Maryland Nat. Bank v. Dauphin Deposit Bank
| Decision Date | 18 November 1986 |
| Docket Number | Civ. A. No. 84-1365. |
| Citation | 647 F. Supp. 908 |
| Parties | MARYLAND NATIONAL BANK, Plaintiff, v. DAUPHIN DEPOSIT BANK AND TRUST COMPANY and Archie R. Battistelli, Defendants. |
| Court | U.S. District Court — Middle District of Pennsylvania |
Michael Doctrow, David E. Lehman, McNees, Wallace & Nurick, Harrisburg, Pa., for plaintiff.
Gary French, R. Stephen Shibla, Charles J. Ferry, Rhoads & Sinon, Harrisburg, Pa., for defendants.
Before this court is the motion of defendants Dauphin Deposit Bank and Trust Company (Dauphin Deposit) and Archie R. Battistelli for summary judgment, filed on March 10, 1986 pursuant to Federal Rule of Civil Procedure 56. Defendants assert that there are no genuine issues of material fact and that they are entitled to judgment as a matter of law. Further, defendants assert that (1) there exists no pattern of racketeering activity under 18 U.S.C. § 1962 — Racketeer Influenced and Corrupt Organizations (RICO); and (2) that discovery has established conclusively that there existed no fraud or "wire fraud" on defendants' part and that defendants acted on advice of counsel in good faith. For purposes of a summary judgment motion, the record must be viewed in the light most favorable to the party opposing the motion.
The undisputed facts are as follows:
1. In May of 1982, Dauphin Deposit loaned Stafford Laboratories (Stafford) $3,000,000 to purchase Whitmoyer Laboratories. The loan was secured by a mortgage on the plant facilities and the personal guaranty of Frank Lucero, the President of Stafford Laboratories, and his wife.
2. In May of 1982, Dauphin Deposit established a line of credit for Stafford in the amount of $500,000 for the operation of Whitmoyer Laboratories.
3. In addition to the mortgage on the Whitmoyer Laboratories plant facility, Dauphin Deposit perfected security interests in Whitmoyer Laboratories' accounts receivable, inventory and equipment.
4. In May of 1983, Dauphin Deposit renewed Stafford's line of credit to operate Whitmoyer Laboratories and raised the line to 1.1 million dollars.
5. In the spring of 1983, Maryland National Bank solicited business in central Pennsylvania by mailing pamphlets promoting its services to various companies including Whitmoyer Laboratories.
6. As a result of this contact, a meeting was held between two Maryland National Bank employees, Carey Jackson and Frances Manus, and Frank Lucero, President of Stafford, to discuss financing for Stafford's anticipated acquisition of Sterwin, the Animal Health Division of the Sterling Drug Company.
7. In preparation for presenting the Stafford loan for approval to Maryland National Bank's Commercial Loan Committee, Jackson obtained 1980 and 1981 unqualified financial statements on Stafford and a 1982 financial review prepared by Touche Ross.
8. During the fall of 1983, Jackson contacted Bruce Burley, a senior partner in Touche Ross's Philadelphia office, to discuss Stafford's acquisition of Sterwin and Burley's acceptance of a position at Sterwin if Stafford acquired Sterwin.
9. In the fall of 1983, Carey Jackson also received and reviewed documents detailing the loans from Dauphin Deposit to Stafford in preparation for presenting the loan to Stafford.
10. No one at Maryland National Bank contacted Dauphin Deposit for information concerning Stafford during the fall of 1983.
11. On the basis of the financial information received on Stafford and information obtained concerning Sterwin, Maryland National Bank's Commercial Loan Committee approved a loan to Stafford for the acquisition of Sterwin in early October of 1983.
12. Following the approval of the Commercial Loan Committee the loan was approved by Maryland National Bank Executive Committee on October 13, 1983.
13. In late 1983, Stafford was searching for a financial institution to replace Dauphin Deposit or to supplement Dauphin Deposit's line of credit, and Maryland National Bank considered doing so.
14. In January of 1984, Maryland National Bank agreed to loan $500,000 to Stafford under a demand note, with Lucero's and his wife's joint and several guaranty as security.
15. In preparation for a second loan presentation to Maryland National Bank's Commercial Loan Committee involving Stafford, Carey Jackson received an internally prepared financial statement on Stafford from Frank Lucero in January of 1984.
16. The Executive Committee of Maryland National Bank approved a term of loan of 3.2 million dollars to Stafford on or about January 26, 1984 which was to be secured by a mortgage on the Whitmoyer Laboratories' plant facilities.
17. Two of the conditions for approval of the 3.2 million dollar term loan were:
18. A thorough appraisal of the Whitmoyer Laboratories' facilities was done by Maryland National Bank's real estate department and, as a result, the term loan was reduced from 3.2 million to 3 million dollars.
19. Carey Jackson received a 1983 financial statement on Stafford from Frank Lucero in early April of 1984 which was fully reviewed by Maryland National Bank personnel in anticipation of booking the loan.
