Empire Merchandising Corp. v. Bancorp Rhode Island, Inc.
| Decision Date | 15 September 2011 |
| Docket Number | C. A. PB 08-3372 |
| Parties | EMPIRE MERCHANDISING CORP. and JOSEPH PIETRANTONIO v. BANCORP RHODE ISLAND, INC. d/b/a BANKRI, BERNARD LABUSH, and STEVAN H. LABUSH |
| Court | Rhode Island Superior Court |
DECISION
Before the Court are various post-trial motions following a jury verdict against Defendant Bancorp Rhode Island, Inc. d/b/a BankRI (BankRI). At trial, the jury found BankRI liable for breach of contract, negligence, and intentional infliction of emotion distress.[1]The jury awarded Plaintiff Empire Merchandising Corporation (EMC) $1, 415, 047, representing the value of the business that was lost. Plaintiff Joseph Pietrantonio (Mr. Pietrantonio) was awarded $147, 960 as lost wages and $347, 718.47 as damages for his claim of emotional distress. The amounts awarded to Plaintiffs against BankRI with interest, totaled $3, 244, 706.81. Following the verdict, BankRI brought the instant Renewed Motion for Judgment as a Matter of Law and Motion for a New Trial pursuant to Super. R. Civ. P. 50 and 59 respectively.
The instant matter arises out of BankRI's alleged mismanagement of EMC's commercial bank accounts and line of credit, as well as its alleged misconduct in connection with an embezzlement scheme executed by an EMC employee. EMC is a closely held Rhode Island corporation that owned and operated several "Dollar Depot" retail stores in Seekonk, Massachusetts and Pawtucket and Cumberland, Rhode Island. Mr. Pietrantonio is the President and sole stockholder. BankRI is a state-chartered financial institution with banking branches throughout much of Rhode Island.
In or about 1971, Mr. Pietrantonio, on behalf of EMC, opened a business checking account with a predecessor of BankRI. At that time, Mr. Pietrantonio was required to sign a Certificate of Authority and Signature Card. Both Mr. Pietrantonio and his former wife, Joann Pietrantonio (Ms. Pietrantonio) (collectively referred to herein as "Pietrantonios"), were authorized users.[2] In 1985, Mr. Pietrantonio, on behalf of EMC, applied for and received a $100, 000 line of credit with BankRI. In connection therewith, Mr. Pietrantonio provided BankRI with a personal guaranty and EMC granted a security interest in the entirety of its inventory.
In the years following, Mr. Pietrantonio executed additional loan agreements as was necessary from time to time to renew EMC's line of credit. Specifically, on or about January 16, 2004, Mr. Pietrantonio renewed EMC's line of credit with BankRI by executing a business loan agreement (Business Loan Agreement) providing for a $250, 000 line of credit. See Pls.' Exs. 1, 9. In accordance with the Business Loan Agreement, Mr. Pietrantonio was authorized "to request advances and authorize payments under the line of credit." See Pls.' Ex. 1. As security for the line of credit, EMC again granted to BankRI a security interest covering its business assets and Mr. Pietrantonio again executed a commercial guaranty (Guaranty) personally guarantying repayment to BankRI. See Pls.' Ex. 78; see also Defs.' Ex. U. On or about February 7, 2005, Mr. Pietrantonio renewed EMC's line of credit and the terms of the Business Loan Agreement for another year by executing a loan modification agreement and reaffirmation of guarantor. See Pls.' Exs. 2-3.
Prior to their divorce, the Pietrantonios split responsibility for the management and operations of the Dollar Depot stores. Until 2002, Mr. Pietrantonio oversaw the daily operations of the stores and purchased the inventory, while Ms. Pietrantonio was responsible for EMC's daily accounting and bookkeeping. Following the Pietrantonios' divorce, however, Rhonda Hastings (Ms. Hastings) became EMC's bookkeeper. Among her responsibilities were: (1) posting all purchase invoices and printing all checks; (2) mailing all checks; (3) reconciling all business checking accounts on a monthly basis; (4) preparing, accounting for, and recording all deposits of cash to be picked up by Dunbar Armored Services; and (5) managing all incoming and outgoing mail. See Defs.' Ex. A10. Because Ms. Hastings had little bookkeeping experience, Mr. Pietrantonio asked Marilyn Solomon (Ms. Solomon), EMC's certified public accountant, to oversee Ms. Hastings. Ms. Solomon, however, was unable to devote adequate time to EMC, and Mr. Pietrantonio subsequently hired the Labushes.
