Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

RESOLUTION TRUST CORP. v. FARMER

August 2, 1993

RESOLUTION TRUST CORPORATION
v.
PETER J. FARMER, et al. v. SANDRA K. CHITWOOD, et al.



The opinion of the court was delivered by: BY THE COURT; JAMES T. GILES

 GILES, J.

 August 2, 1993

 As receiver for Horizon Financial F.A. ("Horizon"), a former federal savings and loan association located in Pennsylvania, the Resolution Trust Corporation ("RTC") brought suit against Horizon's former directors, officers, and attorneys (collectively "DOA Defendants"), *fn1" seeking damages for their alleged mismanagement of the defunct association. The gravamen of the RTC's amended complaint is that the DOA Defendants, in their various capacities, permitted Horizon to engage in highly speculative, unsound and poorly-documented lending practices, particularly with regard to certain automobile and second mortgage consumer loans known as the "SBL" loans. RTC's Amended Complaint, at 9-10. *fn2"

 In response, a number of the DOA Defendants *fn3" have filed a third-party complaint against the individual borrowers and guarantors, and counsel for the borrowers and guarantors of the defaulted SBL loans. In their amended third-party complaint, the DOA Defendants allege, inter alia, that they relied to their detriment upon fraudulent misrepresentations made by the third-party defendants when the SBL loans in question were obtained from Horizon.

 Now before the court is a motion to dismiss the amended third-party complaint filed by third-party defendants, E. Lewis Hansen and Hurt, Richardson, Garner, Todd & Cadenhead (attorneys for the borrowers and guarantors -- collectively "Hurt Richardson"), the DOA Defendants' response, and the replies of the parties. For the reasons that follow, Hurt Richardson's motion is denied in part and granted in part. The DOA Defendants' RICO claim is dismissed with prejudice. *fn4"

 FACTUAL BACKGROUND

 I. SBL/Brokers South Loans

 During the years of 1984 and 1985, Horizon purchased automobile and second mortgage consumer loan portfolios from three lending institutions: Sentry Corporation, Bankers Service and Landbank (collectively the "SBL portfolios"). Amended Third-Party Complaint at P 2. Shortly thereafter, Horizon resold the portfolios to an affiliation of automobile dealerships incorporated in Georgia ("Brokers South"). Id. In exchange for servicing the individual loans in the portfolios and granting to Horizon security interests in all personal and real property, Brokers South acquired the SBL portfolios with financing assistance from Horizon. Id. at 24.

 In all of its transactions with Horizon from 1985 until 1988, Brokers South was represented by Hurt Richardson, a law firm incorporated in Georgia. *fn5" Amended Third-Party Complaint, at PP 25, 27 & 35. During its representation of Brokers South, Hurt Richardson presented several "opinion letters" to Horizon wherein it supported and verified Brokers South's representations contained in loan documents. Id.

 In September 1987, Brokers South had difficulty paying off its loans with Horizon. Therefore, Horizon's loan committee agreed to repurchase the SBL loan portfolios and to restructure Brokers South's outstanding loans. Amended Third-Party Complaint, at PP 32-35. As part of the restructuring, Horizon and Brokers South executed new loan documents. They also executed a mutual general release of all prior claims, including claims of any alleged misuse of loan proceeds by Brokers South. Subsequently, Brokers South still failed to meet its loan repayment obligations to Horizon despite the restructuring agreement. The SBL portfolios all went into default. Id.

 II. The Georgia Litigation

 On October 28, 1988, Horizon, under the control of the DOA Defendants, filed a complaint in the United States District Court for the Northern District of Georgia *fn6" against Brokers South, corporate and individual guarantors, a number of related individuals and entities, and Hurt Richardson. Hurt Richardson's Brief, at 5.

 In February 1989, Horizon, while it was still under the control of the DOA Defendants, settled the Georgia action with Brokers South and all other named defendants, except Hurt Richardson. Hurt Richardson's Brief, at 6. Horizon and the settling defendants executed a mutual general release of all claims. Id.

 Following the RTC appointment as receiver for Horizon, the district court ruled that the vast majority of Horizon's claims against Hurt Richardson had been released by Horizon through the September 1987 general release executed in conjunction with consolidation and restructuring of Brokers South's SBL loans. See Horizon Financial, F.A. v. E. Lewis Hansen and Hurt, Richardson, Garner, Todd and Cadenhead, Civil Action File No. 1:88-cv-2471-JOF (February 11, 1992 Order at 23). Specifically, the district court found that the general release discharged Hurt Richardson from those claims, arising prior to September 1987, which were based on transactions between Horizon and Brokers South where Hurt Richardson acted as Brokers South's agent. Id. However, that court was also found that the release did not discharge Hurt Richardson from liability in transactions in which Hurt Richardson submitted opinion letters to Horizon to support and verify Brokers South's representations made in loan documents. See Id. at 26. *fn7"

 In August 1992, the RTC settled Horizon's remaining claims against Hurt Richardson, and a general release was executed by and between the RTC and Hurt Richardson. Hurt Richardson's Brief, at 7.

 III. The DOA Defendants' Claims Against Hurt Richardson

 The DOA Defendants allege that "with the active participation of [Hurt Richardson], . . ., Brokers South engaged in a fraudulent scheme to acquire Horizon's loan proceeds and then divert those proceeds to outside entities to purchase properties." DOA Defendants' Brief at 6. They further allege that the "third-party defendants concealed [their] after-acquired properties from Horizon so as to prevent the thrift from taking security interests in the real estate." Id.

 The DOA Defendants allege that the loans to Brokers South were made in reliance upon the borrower's and guarantors' assurances of repayment and on the opinion letters given by Hurt Richardson. Id. They further allege that "before any loans to Brokers South could close, Hurt Richardson was required to issue an opinion to Horizon supporting Brokers South's representations in the loan documents." Id.

 The DOA Defendants claim against Hurt Richardson for violations of the Racketeer Influenced and Corrupt Organizations Act ("RICO") (count I), fraud and misrepresentation (count II), negligent misrepresentation (count III), and professional malpractice (count VII). Hurt Richardson moves to dismiss each of these claims.

 APPLICABLE LEGAL STANDARD

 In deciding a motion to dismiss for failure to state a cognizable claim, the court must accept as true all of plaintiff's factual allegations and draw from them all reasonable inferences favorable to the plaintiff. D.P. Enterprises, Inc. v. Bucks County Community College, 725 F.2d 943, 944 (3d Cir. 1984). However, the court need not accept as true legal conclusions or unwarranted factual inferences. Gomez v. Toledo, 446 U.S. 635, 636, n.3, 64 L. Ed. 2d 572, 100 S. Ct. 1920 (1980). A case should not be dismissed for failure to state a claim unless it appears certain that no relief can be granted under any set of facts that could be proved consistent with plaintiff's allegations. Hishon v. King & Spalding, 467 U.S. 69, 73, 81 L. Ed. 2d 59, 104 S. Ct. 2229 (1984).

 DISCUSSION

 I. THIS COURT HAS JURISDICTION OVER HURT ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.