City Federal Savings and Loan Ass'n v. Crowley

• Decision Date: 24 April 1975
• Docket Number: Civ. A. No. 72-C-501.
• Citation: 393 F. Supp. 644
• Parties: CITY FEDERAL SAVINGS AND LOAN ASSOCIATION, Plaintiff, v. Robert P. CROWLEY, Sr., et al., Defendants.
• Court: U.S. District Court — Eastern District of Wisconsin

393 F. Supp. 644

CITY FEDERAL SAVINGS AND LOAN ASSOCIATION, Plaintiff, v. Robert P. CROWLEY, Sr., et al., Defendants.

Civ. A. No. 72-C-501.

United States District Court, E. D. Wisconsin.

April 24, 1975.

COPYRIGHT MATERIAL OMITTED

L. C. Hammond, Jr., W. S. Parsons, and Ross R. Kinney, Milwaukee, Wis., for plaintiff.

Robert J. Loots, Clay R. Williams, and Edward A. Porter, Milwaukee, Wis., for defendants Robert P. Crowley, Sr., and Mary D. Crowley.

Gregory Gramling, Jr., Milwaukee, Wis., for defendants Robert P. Crowley, Jr., Patricia Crowley, David B. Crowley, Paul V. Crowley, Judith Crowley, and Crowley Corp.

Bernard F. Mathiowetz, Milwaukee, Wis., for R & M Corp., Benjamin V. Dela-Hunt, James W. Goggin, Sr., and Joseph R. Vallier.

David E. Beckwith and Robert A. Christensen, Milwaukee, Wis., for defendant Savings Ass'n Retirement Fund.

No appearance for defendant Fidelity and Deposit Co. of Maryland.

DECISION AND ORDER

REYNOLDS, Chief Judge.

This is an action by plaintiff City Federal Savings and Loan Association ("City") in which it is alleged that several of its former officers and directors committed numerous acts of mismanagement and self-dealing over an extended period of time. The complaint contains fifteen separate claims and seeks damages, injunctive relief, and a declaratory judgment. The heart of the complaint is that during the period between January 1, 1954 and February 20, 1971, the defendant officers and directors breached their fiduciary duties to City by usurping various corporate opportunities, receiving excessive compensation, and causing City to make payments for their personal benefit. These actions are alleged to be violative of regulations promulgated by the Federal Home Loan Bank Board and of the federal common law governing the internal management of federal savings and loan associations.

Plaintiff City is a federal savings and loan association organized and existing under § 5 of the Home Owners' Loan Act of 1933, as amended, 12 U.S.C. § 1464(a). City's office and place of business is located at 600 West Wisconsin Avenue, Milwaukee, Wisconsin.

Defendant Robert P. Crowley, Sr., ("Robert Sr.") was the president, managing officer, and a director of City until February 20, 1971. His wife, Mary D. Crowley ("Mary"), was a director of City until August 1968. Their son, Robert P. Crowley, Jr., ("Robert Jr.") was secretary-treasurer of City from January 1955 through February 1971, and a director of City from August 1968 to September 1971. David V. Crowley ("David"), Robert Jr.'s brother, was assistant secretary-treasurer from April 1960 to February 1971. Paul V. Crowley ("Paul"), a third son, was assistant secretary-treasurer from August 1961 to August 1966 and also from January 1968 to November 1969. Patricia Crowley ("Patricia") is Robert Jr.'s wife. Judith Crowley ("Judith") is David's wife.

Defendants R & M Corporation and Crowley Corporation are Wisconsin corporations which were owned and controlled by members of the Crowley family. R & M Corporation engaged in the business of appraising real property being mortgaged to City. Crowley Corporation engaged in the business of inspecting the progress of construction of improvements to real property mortgaged to City, selling hazard insurance policies covering real property mortgaged to City, and to a limited extent, appraising real property being mortgaged to City.

Defendants Dela-Hunt, Goggin, and Vallier were directors of City at times material to the complaint.

Defendant Savings Association Retirement Fund ("SARF") is a multi-employer, nonprofit pension trust through which City provided retirement and other benefits for its employees. Defendant John E. Stipp ("Stipp"), a trustee of SARF, is named as a defendant only in that capacity.

Defendant Fidelity and Deposit Company of Maryland ("Fidelity") is a Maryland corporation authorized to engage in the business of writing surety bonds in Wisconsin and elsewhere.

The complaint alleges that until February 20, 1971, the Crowley family controlled City by soliciting continuous proxies from member borrowers and depositors running to themselves or persons designated by them, voting such proxies for themselves or persons designated by them as directors, and as directors electing themselves officers of City.

