Kovian v. Fulton County Nat. Bank and Trust Co., 86-CV-154.

• Citation: 647 F. Supp. 830
• Decision Date: 10 November 1986
• Docket Number: No. 86-CV-154.,86-CV-154.
• Parties: George KOVIAN, Plaintiff, v. The FULTON COUNTY NATIONAL BANK AND TRUST COMPANY, Charles Moyses, John Valerius, Vincent Salluzzo, Robert Salluzzo, John Gleason, Gleason and Salluzzo, Adirondack Homesites, Inc., Capital Medical Leasing Corporation, Hoye & Hoye, and Theodore E. Hoye, Jr., Defendants.
• Court: United States District Courts. 2nd Circuit. United States District Court of Northern District of New York

647 F. Supp. 830

George KOVIAN, Plaintiff, v. The FULTON COUNTY NATIONAL BANK AND TRUST COMPANY, Charles Moyses, John Valerius, Vincent Salluzzo, Robert Salluzzo, John Gleason, Gleason and Salluzzo, Adirondack Homesites, Inc., Capital Medical Leasing Corporation, Hoye & Hoye, and Theodore E. Hoye, Jr., Defendants.

No. 86-CV-154.

United States District Court, N.D. New York.

November 10, 1986.

Oliver & Oliver, Albany, N.Y., for plaintiff; Lewis B. Oliver, of counsel.

Roche, Corrigan, McCoy & Bush, Albany, N.Y., for defendants Hoye & Hoye and Theodore E. Hoye, Jr.; Robert Roche, of counsel.

Wood, Holtzworth & Seward, Gloversville, N.Y., for defendant Fulton County Nat. Bank and Trust Co.; Jerry Wood, of counsel.

Fitzpatrick, Trombley, Owens & Lahtinen, Plattsburgh, N.Y., for defendants Gleason & Salluzzo, Robert Salluzzo and John Gleason; William L. Owens, of counsel.

Lombardi, Reinhard, Walsh & Harrison, Albany, N.Y., for defendants Vincent Salluzzo, Adirondack Homesites Inc. and Capital Medical Leasing Corp.; Richard P. Walsh, Jr., of counsel.

James C. Hayes III, Amsterdam, N.Y., for defendant John Valerius.

Lomanto & Jung, Gloversville, N.Y., for defendant Charles Moyses; Edward S. Lomanto, of counsel.

MEMORANDUM-DECISION AND ORDER

MUNSON, Chief Judge.

Defendant's motion pursuant to F.R. Civ.P. 12(b)(6) to dismiss the amended complaint in the above-captioned action raises difficult questions concerning the extent to which the civil remedies provided by the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. §§ 1961-1968 (1982), are available in disputes arising out of complex business transactions. Plaintiff's inartfully pleaded amended complaint, organized into six "claims," essentially raises seventeen separate possible bases of liability under RICO, all arising out of a single business transaction which transferred plaintiff's stock in a corporation he formed some years earlier to one of the defendants. Because of uncertainty concerning the scope of civil RICO in the aftermath of the Supreme Court's opinion in Sedima, S.P.R.L. v. Imrex Co., Inc., 473 U.S. 479, 105 S.Ct. 3275, 87 L.Ed.2d 346 (1985), the court feels compelled to discuss defendant's motion at length in this opinion.

I. BACKGROUND

Plaintiff alleges that he and defendant John Valerius formed Adirondack Homesites, Inc. "Adirondack" in 1977. The corporation was apparently formed to facilitate the completion of a construction project. Valerius was in charge of the corporation's financial matters, while plaintiff was in charge of the construction work on an apartment complex which came to be known as the Fonda Project. Plaintiff was the sole stockholder in Adirondack, purportedly at Valerius's request.

Valerius arranged permanent financing for the Fonda Project by obtaining a mortgage from the Farmers Home Administration "FmHA". Adirondack obtained interim financing through construction loans from defendant Fulton County National Bank and Trust Company "the Bank". Plaintiff was the guarantor of those loans. Defendant Charles Moyses was the Vice-President of the Bank who negotiated the loans.

In 1981 plaintiff and Valerius agreed to discontinue their business relationship and sell Adirondack, but were unable to locate a buyer until 1983. In 1983 a buyer was found, apparently through the plaintiff's accountants, defendant Gleason & Salluzzo, or through defendant Robert Salluzzo individually. The buyer was defendant Capital Medical Leasing Corporation "Capital", whose president was defendant Vincent Salluzzo. At the time of the sale, Adirondack's principal asset was the Fonda Project itself, which had an estimated value of $950,000 and an outstanding FmHA mortgage of about $850,000.

