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September 1, 1989

PHILLIP and BRENDA GUIDICE, et al., Plaintiffs

Barron P. McCune, Senior United States District Judge.

The opinion of the court was delivered by: MCCUNE


 We consider the National Bank of the Commonwealth's motion for summary judgment. We have jurisdiction pursuant to 42 U.S.C. § 9613(b) and 28 U.S.C. § 1331. For reasons set forth below the motion will be denied.


 The procedural history of this action is somewhat complicated as it has journeyed through two district court judges and now rests in the hands of a third.

 In October 1986, residents of the Borough of Punxsutawney, Pennsylvania (Borough) commenced action against BFG Electroplating and Manufacturing Company (BFG). Plaintiffs alleged that BFG unlawfully contaminated the environment causing personal injuries. Also asserted by plaintiffs are claims for "response costs" as defined by the Comprehensive Environmental Response, Compensation and Liability Act of 1980, 42 U.S.C. §§ 9601, et seq.

 BFG then filed a third-party complaint against current and past owners of adjacent land known as the "Berlin Property" in December 1986. BFG sought indemnification, contribution and response costs from those owners including the National Bank of the Commonwealth (Bank) as an eight-month record title owner of the Berlin Property.

 On February 25, 1987, the Bank filed a motion to dismiss the third-party complaint. Plaintiffs filed a Rule 14 claim against the Bank and other third-party defendants on August 8, 1988. On September 24, 1987, Judge Dumbauld granted the Bank's motion and later denied BFG's motion for reconsideration in an order dated October 26, 1987.

 On October 5, 1987, in response to an October 1987 written request of the Bank, Judge Dumbauld dismissed plaintiffs' Rule 14 claim. The October 5th order was not served on the parties. Plaintiffs responded to the Bank's letter by requesting that a proper motion be made by the Bank and plaintiffs be afforded an opportunity to respond. The Bank, also unaware of the October 5th order, filed a motion to dismiss plaintiffs' Rule 14 claim against the Bank on November 20, 1987. Three days later Judge Dumbauld issued a second order dismissing the claim with prejudice.

 The case was reassigned to Judge Simmons in December, 1987.

 In early 1988, BFG and plaintiffs filed motions to vacate the order dismissing the Rule 14 claim against the Bank. Additionally BFG moved to strike the orders dismissing its third-party complaint and motion for reconsideration. The Bank made a Rule 54(b) motion for findings regarding dismissal of the aforementioned Rule 14 claim and third-party complaint. At a March 26, 1988 hearing Judge Simmons orally vacated those portions of Judge Dumbauld's orders concerning plaintiffs' Rule 14 claim against the Bank on due process grounds. (Tr. pp. 2-7).

 In late September 1988 the case was reassigned to the undersigned.

 The Bank filed its motion for summary judgment in April 1989. Opposing briefs were filed by plaintiffs and BFG. The Bank filed reply briefs.



 During the 1970's Berlin Metal Polishers (Berlin Metal) operated a metal polishing company at the Berlin Property. Berlin Metal was managed and owned by the Runco family (Runcos).

 In May 1971 the Bank approved a line of credit for Berlin Metal secured by assignment of accounts receivable. Several extensions and renewals of this line of credit were approved by the Bank from May 1971 through September 1975.

 On September 8, 1975, the Bank approved a loan to construct a new treatment facility to satisfy Pennsylvania Department of Environmental Resources (PaDER) requirements secured by a mortgage on the Berlin Property. Subsequently the Bank approved additional lines of credit and two two-year installment loans. During the course of the loans and lines of credit the Bank received periodic financial statements.

 By 1980, Berlin Metal had defaulted on its obligations to the Bank. In January 1980 Bank representatives toured Berlin Metal and met with plant officials to discuss management. At that meeting the Bank representatives were informed of the number of work shifts, the status of Berlin Metal's accounts, the composition of the management and the presence of raw materials. The Bank proposed and the plant management agreed that Berlin Metal take out a loan guaranteed by the Small Business Administration (SBA) to pay off monies owed the Bank on the mortgage and lines of credit. The loan was also to allow for working capital.

 In March 1980, on behalf of Berlin Metal, the Bank submitted with recommendation of approval the loan application to the SBA.

 On April 9, 1980, the Bank confessed judgment against Berlin in the amount of $ 164,000.

 Through the efforts of Dominic Runco, Sr. the Bank was apprised of potential purchasers of the Berlin equipment and/or the Berlin facility as early as June 1980. However, those efforts did not come to fruition in part because Berlin could not obtain a permanent permit to use the Borough sewer.

 In response to the Bank's July 1980 inquiry, the PaDER sent information concerning a May 1979 fish kill in Mahoning Creek which was attributed to a cyanide discharge from the Borough sewage treatment plant. Samples taken at the Berlin and BFG facilities showed cyanide and heavy metal discharge in excess of Borough Ordinance limits.

 According to Bank file memoranda, Bank credit officer Barbara Kay was in direct contact with prospective purchaser Bruce Armstrong. Armstrong advised Kay of his efforts to obtain approval from PaDER of his proposal to dump directly into the creek. Kay independently communicated with Borough officials as to the status of the Borough's acceptance of Berlin discharge. She learned that any new owner of the Berlin facility would have to apply directly to the PaDER for approval to dump into the creek. In the meantime, Berlin was permitted to use the sewer service with monitoring of its discharge commencing January 1981.

 In January 1981 the Runcos requested a meeting with the Bank to discuss the future of Berlin Metal. At that meeting Dominic Runco, Sr. expressed an interest in repurchasing the business from his family, but was concerned about the outstanding debt against the business and property. Possible liquidation of the business was also discussed.

 In February 1981 an agent of the Bank visited the Berlin facility with Anthony Runco. In a written report the agent noted that no one was working and there was no heat or light. Water dripped from the ceiling. He observed 35 drums of chemicals ...

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