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Santander Bank, N.A. v. Branch Banking & Trust Co.

United States District Court, M.D. Pennsylvania

January 3, 2020

SANTANDER BANK, N.A., Plaintiff,



         This is an action under Pennsylvania's Uniform Fraudulent Transfer Act (“PUFTA”). Plaintiff, Santander Bank, N.A. (“Santander”) seeks to avoid a transfer of more than sixteen million dollars that was made to Graystone Bank (“Graystone”), a predecessor of the defendant, Branch Banking & Trust Co. (“BB&T”). The case is presently before the court on a motion for summary judgment filed by BB&T, in which BB&T argues that Santander's claim is extinguished by PUFTA's statute of limitations, and that BB&T should prevail under PUFTA's good faith affirmative defense. For the reasons that follow, the court concludes that there are genuine issues of material fact that preclude the entry of summary judgment. Accordingly, BB&T's motion for summary judgment will be denied.

         Factual Background

         The transfer at issue in this case arises from the business dealings of a company called Gaver Technologies, Inc. (“GTI”), which was founded in 1998 by Mark Gaver (“Gaver”), the company's sole shareholder and sole director. During the period relevant to this case, GTI first maintained a banking relationship with Graystone[1] and then moved its banking activities to Santander.[2]

         After many years of GTI maintaining a banking relationship with Santander, Santander realized that GTI's financial records were fraudulent. This led to Gaver being criminally convicted of bank fraud and money laundering for which he was sentenced to seventeen years in prison. Gaver was also ordered to pay a civil judgment to Santander of $49.4 million.

         Santander's fraudulent transfer claim against BB&T centers on a $16, 167, 624.00 transfer (“the transfer”) made from Santander to Graystone on GTI's behalf shortly after GTI transferred its banking activities from one bank to the other. Because much of the claim depends on what each bank knew at the time it maintained a relationship with GTI, this section will address the facts relating to GTI's relationship with Graystone before addressing the facts relating to GTI's relationship with Santander.

         A. GTI's Relationship with Graystone

         GTI began its banking relationship with Graystone in 2007. (Doc. 12 ¶ 14; Doc. 21 ¶ 14.) As part of the relationship, Graystone gave GTI a $12 million line of credit on April 12, 2007. (Doc. 48 ¶ 4; Doc. 56 at 3.) This line of credit was based in part on GTI documents that Gaver had submitted to Graystone, including financial statements for the years 2004 and 2005 that had purportedly been audited by an outside firm, internal financial statements for the years 2004 through 2006 and part of 2007, an aging of GTI's accounts receivable, a credit bureau report for GTI, and tax returns for Gaver and his wife. (Doc. 48 ¶9; Doc. 56 at 3.) Graystone subsequently increased the value of GTI's line of credit several times, resulting in a $16 million line of credit on September 9, 2008. (Doc. 48 ¶ 14; Doc. 56 at 3.) GTI continued to submit documentation of its financial position to Graystone during this period. (Doc. 48 ¶¶ 10, 192; Doc. 56 ¶¶ 10, 192.)

         In connection with its line of credit with Graystone, GTI was required to make monthly payments to Graystone. (Doc. 12 ¶ 22.)[3] GTI missed the payment it was required to make in June 2009. (Id.) Gaver explained in an email to Graystone that GTI was unable to make the payment because it needed the money to meet its payroll obligations. (Id.)

         On April 14, 2009, Gaver requested another increase in the value of GTI's line of credit, but Graystone informed him that it did not have sufficient capital to provide such an increase. (Doc. 48 ¶ 17; Doc. 56 at 3.) This prompted Gaver to look into moving GTI's line of credit to another bank. (Doc. 48 ¶ 18; Doc. 56 at 3.) Gaver then began negotiating with Michael Postupak (“Postupak”), a Vice President at Santander. (Id.)

         B. GTI's Relationship with Santander

         Gaver began negotiating with Postupak in 2009. (Id.) During these negotiations, Gaver provided Santander financial statements for the years 2004 through 2008 that were purportedly audited by accounting firm Grant Thornton, LLP. (Doc. 12 ¶ 16.) The financial statements showed that GTI was a financially successful company with strong growth. (Id.) The statements also contained several irregularities, including fonts for the accounts receivable agings and contract status reports that differed from the fonts used in the rest of the reports; incorrect dates; references to sections that did not exist anywhere in the reports; and dollar amounts that did not match up with other GTI documentation during the same period. (Doc. 48 ¶¶ 22-32; Doc. 56 ¶ 22-32.) In addition to the financial reports, Gaver also submitted tax returns and personal financial statements for him and his wife. (Doc. 48 ¶ 19; Doc. 56 ¶ 19.)

