Wallace v. Mercantile County Bank

Decision Date31 August 2007
Docket NumberCivil No. CCB-06-3345.
Citation514 F.Supp.2d 776
PartiesBonnie Cruickshank WALLACE,<SMALL><SUP>1</SUP></SMALL> et al. v. MERCANTILE COUNTY BANK, et al.
CourtU.S. District Court — District of Maryland

CATHERINE C. BLAKE, District Judge.

The plaintiffs in this case, Bonnie Cruickshank Wallace ("Ms. Cruickshank Wallace"), Holly Hall Publications, Inc. ("Holly Hall"),2 and the Wallace Family 1997 Trust ("trust")3 (collectively, "plaintiffs"), allege that the defendants, Mercantile County Bank, f/k/a County Banking and Trust Co. ("bank"), Raymond Hamm, Jr., president and CEO of the bank ("Mr. Hamm"), and Gebhardt & Smith, LLP ("law firm")4 (collectively, "defendants"), committed various torts and violations of federal law in a prior suit and other actions they had taken against the plaintiffs. Four motions are currently pending: the plaintiffs' motion for remand to the Chester County Court of Common Pleas in Pennsylvania; the defendants' motion for dismissal or summary judgment; and two motions for sanctions brought by the defendants against Ms. Cruickshank Wallace and her counsel. The motions have been fully briefed, and oral argument was held on March 23, 2007. For reasons stated below, the plaintiffs' motion for remand will be denied; the defendants' motion for dismissal or summary judgment will be granted; and the motions for sanctions will be denied.


Conflict arose between the parties as a result of financial dealings between William Wallace ("Mr.Wallace"),6 the husband of Ms. Cruickshank Wallace, and the bank. In 1995, the bank made two loans to Great Christian Books, Inc. ("Great Christian"), a mail-order retailer of Bibles and Christian books in Elkton, Cecil County, Maryland.7 These loans included a revolving credit loan for $750,000, and a capital improvement loan for a five-year term in the amount of $235,000. Mr. Wallace, a member of Great Christian's board of directors, was one of the guarantors of these two loans. According to the defendants, Mr. Wallace made fraudulent statements to the bank in order to obtain these loans. (Mem. Supp. Mot. Dismiss or Summ. J. [hereinafter "Mot. Dismiss or Summ. J."] at 3-4.) Great Christian seems not to have kept up with its loan payments, so in November 1998, the bank, through the law firm, entered a complaint in confession of judgment against Great Christian, Mr. Wallace, and other loan guarantors in the Circuit Court for Cecil County, Maryland (C98-362). The complaint was not contested, and in December 1998, non-judicial confessed judgments were filed by the bank against Great Christian and Mr. Wallace.8

The plaintiffs allege that the bank, under Mr. Hamm's leadership, engaged in commercially unreasonable conduct in disposing of some of Great Christian's collateral assets, thereby giving rise to potential claims by Mr. Wallace and Great Christian. (Compl.¶¶ 15-16.) In May 1999, during a deposition taken in aid of executing the confessed judgments, Mr. Wallace informed Mr. Hamm and the law firm that Ms. Cruickshank Wallace had deposited the couple's 1998 joint federal income tax refund ("refund") in an account belonging only to her. (Mot. Dismiss or Summ. J., Ex. 8, Wallace Dep. 31:16-32:24.) The refund was in the amount of $19,984 (Compl.¶ 18);9 according to the plaintiffs, the defendants did not object to Bonnie keeping it, and she later used it for family support (id. at ¶¶ 18-19).

In February 2000, the bank filed a complaint in the Circuit Court for Cecil County against Ms. Cruickshank Wallace, Holly Hall, seemingly also a religious book retailer,'10 and the trust (naming a trustee other than Ms. Cruickshank Wallace)11, alleging that they had received fraudulent conveyances from Great Christian and Mr. Wallace. The trust filed a timely answer to this complaint, as well as a counterclaim, but Ms. Cruickshank Wallace and Holly Hall did not respond, allegedly due to a failure on the part of their attorney at the time, William Riddle ("Mr.Riddle"). A default judgment was thus entered against them in April 2000, whereas the trust was voluntarily dismissed from the case by the bank. Ms. Cruickshank Wallace and Holly Hall made unsuccessful motions to vacate the default judgment, and the bank then moved for an entry of final judgment against them, which was entered on September 10, 2001. A judgment in the amount of the refund was entered against Ms. Cruickshank Wallace. An order in the amount of $722,534 against Ms. Cruickshank Wallace and Holly Hall, jointly and severally, was entered as well, which the plaintiffs allege was entered improperly. (Compl.¶ 32.) The basis for the contention this second order was improper seems to be that the court did not mention it in its ruling from the bench; rather, an attorney for the law firm, Eric Schuster ("Mr.Schuster"), listed the $722,534 on the "form of order" he submitted.12 (Id.) Ms. Cruickshank Wallace and Holly Hall filed a timely appeal of this ruling, after their motion for a new trial and motion to alter or amend the judgment were denied.

