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MELLON BANK v. JEFFREY K. RAFSKY (12/29/87)

filed: December 29, 1987.

MELLON BANK, EAST NATL ASSN
v.
JEFFREY K. RAFSKY, APPELLANT



Appeal from the Order Entered on March 27, 1987, in the Court of Common Pleas of Montgomery County, Civil Division, at No. 85-00917.

COUNSEL

Richard N. Lipow, Audubon, for appellant.

Howard Solomon, Media, for appellee.

Cavanaugh, Beck and Hester, JJ.

Author: Hester

[ 369 Pa. Super. Page 587]

This is an appeal from an order denying Jeffrey K. Rafsky's petition to open or strike a judgment for $756,392 entered against him by confession. Mellon Bank confessed

[ 369 Pa. Super. Page 588]

    judgment against Rafsky, president of a corporation indebted to the bank, under a suretyship agreement whereby Rafsky had personally guaranteed the corporation's debt. We affirm the order, holding that the trial court correctly applied the doctrine of collateral estoppel in refusing to open the judgment and that no defect on the face of the record warranted striking the judgment.

The international commercial transactions which form the background of this case were the subject of prior litigation in Mellon Bank (East) N/A v. The Trend Group, Inc., 42 Pa.D. & C.3d 374 (Montgomery County, 1986). We quote at length from the trial court opinion to explain the factually complex litigation.

"[D]efendant, the Trend Group Limited, (Trend) seeks to have this Court open or strike a judgment by confession entered by plaintiff, Mellon Bank (East) National Association (Bank). On August 1, 1984 the Bank confessed judgment against Trend on a promissory note in the amount of $717,444.13. The note was executed by Trend on June 17, 1983 and secured part of an international financing arrangement wherein Trend Export Funding Company (TEFCO), a wholly owned subsidiary of Trend, contracted with a party in the Hashemite Kingdom of Jordan for the sale and delivery of certain heavy construction equipment. Trend filed a Petition to Open or Strike . . . alleging that . . . the Bank negligently mishandled certain security documents resulting in the construction equipment being delivered without the buyer first signing the documents. The petition also alleges the Bank manipulated maturity dates on certain notes which resulted in defenses being raised by the insurance company which insured the transaction. The petition seeks legal fees, travel and miscellaneous expenses. The hearing began on December 11, 1984. Additional testimony was taken on January 14 and 16, February 27 and 28 and March 4 and 5, 1985. The parties were also directed to argue one of the issues and this took place on August 27, 1985.

[ 369 Pa. Super. Page 589]

"During the course of the hearing Trend raised three additional defenses which were not mentioned in the first petition . . . . First, it claims the Bank coerced Jeffrey Rafsky, President and Chairman of the Board of Trend to sign the note at issue on behalf of Trend at meetings held on June 16 and 17, 1983. Second, it contends the Bank had a duty to inform Rafsky, before he signed the note, that a previous note securing the same transaction was purchased by the Bank 90% without recourse to TEFCO.

"Finally, Trend claims the Bank breached its duty under Section 4-501 of the Uniform Commercial Code and committed fraud in failing to notify Rafsky, before the execution of the June 17 note, that the purchaser of the equipment in Jordan had refused to sign a promissory note and pay a sight draft presented by the Bank's correspondent in Jordan.

"Trend is a financial service organization involved in equipment lease financing, both domestically and internationally, in addition to other types of financing. TEFCO, as noted above, is a subsidiary of Trend. On April 14, 1982 TEFCO obtained a master policy of export insurance from the Foreign Credit Insurance Association (FCIA) with respect to the sale of heavy construction equipment. On September 1, 1982 TEFCO obtained a non-acceptance endorsement to its FCIA master policy which provided coverage against a loss caused by failure or refusal of a foreign buyer to accept shipment of goods. In November of 1982 officers of TEFCO met with Mr. Yousef F. Jashan (Jashan), a road building contractor in Jordan, and after negotiation agreed to sell and deliver to him at the port of Aquaba, in Jordan, the heavy construction equipment in question. The sale totaled $1,529,391 conditional upon approval by the FCIA. The sale was approved and FCIA provided coverage against non-acceptance of the merchandise.

"In an effort to secure financing for the transaction, TEFCO contacted Girard International Bank (Bank). It agreed to extend TEFCO a $2,500,000 line of credit. As part of the agreement the Bank was to process the collection

[ 369 Pa. Super. Page 590]

    of all payments to be made by Jashan. During negotiations with TEFCO, Jashan executed a power of attorney in favor of Steven R. Michaels, and Philip T. Amico, President and Vice-President respectively. Both Michaels and Amico later executed a promissory note dated April 1, 1983 as attorneys-in-fact, obligating Jashan to pay TEFCO the sum of $1,529,391. On that same date TEFCO forwarded to the Bank certain collection documents which included a sight draft for $106,427.67. The draft represented TEFCO's commission on the transaction.

"The form sight draft included instructions for the bank to present the documents through Jordan Securities (Jordan). In addition to other instructions, the Bank was directed to contact Philip T. Amico in case of need. The Bank was further directed under a special instructions section, to "please have Yousef Jashan acknowledge the note by signing as the President and as the personal guarantor of the obligation. Have Bank (Jordan) release documents only upon signing of the note and payment of the sight draft. Please have Bank (Jordan) return signed note." The Bank forwarded the collection documents, with various instructions, to Jordan on April 18, 1983. Jordan was directed to "pls have Yousef Jahshan (sic) acknowledge the note by signing as the President and as the personal guarantor of the obligation. Release ...


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