         Based in part on the financial statements and other documents that Gaver provided, Santander approved an $18.5 million line of credit for GTI. (Id. ¶ 20.) Through that line of credit, GTI borrowed $16, 167, 624.00 from Santander, which it used to pay off its outstanding debt to Graystone. (Doc. 48 ¶ 49; Doc. 56 ¶ 49.) The $16, 167, 624.00 was transmitted from Santander to Graystone via wire transfer. (Id.)

         Following its initial approval of the $18.5 million line of credit, Santander agreed to increase the value of GTI's line of credit several times, resulting in an eventual value for the line of credit of $50 million. (Doc. 48 ¶ 176; Doc. 56 ¶ 176.) These increases were based in part on financial statements showing that GTI continued to grow at a fast pace and had a strong financial position. (Doc. 12 ¶ 23; Doc. 48 ¶¶ 68, 79, 99, 101, 112, 136; Doc. 56 ¶¶ 68, 79, 99, 101, 112, 136.) Like the initial financial statements Gaver submitted, however, these statements contained several irregularities, including a discrepancy in one statement of almost $5 million between the value of GTI's accounts receivable and its total assets. (Doc. 48 ¶ 70; Doc. 56 ¶ 70.) Another statement contained a date that was off by seven months and amounts that were completely identical from one year to the next. (Doc. 48 ¶ 141; Doc. 56 ¶ 141.)

         GTI's agreement with Santander required the company to maintain most of its deposit accounts and deposits with Santander. (Doc. 48 ¶ 51; Doc. 56 ¶ 51.) Accordingly, GTI maintained a deposit account with Santander, Account 3553. (Doc. 48 ¶ 53; Doc. 56 ¶ 53.) Despite the requirement that GTI maintain most of its deposits with Santander, there were substantial stretches of time in which GTI's only significant deposits into Account 3553 were advances through GTI's line of credit with Santander. (See Doc. 48 ¶ 56; Doc. 56 ¶ 53; Doc. 48 ¶ 63; Doc. 56 ¶ 63.) For example, from August 27, 2009, to January 2010, GTI made only one $450 deposit into Account 3553 that was not an advance on its line of credit. (Doc. 48 ¶ 56; Doc. 56 ¶ 53.) In addition to this lack of deposits in Account 3553, GTI over-drafted the account on multiple occasions. (Doc. 48 ¶¶ 86, 109; Doc. 56 ¶¶ 86, 109.)

         In addition to the lack of activity in Account 3553, there were multiple occasions during GTI's relationship with Santander in which GTI struggled to repay its loans from the bank. On February 24, 2010, for example, credit professional Joseph Sigle advised Postupak that GTI's financial records suggested that the company was going to default on a portion of its loan agreement with Santander. (Doc. 48 ¶ 57; Doc. 56 ¶ 57.) The next month, Gaver told Postupak that GTI's loan payment to Santander would bounce unless the value of GTI's line of credit was increased immediately. (Doc. 48 ¶ 58; Doc. 56 ¶ 58.) Santander agreed to increase GTI's line of credit at that time. (Doc. 48 ¶ 59; Doc. 56 ¶ 59.)

         At one point during GTI's relationship with Santander, the company submitted a balance sheet showing that the company had $6.9 million in cash on hand, an amount that Postupak noted was “contrary to every balance sheet [he had] seen for [the] company since 2009.” (Doc. 48 ¶ 152; Doc. 56 ¶ 152.) Postupak emailed Gaver to inquire about the discrepancy, noting that such a large amount of cash on hand was “atypical for GTI.” (Doc. 48 ¶ 155; Doc. 56 ¶ 155.) Gaver explained that the discrepancy was “just an anomaly” regarding the timing of payments to the company. (Doc. 48 ¶ 156; Doc. 56 ¶ 156.) Postupak and two other Santander employees failed to investigate this explanation further, even though an investigation would have shown that GTI's cash on hand at the relevant time actually totaled less than $450, 000. (Doc. 48 ¶¶ 158-59; Doc. 56 ¶¶ 158-59.)

         During the period in which GTI maintained a banking relationship with Santander, Santander allowed GTI to depart from the bank's regular policies on multiple occasions. For example, Santander's policies required a field examination to be performed on GTI's records before Santander could make any advance to GTI. (Doc. 48 ¶ 38; Doc. 56 ¶ 38.) Santander agreed to waive this requirement for GTI because of Santander's belief that GTI was being regularly audited by the United States Department of Defense. (Doc. 48 ¶ 39; Doc. 56 ¶ 39.) Santander, however, never obtained a copy of any Department of Defense audit or confirmed in any other way that the Department of Defense audits were being performed. (Doc. 48 ¶ 40; Doc. 56 ¶ 40.) ...

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