The defendants then obtained Maryland writs of garnishment ("first writs") against Ms. Cruickshank Wallace for $742,518 (the total amount of the two judgments entered on September 10, 2001). The plaintiffs allege this action was improper because the defendants knew an appeal was pending and the judgments were not final.13 (Id. at ¶ 36.) The defendants claim they were at liberty to collect on the September 2001 judgments, despite their lack of finality, because Ms. Cruickshank Wallace and Holly Hall had not posted the proper appeal bond. (Mot. Dismiss or Summ. J. at 8.) They further contend that Ms. Cruickshank Wallace did not object to the collection. (Id.) More than $40,000 of funds belonging to Ms. Cruickshank Wallace allegedly were attached pursuant to these first writs. (Compl.¶ 38.)

One of the garnishees was Peoples Bank ("Peoples") of Oxford, Chester County, Pennsylvania. Peoples answered that the Circuit Court for Cecil County had no jurisdiction over it due to its Pennsylvania residency. (Id. at ¶¶ 39-41.) The defendants do not dispute they obtained the writs or that Peoples was one of the garnishees, but contend they believed Peoples to be subject to the jurisdiction of the Maryland courts. (Mot. Dismiss or Summ. J. at 9.) In October 2001, the defendants entered judgment by transfer against Ms. Cruickshank Wallace and Holly Hall in the Court of Common Pleas of Chester County, Pennsylvania ("first transfer"). The plaintiffs characterize this transfer as the result of Peoples's jurisdictional challenge (Compl. at ¶ 42), while the defendants claim it was the consequence of the Wallaces having moved from Maryland to Pennsylvania in December 2000. (Mot. Dismiss or Summ. J. at 8.)

Following the first transfer and continuing over the course of the rest of the events giving rise to this case, the plaintiffs allege the defendants or others associated with them threatened or intimidated Ms. Cruickshank Wallace, resulting in severe emotional distress to her. These threats included selling her home; subpoenaing her mother, who has Alzheimer's disease (ostensibly because she and Ms. Cruickshank Wallace had some joint bank accounts); and threatening to sue her children. (See Compl. at ¶¶ 43, 44, 46, 47, 54, 59-63.) Mr. Schuster is the attorney for the law firm who the plaintiffs allege committed most of this misconduct, including making Ms. Cruickshank Wallace concerned for her physical safety. (Id at ¶ 59.) These threats also allegedly compelled her to seek bankruptcy protection in the United States Bankruptcy Court for the Eastern District of Pennsylvania. (Id. at ¶ 45.)

In the spring of 2002, the Court of Special Appeals of Maryland remanded the September 2001 judgments to the Circuit Court for Cecil County because they had omitted two declaratory judgment counts involving Holly Hall and therefore did not constitute final judgment under state law. The Circuit Court then entered final judgment on all counts for $742,518 against Ms. Cruickshank Wallace and $722,805 against Holly Hall. Ms. Cruickshank Wallace and Holly Hall again filed a timely appeal, but the defendants allege they again failed to post the appropriate bond "to stay enforcement of the judgment during the appeal." (Mot. Dismiss or Summ. J. at 7.) In May 2002, the defendants again obtained Maryland writs of garnishment ("second writs") against Ms. Cruickshank Wallace, and again served Peoples despite not having transferred the new judgment to Pennsylvania. In June 2002, the defendants transferred the April 2002 judgments to the Court of Common Pleas of Chester County, Pennsylvania ("second transfer"), resulting in that court's docket reflecting two separate judgments against Ms. Cruickshank Wallace, each for $742,518, and two separate judgments against Holly Hall, each for $722,805.

Shortly afterwards, the defendants had a writ of execution issued to the Chester County Sheriff, which was served upon Ms. Cruickshank Wallace's counsel, Edward M. Foley ("Mr.Foley"). (Compl.¶ 53.) The plaintiffs allege that, at the same time, the defendants served Mr. Foley with interrogatories and a request for Ms. Cruickshank Wallace's documents, which Mr. Foley responded to by claiming attorney-client confidentiality. (Id.) The plaintiffs also allege that the defendants contacted Mr. Riddle's malpractice carrier, CNA Insurance Co. ("CNA"), and tried to collect a claim on the plaintiffs' behalf. (Id. at ¶¶ 56-57.) When the plaintiffs learned of this, they negotiated a settlement directly with the insurance carrier. (Id. at ¶ 58.) The defendants allege...

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