With access to and control of EMC s daily cash flow, in or about 2004, Ms. Hastings began to embezzle EMC's funds. As part of her scheme, Ms. Hastings would properly record EMC's sales on the weekly sales and reconciliation reports, but withhold amounts of cash from its bank deposits for her own personal use. See Defs.' Exs. L, M, O, A10. During this time, approximately 946 checks were presented for payment to BankRI upon insufficient funds as a result of cash shortfalls in EMC's accounts. See Pls.' Ex. 19.
In an attempt to conceal the fact that she had been diverting monies generated from EMC's daily operations, Ms. Hastings obtained online access to EMC's line of credit and transferred funds to its operating accounts. See Defs.' Ex. A10. In so doing, Ms. Hastings was able to substitute missing cash with line of credit borrowings and cover checks drawn on these otherwise deficient accounts.[3] See id Additionally, Ms. Hastings further concealed her scheme by altering and/or manipulating several monthly bank statements from BankRI, various weekly reconciliation reports, Dunbar Armored Services reports, bank deposit tickets, and disbursement checks. Id Between March 2005 and August 2005, Ms. Hastings maxed-out EMC's $250, 000 line of credit with BankRI, and overall, she embezzled approximately $540, 000 of EMC's cash.[4] Id.
After discovering that Ms. Hastings had accessed EMC's line of credit, Mr. Pietrantonio contacted BankRI to inform them that an employee had accessed it without his authorization and requested that BankRI forgive the debt. BankRI refused and thereafter continued to charge interest on EMC's balance. On or about January 23, 2006, Bank RI, through counsel, informed EMC and Mr. Pietrantonio that the entire outstanding balance (including interest, attorneys' fees, and costs) was immediately due and payable. See Pls.' Ex. 9. BankRI informed EMC and Mr. Pietrantonio "that if the Indebtedness . . . [was] not paid to BankRI in full via certified funds or bank check on or before March 8, 2006, BankRI [would] exercise its rights and remedies to collect the Indebtedness from each of [EMC] and [Mr. Pietrantonio]." Id
In the aftermath of Ms. Hastings' embezzlement scheme, EMC required immediate financing in order to continue purchasing merchandise, meeting its ongoing payroll obligations, and paying business expenses. EMC, however, was unable to obtain additional financing. See Pls.' Exs. 10, 15. In particular, on or about March 31, 2006, Rockland Trust denied Mr. Pietrantonio's application for a $300, 000 loan. See Pls.' Ex. 10. Rockland Trust stated that its reason for denying the application was EMC's "inability to provide collateral as [the] existing lender [was] unwilling to release [its] collateral . . . [and EMC's] inability to repay the requested loan based on historical operations." Id
Despite a personal loan to EMC from Mr. Pietrantonio in the amount of $75, 000 and an additional $100, 000 bank loan from Citizens Bank, by the end of 2006, EMC lacked sufficient funding to continue its operations. On January 31, 2007, EMC notified its creditors that of its remaining stores, the Cumberland Store had closed on January 5, 2007, and the Pawtucket Store would close on February 4, 2007. See Pls.' Ex. 18.
In May 2008, Plaintiffs filed a seventeen-count Complaint against BankRI and the Labushes. As relevant to these post-trial motions, following the conclusion of the trial and prior to charging the jury, this Court heard arguments on BankRI's Motion for Judgment as a Matter of Law. In that connection, the Court granted BankRI's motion as to Counts II (Breach of Oral Contract), III (Breach of Implied-in-Fact Contract), IV (Breach of Contract by Estoppel), VII (Intentional Interference with Advantageous Relations), VIII (Negligent Infliction of Emotional Distress), X (Unjust Enrichment), and XI (Declaratory Relief). Following a hearing on the jury instructions and related matters, closing arguments, and the Court's charge, the jury deliberated and returned a verdict in Plaintiffs' favor. The Court now has before it BankRI's Renewed Motion for Judgment as a Matter of Law and Motion for a New Trial.
Rule 50 of the Superior Court Rules of Civil Procedure governs motions for judgment as a matter of law. It provides in pertinent part:
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