On April 19, 1983 the closing was held in the law offices of defendant Hoye & Hoye. Plaintiff and defendants Valerius, Moyses, Robert Salluzzo, Vincent Salluzzo, Theodore Hoye, and John Gleason were all present. Plaintiff signed four agreements. The first two agreements effectuated the sale of Adirondack's stock to Capital. (Amended Complaint Exs. A and B). In a third agreement Capital and Adirondack, through Vincent Salluzzo, now the president of both corporations, acknowledged a debt to plaintiff in the amount of $118,000. (Amended Complaint Ex. C). A fourth agreement obligated plaintiff to manage the Fonda Project for six years, with plaintiff guaranteeing up to $50,000 against any deficit occurring during this period. (Amended Complaint Ex. D). Cashier's checks in the amounts of $15,000 and $20,000 were issued by the Bank to Gleason & Salluzzo and Robert Salluzzo, respectively, apparently as finder's fees. Plaintiff approved payment on both checks. (Amended Complaint Exs. E and F). A promissory note bearing plaintiff's signature and made out in the amount of $88,328.76 was also dated April 19, 1983, though plaintiff denies knowledge of how this note came into existence. (Amended Complaint Ex. G). By that note plaintiff assumed a prior obligation owed by Adirondack of $50,000 plus interest, and also assumed liability for the $35,000 that the Bank had paid out to Gleason & Salluzzo and Robert Salluzzo.

The defendants claim that plaintiff did not honor the agreement struck by the parties, failing to manage the Fonda Project without a deficit. Adirondack ceased payment to plaintiff, claiming that plaintiff's breach of the fourth agreement relieved it of its obligations under the third. Thereafter, the Bank brought an action in state court to recover on certain notes bearing plaintiff's signature. This state court action is still pending. Plaintiff then brought his RICO claims in this court.¹

Plaintiff asserts that Valerius had assured him that his Adirondack stock would be sold to Capital for $118,000, with the purchase price going to pay debts the plaintiff had accrued by guaranteeing the Bank's loans to Adirondack. Plaintiff contends that on the day of the closing, however, he was "forced" into signing the four agreements and approving the cashier's checks given to Gleason & Salluzzo and Robert Salluzzo. Plaintiff claims that when he voiced his objection to the terms of the agreements on the day of the closing, defendant Moyses, in the presence of the other defendants, threatened to call in all of Adirondack's outstanding notes and to refuse to extend plaintiff credit in the future. At this point plaintiff admits he signed the four agreements and approved the two checks.

Plaintiff also denies knowledge of how certain promissory notes bearing his signature and held by the Bank came into existence. Plaintiff claims that when he originally went to the Bank for loans needed to finance the construction of the Fonda Project, Moyses, pursuant to Bank policy, required him to sign four blank promissory notes. Plaintiff claims that one of these notes was completed by the Bank and Moyses without his authorization at an unknown time and place in the amount of $88,328.76. That note is dated April 19, 1983. Plaintiff further alleges that he did not authorize the completion of three other notes bearing his signature. One such note, dated September 23, 1983, is in the amount of $46,691.97 and signed by plaintiff in his capacity as president of Adirondack. Plaintiff notes that as of that date he no longer held any corporate office with Adirondack. A second note, dated September 27, 1983, is made out for $98,800.35 and is signed by plaintiff in his individual capacity. A third, in the amount of $118,000 and dated October 3, 1983, was also signed by plaintiff in his individual capacity. Some of these notes were apparently used to cancel out the others, and after October 3, 1983 only this last note remains outstanding.

Finally, plaintiff complains that he never received any payments under the third agreement signed by Vincent Salluzzo as President of Capital and Adirondack. Instead, payments went directly to the Bank and were applied to reduce the unauthorized notes dated April 19, September 27 and October 3. Since August 20, 1984 Adirondack has refused to pay on the debt acknowledged by the third agreement.

Plaintiff's amended complaint sets out these allegations and is organized into six "claims" defining six distinguishable "enterprises" affecting interstate commerce.² Within five of the six "claims" plaintiff identifies three distinct bases for liability under civil RICO: the conduct of an enterprise affecting interstate commerce through a "pattern of racketeering activity" in violation of 18 U.S.C. § 1962(c) (1982); the conduct of an enterprise through the collection of an "unlawful debt" in violation of § 1962(c); and conspiracy to violate the provisions of § 1962(c) in violation of § 1962(d). A sixth claim is predicated on § 1962(c) only. The defendant Bank has moved to dismiss the amended complaint pursuant to Rule 12(b)(6) for failure to state a claim upon which relief can be granted, and all other defendants named in this action have joined in this motion. For the disposition of this motion all of plaintiff's allegations are presumed to be true and the facts are construed in a light most favorable to plaintiff's cause of action. Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 1686, 40 L.Ed.2d 90 (1974).

II. PLAINTIFF'S ALLEGATIONS OF A "PATTERN OF RACKETEERING ACTIVITY"

Among the remedies created by the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. §§ 1961-1968 (1982), is a private cause of action for treble damages, costs and attorneys' fees for injuries to one's "business or property by reason of a violation" of § 1962. 18 U.S.C. § 1964(c)(1982). Among other things, § 1962 prohibits any person employed by or associated with an "enterprise"³ from conducting its affairs through a "pattern of racketeering activity." 18 U.S.C. § 1962(c) (1982).⁴ Section 1961(5) requires a showing of at least two "acts of racketeering activity" occurring within ten years of each other in order to establish a "pattern of racketeering...