One Bank & Trust, N.A. v. Galea

• Decision Date: 03 December 2012
• Docket Number: No. 4:11-cv-00567 KGB,4:11-cv-00567 KGB
• Court: U.S. District Court — Eastern District of Arkansas
• Parties: ONE BANK & TRUST, N.A. PLAINTIFF v. CARMELO GALEA a/k/a CHARLES GALEA, FAE A. GALEA, and ANTHONY W. IMBIMBO, as Trustee of THE CARMELO GALEA FAMILY INSURANCE TRUST DEFENDANTS

ONE BANK & TRUST, N.A. PLAINTIFF

v.CARMELO GALEA a/k/a CHARLES GALEA, FAE A. GALEA, and ANTHONY W. IMBIMBO,as Trustee of THE CARMELO GALEA FAMILY INSURANCE TRUST DEFENDANTS

No. 4:11-cv-00567 KGB

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF ARKANSAS WESTERN DIVISION

Dated: December 3, 2012

OPINION AND ORDER

Plaintiff, One Bank & Trust, N.A. ("One Bank"), seeks judgment against defendant The Carmelo Galea Family Insurance Trust (the "Trust") on a promissory note and against defendants Carmelo Galea a/k/a Charles Galea and Fae A. Galea (the "Galeas") as guarantors of the note. One Bank filed its complaint in the Circuit Court of Pulaski County, Arkansas, on June 8, 2011. Defendants removed the action to this Court and filed a counterclaim alleging fraud, negligence, and mutual mistake. One Bank has moved for summary judgment on the note and guaranties and on defendants' claims of fraud and mutual mistake (Dkt. No. 47).¹ For the reasons that follow, One Bank's motion is granted in part and denied in part.

I. Background

Mr. Galea is a businessman, and the company he is the principal stockholder and controlling owner of has had revenues recently from $4 million to $6 million (Dkt. No. 49, ¶ 2; Dkt. No. 58, Exhibit C, at 10:16-25). In his business, Mr. Galea deals with contracts in the form of purchase orders up to $250,000.00 (Dkt. No. 58, Exhibit C, at 9:12-10:10).

In 2008, Anthony Imbimbo, a representative of the Galeas, spoke with Andrew Castro of Lincoln Financial Group ("Lincoln Financial") about purchasing life insurance on the life of Mr.Galea. Mr. Imbimbo is a certified public accountant, licensed to practice in the State of California (Dkt. No. 49, ¶ 3). Mr. Castro represented to Mr. Imbimbo that a non-recourse loan would be obtained to pay the first year's policy premium (Dkt. No. 58, Exhibit A, at 24:24-25:3; 26:1-6). Mr. Castro did not indicate who the lender would be (Dkt. No. 58, Exhibit A, at 25:23-26:6). With that information, Mr. Imbimbo, as trustee of the Trust, purchased three life insurance policies from Lincoln Financial.

Mr. Castro asked Christopher Hammatt, a California attorney, to find a lender for the Galeas (Dkt. No. 56, Exhibit A, at 15:16-16:16). Mr. Hammatt, in turn, contacted Steve Burgess of the Burgess Group (the "Burgess Parties") (Dkt. No. 56, Exhibit A, at 18:1-25). Mr. Hammatt testified in his deposition that the Burgess Parties, before securing financing through a specific bank, represented to him that the financing would be non-recourse (Dkt. No. 56, Exhibit A, at 30:11-19; 38:12-20). The Burgess Parties eventually arranged financing through One Bank.

On July 11, 2008, Heather Redding of the Burgess Group sent an email to Mr. Hammatt containing a list of documents that were needed to process the loan which states that "we can get credit committee approval and loan documents out to you Tuesday morning" (Dkt. No. 56-9). In an email dated July 15, 2008, Nick Guerriero, Mr. Castro's assistant, asked Ms. Redding if they would be receiving the loan documents that day (Dkt. No. 56-8). Ms. Redding responded that the bank still needed copies of some tax returns before it could approve the loan and confirmed that "we are funding . . . the first year premiums . . . ." (Dkt. No. 56-8). Ms. Redding emailed the loan documents to Mr. Hammatt and Mr. Guerriero the next day and stated that "we fund with a copy of the executed documents" (Dkt. No. 56-5). Mr. Imbimbo obtained the loan documents from Mr. Castro's office and passed them along to Mr. Galea (Dkt. No. 58, Exhibit A, at 31:1-12).

On July 17, 2008, Mr. Guerriero emailed Ms. Redding to inform her that Mr. Hammatt was "in the office" and had "all the original executed docs . . . ." (Dkt. No. 56-6). Later that afternoon, Mr. Hammatt emailed Ms. Redding to inform her that he had the original loan documents and that he would make arrangements with Mr. Burgess to "get him the rest of the items" (Dkt. No. 56-6).

The loan documents were executed on or about July 16, 2008 and returned by Mr. Imbimbo to Mr. Castro's office (Dkt. No. 58, Exhibit A, at 33:7-9). The loan documents included two personal guaranties, one for each of the Galeas. One Bank contends the Galeas executed these guaranties. Mr. Galea does not dispute the genuineness of his signature but disclaims knowing the document was a guaranty and disputes its enforceability. Ms. Galea disputes the genuineness of her signature, disclaims knowing the document was a guaranty, and disputes its enforceability.