The original complaint contains fifteen distinct claims against the several defendants. Claim I alleges that from January 1, 1955 through February 1971, the directors wasted City's assets, in violation of their fiduciary duties to City and its members, by paying Robert Sr., Robert Jr., and David salaries and bonuses which, in some instances, lacked any consideration and consistently exceeded the reasonable value of the services rendered. City demands an accounting by Robert Sr., Robert Jr., and David to determine the amount that the salaries and bonuses were excessive, and seeks to recover the amount of excessive salaries and bonuses from the director defendants and from David.

Claim II seeks a declaratory judgment that Robert Sr. is entitled to no further benefits under a deferred compensation contract and also seeks return of payments already made on the grounds that the payments were excessive and disproportionate, and that Robert Sr. breached the contract by engaging in misconduct violative of his fiduciary duties to City and its members.

Claim III concerns the SARF pension plan. It is alleged that the benefits payable to Robert Sr. and Robert Jr. are excessive and that the contributions of City to SARF for these excessive benefits were wasteful. It is further alleged that Robert Sr. and Robert Jr. engaged in misconduct violative of their fiduciary duties to City and its members and that they are, therefore, barred from receiving any benefits from SARF. City seeks recovery of any SARF benefits already paid, a declaratory judgment that Robert Sr. and Robert Jr. are entitled to no further SARF benefits, a permanent injunction against payment, and recovery from the former directors of the amount of excessive SARF contributions which they authorized and which is not otherwise received or credited to City, with interest.

Claim IV deals with amounts paid by City for expenses insured by or for Crowley family members. It is alleged that Robert Sr., Robert Jr., David, and Paul caused City to pay expenses and falsely represented to City's board of directors that the expenses were for City's benefit when actually a substantial portion of the expenses were incurred for the Crowleys' personal use, comfort, or entertainment, or for the use and benefit of Crowley Corporation or R & M Corporation. Robert Sr., Robert Jr., David, and Paul allegedly kept inadequate records of the expenses or caused the records to be destroyed. The complaint contains a schedule of the amounts which were allegedly fraudulently converted or wasted by City's officers and directors who should have discovered the misrepresentations. An accounting is sought for all the expenses listed in the complaint and judgment for the amount of expenses which cannot be accounted for.

Claim V is concerned with automobile transactions. It is alleged that Robert Sr. and Robert Jr. converted City funds to their own use on three separate occasions in purchasing automobiles, and that they concealed the conversions. Damages are sought from both Robert Sr. and Robert Jr.

Claim VI, alleges that the defendant directors wasted City's assets by permitting three home mortgage loans at preferential interest rates to Crowley family members, and seeks recovery of the interest which City lost.

Claim VII concerns real estate appraisal fees paid by City to defendants Robert Sr., Robert Jr., R & M Corporation, and Crowley Corporation. It is alleged that the appraisals were done without meaningful evaluation, that the fees paid by City for the reports were grossly excessive, and that Robert Sr., Robert Jr., and David caused City to bear all the expenses of preparation of the reports by having City's employees type them on City's time using City's offices and supplies. The signers of the reports — Robert Sr., Robert Jr., David, and Paul — allegedly failed to disclose these facts to City's directors, converted City's payments, and received payments for the reports in violation of 12 C.F.R. § 545.6-10. The complaint further charges that the above-named signers of the reports wrongfully appropriated a business opportunity, and that City's officers and directors wasted City's assets by allowing payment to be made for the reports. Damages are sought against the former directors, the two Crowley controlled corporations, and Paul.

Claim VIII concerns fees paid by City to Crowley Corporation, Robert Jr., and David for inspections and reports of inspections of construction progress on real estate developments financed by City. It is alleged that some inspections were unnecessary, that some inspections were in fact never done, that inspections were unsubstantiated, that the fees were excessive, and that inspection fees were paid for David's services at times he should have devoted to City's business. Defendants are charged with converting the fees, receiving payments in violation of 12 C.F.R. § 545.6-10, wasting City's funds, and wrongfully appropriating a business opportunity. An accounting and damages are demanded.

Claim IX alleges that City paid Robert Sr. and Robert Jr. an excessive amount of money for title opinions which were done at City's expense and at times they should have devoted to City's business. Thus, it is claimed that Robert Sr. and Robert Jr. thereby converted the fees in violation of federal common law and 12 C.F.R. § 545.6-10 and wrongfully appropriated a business opportunity. Further, the directors are charged with wasting City's assets by paying the fees. A money judgment against all the directors is demanded.

Claim X alleges that Crowley family members utilized City's facilities to conduct the business of selling and...