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May 20, 1976

TRI-COUNTY STATE BANK, individually and on behalf of all other persons and financial institutions similarly situated

The opinion of the court was delivered by: NEALON

 This case arises out of certain loan transactions between plaintiff Tri-County State Bank (Tri-County Bank), a Pennsylvania state bank with its principal office and place of business in Bowmanstown, Pennsylvania, and its customer, Penn Valley Furniture Industries, Inc. (Penn Valley), which, during the period relevant to this suit, was a wholly-owned subsidiary of Drew National Corporation (Drew), a Delaware corporation which is presently the subject of proceedings under Chapter XI of the Bankruptcy Act in the Southern District of New York. The essence of the complaint is that plaintiff was induced, on the basis of false and fraudulent representations regarding the financial position of Drew, to loan Penn Valley $125,000, in return for which plaintiff received promissory notes executed by Penn Valley and secured by Drew's endorsement. The defendants are individual officers and directors of Drew, as well as the accounting firm, together with two of the firm's partners, that prepared financial statements concerning Drew. On the basis of this allegation, the complaint asserts four causes of action, the first for violations of the federal securities laws, *fn1" jurisdiction over which is predicated on 28 U.S.C. § 1331, and the remaining three for violations of the Business Corporation Law of Pennsylvania, 15 P.S. § 1401 et seq., and the common law of fraud and negligence, jurisdiction over which is based on diversity of citizenship and pendent jurisdiction.

 Plaintiff seeks to bring this suit as a class action on behalf of "the hundreds of financial institutions and commercial establishments who from time to time extended loans and credit to the Drew National Corporation or its twenty-two (22) wholly owned subsidiary companies." Complaint, Para. 25. The defendants fall into two classes, (1) individual officers and members of Drew's board of directors, who allegedly conspired to disseminate false and fraudulent financial information regarding Drew, and (2) the accounting firm of Hertz, Herson and Company, together with its co-partners Saul and Ronald Hertz, who are alleged to have participated in the above-described conspiracy and also to have been "negligent, grossly negligent, reckless, wanton, and careless" in the preparation of financial statements and other documents concerning Drew. Complaint, Para. 50.

 Presently before the Court is defendants' motion to dismiss the first cause of action on the ground that the promissory notes given to plaintiff by Penn Valley, which are the basis for the cause of action under the federal securities laws, are not securities within the meaning of those laws, because they are commercial paper and not investment securities. In addition, assuming that the motion to dismiss is meritorious and that therefore plaintiff has no cause of action under the federal securities laws, defendants maintain that service of process on the remaining three counts, which was made pursuant to the nationwide service of process provisions of the federal securities laws, 15 U.S.C. §§ 77v and 78aa, must be set aside for non-compliance with Rule 4(f) of the Federal Rules of Civil Procedure. Plaintiff argues that the promissory notes are securities within the meaning of the federal statutes, and that, in any event, service of process on the non-federal counts was proper because it was in accordance with Pennsylvania's long arm statute. The parties have submitted affidavits and counter-affidavits in support of their positions, together with various exhibits attached to the affidavits. Because the motion to dismiss is for failure to state a claim upon which relief can be granted, *fn2" and because matters outside the pleadings have been presented to and not excluded by the Court in consideration of the motion, the motion will be treated as for summary judgment and disposed of as provided in Rule 56, Federal Rules of Civil Procedure. See Rule 12(b), Federal Rules of Civil Procedure. Summary judgment must be awarded the defendants on count I of the complaint if there is no genuine issue as to any material fact and defendants are entitled to judgment as a matter of law. Rule 56(c).

 From the materials submitted by the parties, the following uncontroverted relevant facts appear. Penn Valley and Tri-County Bank have a relationship that antedates the loan transactions which are the basis of this lawsuit. Penn Valley maintained three deposit accounts with plaintiff bank: a general, a payroll and a petty cash account. Thus, Penn Valley was a customer of the bank prior to the transactions at issue here.

 Two separate loans between plaintiff and Penn Valley are the focus of plaintiff's claim that it was induced to loan money to Penn Valley by false and fraudulent representatives as to Drew's financial condition, a $50,000 loan in April, 1971, and a $25,000 loan in March, 1974. When the loans were applied for, Penn Valley informed Tri-County that the proceeds would be used for day to day working capital, and that was the use to which the proceeds were put. Both loans were issued on plaintiff's standard promissory note form, were due one day after issuance, and were endorsed by Drew. Payments of principal and interest on the loans were made by regular charges to Penn Valley's general account at the bank, a fixed weekly charge in the case of the larger loan, and a monthly charge for the smaller. The payments on the balance due were made from Penn Valley's own operating capital which had been deposited in its general account.

