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WILLIAM L. KNECHT v. CITIZENS & NORTHERN BANK. APPEAL DONALD J. TREVINO (01/05/87)

submitted: January 5, 1987.

WILLIAM L. KNECHT, TRUSTEE IN BANKRUPTCY FOR DONALD J. TREVINO, T/B/A DON'S WOOD PRODUCTS
v.
CITIZENS & NORTHERN BANK. APPEAL OF DONALD J. TREVINO, D/B/A DON'S WOOD PRODUCTS



Appeal from the Order of September 3, 1986, in the Court of Common Pleas of Lycoming County, Civil Division, at No. 84-01,013.

COUNSEL

John P. Campana, Williamsport, for appellant.

William F. Campbell, Jr., Wellsboro, for appellee.

Wieand, Tamilia and Hester, JJ.

Author: Hester

[ 364 Pa. Super. Page 371]

This is an appeal from an order of September 3, 1986, granting appellee's motion for summary judgment. As we conclude that the pleadings and affidavits on file demonstrate that appellee is not entitled to judgment as a matter of law, we reverse.

Donald Trevino, t/d/b/a Don's Wood Products, instituted this action on May 18, 1984, against Citizens & Northern Bank, appellee. On August 13, 1985, appellee's preliminary objections to that complaint were granted on the basis that it failed to set forth a claim upon which relief could be granted, and Trevino was granted leave to file an amended complaint. In the meantime, the trustee in bankruptcy for Trevino, appellant, intervened as plaintiff.

[ 364 Pa. Super. Page 372]

Appellant filed an amended complaint, which contains the following allegations. In 1981, Trevino operated a pallet-manufacturing and logging business, for which appellee lent him $100,000.00. Of that amount, $88,672.34 had been loaned on the basis of unsecured timber notes. In 1982, Trevino needed an additional $80,000.00, and appellee agreed to lend him $17,500.00, the balance to be financed through the Small Business Administration ("SBA"). Appellee, acting as Trevino's agent, completed the SBA application, but, he alleges, without his knowledge increased the requested amount from $62,500.00 to $151,172.34, the difference to be used to repay to the bank the unsecured timber notes. Although the loan was refused in January, 1983, Trevino alleges he was not informed of the reason for refusal until November of that year. Trevino further alleges that at that time, Joseph Migliorino, an SBA official from Wilkes-Barre, told him that "but for" the increase in the amount requested, the loan would have been approved. In the meantime, Trevino went bankrupt as the result of his failure to obtain financing.

Appellee denied all the material allegations of the amended complaint, contending that Trevino reviewed and signed the application, which it never altered, that it was not acting as Trevino's agent in assisting him with the application, and that the loan was refused due to Trevino's failure to supply adequate financial information to the SBA. Attached as an exhibit to the answer was the letter from the SBA to the bank delineating the reasons for the loan refusal:

The information submitted on January 10, 1983 in connection with your request for SBA to guarantee 90% of a loan to the subject has been carefully reviewed.

Our review of the information submitted reveals many noticeable deficiencies which preclude our accepting the application for processing.

The financial information submitted with the application is without merit. No lender, including this Agency, can perform a thorough and meaningfull [sic] credit analysis of a loan package when such financial information submitted is based on estimates.

[ 364 Pa. Super. Page 373]

Further, the bulk of the request is to refund several loans at your bank. It is not the intention of SBA's lending programs to bail out banks and/or other creditors who are in a position to substain [sic] a loss thereby transferring the potential loss to government hands.

Additionally, considerable supplementary data was not submitted with the application. However, the above areas of concern, i.e. the lack of accurate financial information precludes consideration and we determined that it was not necessary to delay further.

We would not wish to review this request further without audited financial statement and fully completed loan applications.

We regret our inability to be of assistance to you in this matter. Enclosed herewith is the ...


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