20. Frank Lucero represented that the statement had been prepared by Touche Ross after a full audit.
21. Dauphin Deposit also received a 1983 financial statement from Frank Lucero in early April of 1984 which had allegedly been prepared by Touche Ross after a full audit.
22. On or about April 10, 1984, in preparation for an April 13, 1984 "closing" on the approved loan to Stafford, Carey Jackson contacted Archie Battistelli, a bank official with Dauphin Deposit, to receive the "pay-off" figures for Dauphin Deposit's loans to Stafford.
23. Carey Jackson's telephone call to Archie Battistelli was the first contact between Maryland National Bank and Dauphin Deposit concerning Stafford.
24. In addition to requesting "pay-off" figures, Carey Jackson asked Archie Battistelli whether Stafford had been a good customer of Dauphin Deposit, as part of Maryland National Bank's credit analysis of Stafford.
25. In response to Carey Jackson's credit inquiry concerning Stafford, Archie Battistelli responded that Stafford had been a good customer, but a little slow-paying lately.
26. Stafford had made timely payments on its loans until the end of 1983 when payments fell behind and, in April of 1984, Stafford was ninety days delinquent in paying interest on its line of credit.
27. Carey Jackson sought no other credit information from Dauphin Deposit concerning its Stafford account at any time during 1984.
28. After receiving "pay-off" figures from Dauphin Deposit, the closing date was postponed until April 27, 1984.
29. The closing date was postponed after Maryland National Bank received the "pay-off" figures and determined that the loan it had approved for Stafford was not sufficient to fully "take-out" Dauphin Deposit.
30. On April 27, 1984, a dry closing was held in which Stafford entered into a loan agreement with Maryland National Bank and issued and delivered to Maryland National Bank loan documents including an installment note (mortgage loan) for 3 million dollars and a revolving loan note of 1 million dollars. The installment loan was intended to pay out Stafford's mortgage loan with Dauphin Deposit. The revolving loan was to be funded over a period of time in amounts in Maryland National Bank's discretion based in part on Stafford's financial condition.
31. On May 3, 1984, Maryland National Bank wired Dauphin Deposit the funds necessary to "pay-off" the mortgage.
32. Dauphin Deposit subsequently satisfied its mortgage.
33. As of May 3, 1984, Maryland National Bank had not paid off Stafford's line of credit with Dauphin Deposit which amounted to approximately 1.1 million dollars.
34. On or about June 22, 1984, Archie Battistelli wrote a letter to Frank Lucero concerning the Stafford line of credit and concerns as to the financial statements purportedly prepared by Touche Ross.
35. On or about June 28, 1894, Thomas H. Yeager telephoned Dauphin Deposit concerning Frank Lucero. Thomas Yeager identified himself as a federal probation and parole officer from Phoenix, Arizona.
36. Or or about June 29, 1984, Archie Battistelli telephoned Thomas Yeager. Yeager advised Archie Battistelli that Frank Lucero had pleaded guilty to the forgery of government documents and was scheduled to be sentenced on July 16, 1984 to up to five years in prison.
37. Yeager asked Battistelli if Frank Lucero was crucial to Whitmoyer Laboratories' operation and what impact, if any, Whitmoyer Laboratories had on the Lebanon County economy.
38. Thomas Yeager also advised Archie Battistelli that the Price Waterhouse financial statements presented by Lucero to Chase Manhatten Bank several years ago were fictitious. Archie Battistelli noted that these were probably the same financial statements which Dauphin Deposit had on file.
39. It is disputed that Thomas Yeager told Archie Battistelli that their conversation concerning Frank Lucero should be kept confidential.
40. Archie Battistelli reported his conversation with Thomas Yeager to William King, the President of Dauphin Deposit.
41. William King told Archie Battistelli to relate his conversation with Thomas Yeager to Dauphin Deposit's legal counsel.
42. Archie Battistelli first advised Dauphin Deposit's legal counsel of his conversation with Thomas Yeager and of Stafford's delinquency with respect to its line of credit on or about June 29, 1984.
43. During his meeting with Archie Battistelli, Henry Rhoads, Dauphin Deposit's legal counsel, attempted unsuccessfully to contact Thomas Yeager.
44. Henry Rhoads also attempted unsuccessfully to reach someone at Touche Ross to verify that the 1983 audited financial statements on Stafford which...
To continue reading
Request your trial
-
Chronister v. Atlantic Richfield Co.
...573 (1986). The Middle District of Pennsylvania, however, is split on this issue. Judge Rambo in Maryland National Bank v. Dauphin Deposit Bank & Trust Co., 647 F.Supp. 908 (M.D.Pa. 1986) held that multiple acts in a single fraudulent scheme do not constitute a pattern, while Judge Nealon i......
-
Citizens Sav. Ass'n v. Franciscus
...defendants' interpretation of the Supreme Court's "continuity plus relationship" test. See Maryland National Bank v. Dauphin Deposit Bank & Trust Co., 647 F.Supp. 908 (M.D.Pa.1986) (Rambo, J.) (multiple fraudulent acts in a single fraudulent scheme cannot constitute a pattern); Rich Maid Ki......