 The April, 1971 loan of $50,000 was initially at an interest rate of 9 1/2 percent. The record shows that it was subsequently increased and renewed several times in varying amounts and at varying interest rates, and that the weekly payments were made regularly until April, 1975. For example, the bank's ledger sheets show that on October 19, 1973, the loan had an outstanding balance of $66,107.84 and was renewed in the amount of $100,000; on February 7, 1974, it had an outstanding balance of $73,727.98 and was renewed in the amount of $100,000; on July 2, 1974, the balance had been reduced to $62,044.90 and was renewed in the amount of $100,000; on December 31, 1974, the balance was $57,619.72 and was again renewed for $100,000; and by April, 1975, at the time of the last payment, the balance was $68,661.22.

 The smaller loan was made at an initial interest rate of 12 percent. It was secured by certain of Penn Valley's inventory and all its equipment and machinery. It was also renewed several times, on each occasion in the amount of $25,000 after the outstanding balance had been substantially reduced by the regular monthly charges to Penn Valley's general account. After the last payment made by Penn Valley, in April, 1975, the outstanding balance was $16,749.

 Besides the above facts concerning the transactions between Tri-County Bank and Penn Valley, plaintiff has also sought to introduce into the record facts concerning other loans made to Drew and its subsidiaries other than Penn Valley by banks other than plaintiff bank. In support of these facts, plaintiff has offered the affidavit of Mr. Carl A. Johnson, president of Tri-County Bank, which contains a list of ten banks, together with sums allegedly owed each bank by Drew and/or its subsidiaries; the list is taken from an exhibit, presumably a list of creditors, in Drew's petition in bankruptcy in the Southern District of New York. In addition to the list, Mr. Johnson's affidavit also contains some conclusory allegations regarding Drew's motivation in securing the various loans and the uses to which the proceeds of the loans were put. In essence these allegations are that the loans were part of a common scheme by Drew to raise capital in order to rejuvenate itself and its subsidiaries at a time of financial crisis in its affairs; that the lenders were unaware of the interrelatedness of the loans and of the purpose of the funds to finance Drew's revitalization; and that the entire scheme was "a common enterprise the success of which was totally dependent upon the ability of Drew National Corporation and its various subsidiaries to rejuvenate their business by and through the substantial amounts of money borrowed." Affidavit of Carl A. Johnson at 3.

 At first blush, however, the allegations concerning the purpose and uses of loans other than those made by Tri-County Bank are not credible, if only because the affiant on whose sworn statement the allegations are based, the president of Tri-County Bank, is not in a position to have any knowledge concerning loans made by banks other than his own institution. Plaintiffs have sought to remedy this defect by filing a discovery motion permitting them to contact the other lending institutions and have them file affidavits and/or briefs concerning the circumstances surrounding their loans to Drew and its subsidiaries in support of plaintiff's opposition to the motion to dismiss. *fn3" Defendants have opposed the discovery motion on the grounds that by it plaintiff is seeking information concerning other members of the class it seeks to represent in the instant class action in order to establish its eligibility to sue in its own right, and that plaintiff must first establish its own right to sue before it may seek to represent other members of a class. See Kauffman v. Dreyfus Fund, Inc., 434 F.2d 727, 734 (3d Cir. 1970), cert. denied, 401 U.S. 974, 28 L. Ed. 2d 323, 91 S. Ct. 1190 (1971). Defendants, however, misperceive the relevance of the information concerning the character of other loans made to Drew and its subsidiaries. Plaintiff does not seek to establish by such information its fitness as a representative of a class, but merely to adduce evidence concerning the loans it made to Penn Valley in order to establish that those loans were part of a larger scheme by Drew and all its subsidiaries to raise capital to be used to rejuvenate the borrowers. Thus, there is no legal reason why plaintiff should be prevented from obtaining the discovery it seeks. Nevertheless, I do not find it necessary to permit plaintiff to obtain the desired discovery, because, even assuming that by it plaintiff could establish the propositions it has advanced, i.e., that its loans to Penn Valley occurred at a time when Drew and its subsidiaries were engaged in a scheme to raise capital for continued operation by individual loans from commercial lending institutions, under the prevailing law it will still have failed to establish that the promissory notes given by Penn Valley in exchange for the loans were securities within the meaning of the federal securities laws.

 An analysis of that prevailing law must begin with the statutory framework. The Securities Act of 1933 and the Securities Exchange Act of 1934 differ slightly in their handling of the kind of notes that are at issue here. The 1933 act provides that "unless the context otherwise requires -- (1) the term 'security' means any note, stock, treasury stock, bond, debenture . . ." 15 U.S.C. § 77b(1) (emphasis supplied), but exempts from the registration and prospectus requirements "any note, draft, bill of exchange or banker's acceptance which arises out of a current transaction or the proceeds of which have been or are to be used for current transactions, and which has a maturity at the time of issuance of not exceeding nine months, exclusive of days of grace, or any renewal thereof the maturity of which is likewise limited." 15 U.S.C. § 77c (a)(3). However, Section 17 of the 1933 Act, the general anti-fraud provision which prohibits fraud in the "offer or sale" of any securities, 15 U.S.C. § 77q(a), provides that the exemptions in 15 U.S.C. § 77c shall be inapplicable to that section.

 The 1934 act, on the other hand, defines the term "security" as follows:

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