell agreement and one of the conditions for Chrysler Credit's approval of the agreement was the understanding that the Lashingers and the Gambones would satisfy for B.J.M., Jr., Inc. a Meridian Bank loan, a Fidelity Bank auto lease and the approximately $209,000 sold-out-of-trust situation which the corporation then had with Chrysler Credit Corporation. (N.T. 6/3/93, 7-8; 6/7/93, 108-110; 6/9/93, 50-51)

7. George Tallant and Edward Muscara are adult individuals who were at all times relevant hereto employed by Chrysler Credit Corporation as Branch Manager and Sales Representative respectively. (N.T. 6/3/93, 4-6; 6/4/93, 91-92)

8. Under the Security Agreement and Master Credit Agreements which Chrysler Credit and B.J.M., Jr., Inc. entered into in May, 1988 and again in May, 1991, interest would begin to accrue upon delivery of each financed vehicle to the dealership and would continue to accrue until such time as the vehicle was paid for in full by the dealership after sale. (N.T. 6/3/93, 67; Exhibit P-13)

9. In May, 1988, prior to Messrs. Lashinger and Gambone's acquisition of an interest in the corporation, B.J.M., Jr., Inc., through its then-principal, B.J. Marchese, Jr. and in conjunction with the execution of a Security and Master Credit Agreement, gave to Chrysler Credit a security interest in all of its "chattel paper, accounts whether or not earned by performance, contract rights, documents, instruments, general intangibles, consumer goods, equipment, fixtures, leasehold improvements, whether now owned or hereafter acquired, together with all additions and accessions thereto," all "inventory, including but not limited to all new and used motor vehicles, campers, travel trailers, mobile homes and motor homes and automotive parts and accessories, whether now owned or hereafter acquired, together with all additions and accessions thereto" and "all proceeds of the property covered by this statement ..." This security interest, in turn, was documented by the filing of financing statements with both the Pennsylvania Department of State and the Office of the Prothonotary of Montgomery County, Pennsylvania on June 3, 1988. (N.T. 6/03/93, 5-7; Exhibits P-2, P-3, and P-4)

10. The Master Credit Agreement and Security Agreement entered into by B.J.M., Jr., Inc. and Chrysler Credit Corporation in May, 1988 was lost and could not be located in Chrysler Credit's files. That agreement, however, had the same terms and conditions as did the Master Credit Agreement and Security Agreement which the parties executed in May, 1991. (N.T. 6/03/93, 12-13; Exhibit P-10)

11. A sold-out-of-trust situation arises when an automotive dealership sells and receives payment for a vehicle which they have financed but fails to remit payment for that vehicle to the wholesale (or retail) credit source. (N.T. 6/3/93, 8-9)

12. After the November, 1989 buy-out, Justin Gambone assumed the position of President and general manager of B.J.M., Jr., Inc., trading as All-Star Jeep/Eagle. Joseph Lashinger became the Vice President of the corporation. (N.T. 6/8/93, 218; Exhibit P-5)

13. In November, 1989 and again in November, 1990, B.J.M., Jr., Inc., on these occasions through its principals Lashinger and Gambone, gave security interests to Madison Bank in "all of the debtor's property and assets whether existing or hereafter acquired or created, including all of ... B.J.M.'s chattel paper, fixtures, accounts, instruments, money, inventories, equipment and all accessories, substitutions and appurtenances thereto, documents, general intangibles, records, insurance policies and all cash and non-cash collateral and the proceeds and products of the foregoing ..." to secure loans in the amounts of $250,000 and $100,000, respectively. On November 16, 1990, that security interest was recorded and filed in the office of the Prothonotary of Montgomery County, Pennsylvania. (N.T. 6/03/93, 86-91; 6/04/93, 71-78; Exhibit P-39)

14. Justin Gambone holds a Bachelor's degree in Business Administration from Temple University and has partially completed graduate work at Temple toward an advanced business degree. Since his graduation from college in 1974, Mr. Gambone has been employed primarily in the automotive sales industry in the capacity of accountant, office manager, controller and general manager and for a time was also self-employed as a tax preparer/accountant and small business planner. From 1978 to 1989, he was employed as the general manager of Marchese Honda. (N.T. 6/8/93, 212-217; Exhibit D-54)

15. Joseph Lashinger earned both a Bachelor's degree in Political Science and a Master's degree in American National Government from the University of Pennsylvania and has a law degree from the Delaware (Widener) Law School. He is a partner in the Norristown, Pennsylvania law firm of Fox, Differ, Callahan, O'Neill & Lashinger specializing in family law and was an adjunct professor of family law at Widener Law School for four years. Mr. Lashinger is also a contributing editor to the Pennsylvania Family Lawyer, a former member of the Pennsylvania House of Representatives and a partner in a Harrisburg-area lobbying firm. In addition, Mr. Lashinger had in the past represented the legal interests of Mr. Marchese and other automotive dealerships in Montgomery County; he is a former director of the Madison Bank in Blue Bell, Pennsylvania, a former restaurant owner and had done tax consulting work in the late 1970's-mid 1980's. (N.T. 6/7/93, 92-97)

16. Prior to creating and executing the November, 1989 buy-sell agreement, Messrs. Lashinger and Gambone did some due diligence and, together with one of Mr. Lashinger's law partners examined the dealership's and the corporation's debt structure, operations and expenses and spoke with Chrysler Motors' representatives about what products would be available for sale in the coming year. (N.T. 6/7/93, 100-101)

17. At the time that the Lashingers and Gambones were negotiating with Mr. Marchese for the sale of 66 2/3 of the stock of B.J.M., Jr., Inc., the All-Star dealership was sold-out-of-trust in the amount of $226,000. The dealership had been placed on finance hold by Chrysler Credit Corporation since March of 1989 with the effect that it hadn't been able to acquire new or used vehicles for its inventory since that time. (N.T. 6/3/93, 26-27; 6/7/93, 101-102)

18. Although Chrysler Credit did not then declare B.J.M., Jr., Inc. in default under its Security/Credit Agreements as a result of the out-of-trust situation in early November, 1989, Mr. Tallant did threaten to "padlock the doors" of the dealership if settlement with Lashinger and Gambone could not be immediately consummated. (N.T. 6/7/93, 102-103)

19. At the time of their acquisition of 66 2/3 of the B.J.M., Jr., Inc. stock and as a further condition of Chrysler Credit's approval of the buy-sell agreement, the Lashingers and the Gambones executed continuing...