Defendants never communicated directly with One Bank or the Burgess Parties during the loan transaction, prior to the loan documents being signed (Dkt. No. 49 ¶ 15; Dkt. No. 57 ¶ 15). Mr. Imbimbo did not communicate with anyone outside of Mr. Castro's office, and Mr. Galea communicated through Mr. Imbimbo (Dkt. No. 58, Exhibit A, at 28:24-29:4; Exhibit C, at 23:22-24:2). Mr. Castro never told Mr. Imbimbo that the Burgess Parties would arrange the financing (Dkt. No. 58, Exhibit A, at 25:23-26:6). At the time of the loan, Mr. Galea did not believe Mr. Burgess had any relationship with One Bank (Dkt. No. 58, Exhibit C, at 32:13-18).

In fact, defendants did not know of the Burgess Parties' involvement until they were informed in October 2009 that the insurance policies had lapsed due to nonpayment of premiums (Dkt. No. 58, Exhibit A, at 24:12-13; 28:1-10; Exhibit C, at 22:15-24). It was at this time, Mr. Galea maintains, that he learned he may have signed a personal guaranty.

Around the same time and in the months leading up to October 2009, the Burgess Parties exchanged several emails regarding the loan transaction. On June 26, 2009, Megan Rytting of the Burgess Group sent the following email to Vernon Scott, a One Bank loan officer: "Steve mentioned that you should have a file and notes on the transaction mentioning it as a yearly renewable term type loan that would require the normal One Banc up-dates but that there would be an option to renew. He also thought that this was laid out in the loan documents." (Dkt. No. 36-4). Ms. Rytting followed up with an email on July 6, 2009: "So there aren't any notes or anything about a scheduled renewal on this one right? I am trying to reconcile what the agents/Steve were expecting with what was actually approved. Once I can tell them what was actually approved, I can then move forward and show them what their options are . . . now that they aren't looking at an annually renewable deal for up to 5 years." (Dkt. No. 36-4).

An email dated August 18, 2009, from Liz Burgess to Mr. Hammatt and Mr. Castro, among others, states, in part, "We need to be able to talk to the client. He is getting bad information. We need to be able to explain that he has purchased life insurance. It is not free. He is borrowing money for the premiums. He is personally obligated on the loan. He has a one-year renewable term loan. . . . The original term was secured by the policy and a personal [guaranty]. The bank is willing to renew the loan as well as finance additional premiums." (Dkt. No. 56-14).

An email dated September 22, 2009 from Liz Burgess to Mr. Castro references the Galeas' belief that they would not be personally liable on the loan transaction and states that "while this may be conceptually true at the inception of some premium financing, events beyond anyone's control interceded." (Dkt. No. 36-4). Mr. Castro responded that "we are told that the policy was the only collateral for the loan" and that he "was not aware of a personal guaranteeever being signed." Liz Burgess responded that there was "so much confusion on the transaction." (Dkt. No. 36-4). There are other emails in the record that trace the parties' exchanges on these issues; these exchanges occurred well after the loan documents were executed.

During this same time period and then after, Mr. Imbimbo in his capacity as Trustee of the Trust executed with One Bank a "Modification and Extension of Promissory Note and Security Agreement." Mr. Imbimbo as Trustee executed this document on July 16, 2009, July 15, 2010, and December 5, 2010, each time for separate, successive extensions of the maturity date of the Promissory Note and Security Agreement for the loan (Dkt. No. 48, Exhibits G, H, and I). Each of these agreements includes in paragraph five the following language:

The Borrower acknowledges, represents and warrants that (a) Bank has, and at all times during the debtor/creditor relationship between the parties, acted with commercial good faith toward the Borrower and has not, in any way, exercised improper control or dominion over Borrower; (b) Bank shall, in no way, be under any duty or obligation to further extend or renew the Note, or any other indebtedness, or any part thereof, beyond the maturity date established by this Modification Agreement; and (c) without any admission of liability whatsoever by the Bank, the Borrower hereby fully and completely releases the Bank from any and all claims of Bank misconduct which have been, or could have been, asserted by Borrower against the Bank regarding the statements, actions, or other conduct of the Bank regarding the Loan, the Note, this Modification Agreement, or any other document executed in connection therewith, or any other aspect of any relationship between the Bank, its employees, agents and independent contractors, and the Borrower prior to or contemporaneously with the execution of this Modification Agreement.

(Dkt. No. 48, Exhibits G, H, and 1, ¶ 5).

To summarize, defendants claim that the Burgess Parties with apparent authority on behalf of One Bank made several false representations to Mr. Castro and others including Mr. Hammatt, intending for Mr. Castro to relay the representations to Mr. Imbimbo. These representations included that the loans were non-recourse, that the Galeas' personal assets wouldnot be exposed, that the life insurance policies issued by Lincoln Financial on the life of Mr. Galea were the only collateral needed for...