Kovian v. Fulton County National Bank And Trust Company

857 F.Supp. 1032 (1995)

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Nature of the Case

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Facts

Ps allege four claims under the Racketeer Influenced and Corrupt Organizations Act (RICO). Ds alleged illegal lending activities by Fulton County National Bank (D) and Pratt (D) as President of the Bank, and Moyses (D) as Vice-President of the Bank, at the time of the alleged schemes. Ps allege four claims under the Racketeer Influenced and Corrupt Organizations Act (RICO). Ds alleged illegal lending activities by Fulton County National Bank (D) and Pratt (D) as President of the Bank, and Moyses as Vice-President of the Bank, at the time of the alleged schemes. Both are purportedly tied to the Bank's unlawful activities Pratt's (D) involvement in the alleged wrongs is limited to the 'Hibjay scheme,' one of the three schemes described by Ps. Hibjay was founded by Ps to undertake the rehabilitation and renovation of low-income properties. The idea to initiate the business originated with Moyses (D). Moyses (D) encouraged Ps to start Hibjay by promising to locate a purchaser for their first renovation project, known as the 'Hibbard Street building.' Moyses (D) secured signed, blank promissory notes from Ps, which he filled in when either P sought a construction draw. Moyses (D) would enter Pratt's (D) office prior to completing the form and would return to his own desk to fill in an amount in excess of that which Ps requested. Ps claim they did not realize at the time that these excess amounts represented kickbacks, as they now allege. Moyses (D) secured signed, blank promissory notes from Ps, which he filled in when either P sought a construction draw. