Dommel Props., LLC v. Jonestown Bank & Trust Co.

Decision Date19 March 2013
Docket NumberCivil Action No. 1:11-cv-2316
CourtU.S. District Court — Middle District of Pennsylvania

(Judge Conner)


Presently before the court in the above-captioned matter are the motions to dismiss of defendants Lebanon County Tax Claim Bureau and Sallie A. Neuin (collectively, where appropriate, the "county defendants"), (Doc. 29), and defendant Jonestown Bank and Trust Company, (Doc. 30). The motions are fully briefed, and are ripe for disposition. For the reasons set forth below, the court will grant each motion in part, and will deny each motion in part.

I. Factual Background

When ruling on a motion to dismiss under Rule 12(b)(6), the court must "accept all factual allegations as true, construe the complaint in the light most favorable to the plaintiff, and determine whether, under any reasonable reading of the complaint, the plaintiff may be entitled to relief." Gelman v. State Farm Mut. Auto. Ins. Co., 583 F.3d 187, 190 (3d Cir. 2009) (quoting Phillips v. County of Allegheny, 515 F.3d 224, 233 (3d Cir. 2008)); see also Kanter v. Barella, 489 F.3d 170,177 (3d Cir. 2007) (quoting Evancho v. Fisher, 423 F.3d 347, 350 (3d Cir. 2005)). Accordingly, the court will present the well-pleaded facts as set forth in the complaint.

Plaintiffs William J. Dommel and his father Robert W. Dommel reside in Palmyra and Drumore Pennsylvania, respectively. The Dommels engage in the horse breeding trade, through their businesses Land of Believe Farm, Inc., and Dommel Properties, LLC, both of which are also plaintiffs in the above-captioned matter. Plaintiffs filed the Complaint (Doc. 1) against defendants The Lebanon County Tax Claim Bureau (the "TCB"), a municipal agency located in Lebanon, Pennsylvania; Jonestown Bank (the "Bank"), a banking corporation located in Cleona, Pennsylvania; and Salle A. Neuin ("Neuin"), Director of the TCB and a member of the Board of Directors of the Bank.

A. The Dommel Properties and Promissory Notes

Collectively, the Dommels have been in the commercial horse breeding business for over twenty-five years. Of relevance to this litigation are three properties currently or at one time owned by the Dommels. The first ("Farm One") is located in Palmyra, and consists of 96 acres of farmland, including 62 horse stalls in four barns, a pond, and a four bedroom home. The Land of Believe Farm ("Farm Two") is also located in Palmyra, and consists of 68 acres, upon which sit a two-story home and a number of horse barns and outbuildings. The Dommels live on Farm Two, where they board, breed, and foal thirty-five thoroughbred horses. Finally, the Dommels owned, but have sold, a property known as the "HuntingCamp," in Lycoming County, that consisted of five hundred acres of hunting land. The Dommels sold this property in March 2010, for $575,000.

On March 26, 2006, the Dommels and Land of Believe Farm, Inc., executed a Demand Promissory Note with the Bank (the "First Note"). The First Note provided a $1.3 million line of credit to be used to expand the Dommels' horse breeding business, and was secured by a mortgage against Farm One and Farm Two. Dommel Properties LLC signed a Guaranty and Suretyship agreement, guaranteeing Land of Believe Farm, Inc.'s repayment of the First Note.

On January 23, 2007, the Dommels took out a construction loan with the Bank, in the amount of $2,425,000 (the "Second Note"). The Dommels intended to use this loan to finance construction on Farm Two. On the same day, Land of Believe Farm, Inc. and Dommel Properties LLC signed a Guaranty and Suretyship agreement, guarantying the Dommels' repayment of the Second Note, which was secured by a mortgage against Farm One and Farm Two.

On May 31, 2007, the Dommels secured a loan from the Bank in the amount of $605,000 (the "Third Note"). Land of Believe Farm, Inc. and Dommel Properties, LLC signed a Guaranty and Suretyship agreement, guaranteeing the Dommels' repayment of the Third Note. The Third Note was secured by a mortgage against the Hunting Camp.

According to the Complaint, at no time during the executions of the First, Second, or Third Notes did the Dommels have counsel present, nor were the agreements reviewed by counsel.

B. Farm One

The Dommels listed Farm One for private sale in 2007, and received a bona fide offer of $4.5 million dollars, but a sale was never consummated. The unsuccessful sale of Farm One, coupled with a lull in the market for thoroughbred horses brought on by the economic recession of recent years, put the Dommels into a financially precarious position. Mr. Dommel1 met with bank executives to express his concern about ongoing construction on Farm Two, given the failed sale of Farm One. According to the Complaint, the Bank encouraged Mr. Dommel to continue with construction on Farm Two, notwithstanding his over-extended credit line, and "not to worry, we will work it out." (Doc. 1 at 6).

The Dommels saw a 50% decline in business in 2007, from breeding and boarding 80-90 horses prior to that year, to fewer than 50 horses after. They were no longer able meet their monthly payment obligations to the Bank. On October 10, 2008, the Bank confessed judgment against the Dommels in the amount of $1,520,827.33 on the First Note; $2,936,408.53 on the Second Note; and $716,424.24 on the Third Note.2

Plaintiffs assert that Mr. Dommel met repeatedly with executives from the Bank throughout the fall and winter of 2008, during which time they repeatedly assured him that the Bank would continue to work with him to resolve the debts, notwithstanding the confessed judgments on the notes. Allegedly, the Bank also represented to Mr. Dommel that it would not execute upon the judgments.

The Dommels held a public auction for Farm One on August 21, 2008. The auction was attended by developers, horse breeders, and investors, numbering over 150. According to the Complaint, a Senior Vice President of the Bank announced at the podium that any offer was "contingent upon approval by the Bank's Board of Directors." (Id. at 8). Plaintiffs allege that this statement was made in an effort to chill the bidding. Farm One received a high bid of $1,815,000,3 but the Bank rejected it, purportedly to avoid crediting the equity against the Dommels' debt, and to pave the way for the Bank's ownership of Farm One.

The Dommels had Farm One appraised in July 2008, and it was valued at $2.3 million. In June 2009, however, the Bank had its own appraiser assess Farm One, who devalued it by 46%. The Bank conducted a sheriff's sale of Farm One on July 23, 2009, "surreptitiously" purchasing the property for $11,053.31. Plaintiffs allege that the sheriff's sale was conducted to usurp the Dommels' property.

On January 18, 2010, the Bank filed a petition to fix the fair market value of Farm One.4 At a hearing on September 27, 2011, the court fixed the fair market value of Farm One as $1.5 million, crediting the Dommels with this amount and any accrued interest and legal fees. According to plaintiffs' Complaint, the Bank has not credited the $1.5 million against the Dommels' debt.

C. Farm Two

Neuin is a member of the Bank's Board of Directors. She is also the Treasurer for Lebanon County and Director of the TCB. She is married to the Director Emeritus and former President of Jonestown Bank, Howard M. Neuin; together, they are two of the Bank's largest shareholders.

Plaintiffs allege that Neuin, through her positions at the Bank and the TCB, discovered confidential information related to the Dommels, the properties that they owned, the value of their properties, and their businesses, collateral, and clients. According to plaintiffs' Complaint, Neuin was aware of the Dommels' history with the bank, including their loan agreements and borrowing history, and with their tax situation. On May 25, 2011 and July 7, 2011, plaintiff Dommel Properties LLC received a notice from the TCB stating that, due to delinquent real estate taxes during tax year 2009, the TCB would hold a tax sale of Farm Two on September 12, 2011. Plaintiffs allege that notice of the sale for delinquent taxes was not properly "posted."

Throughout the spring and summer of 2011, the Dommels continued to meet with the Bank in an effort to negotiate a resolution to their outstanding debt. According to the Dommels, they were repeatedly assured by Bank executives that the Bank had no interest in taking Farm Two. The Complaint details one occasion in August 2011, when Mr. Dommel met with Bank Vice President Richard Rollman ("Rollman"). Rollman allegedly agreed to negotiate in good faith with the Dommels to reach a settlement proposal that could be taken to the Bank Board for approval. Rollman continued to assure Mr. Dommel that the Bank would not seize the farm. On September 9, 2011, three days before the tax sale, Mr. Dommel met with Roger Jeremiah ("Jeremiah"), Senior Vice President of the Bank, who assured Mr. Dommel that the bank would not bid on Farm Two. Mr. Dommel gave the Bank $5,000 as a good faith payment toward his outstanding debt. Mr. Dommel spoke to Rollman again on September 9, who again assured him that the Bank was not planning to bid on Farm Two.

On September 12, 2011, the TCB held the tax sale on Farm Two. The Dommels did not attend. According to the Complaint, notwithstanding their assurances to the contrary, the Bank "surreptitiously" purchased the property at an "upset price" of $110,401.95. (See Doc. 1 at 11). When Mr. Dommel called the TCB on September 13, 2011, to inquire as to the outcome of the sale, Neuin allegedly informed him "We own your property. You will be looking for a new place to live." (Id.) Mr. Dommel then spoke with Jeremiah, who advised him that the Bankpurchased the property because "it puts us . . . in a better position." (Id....

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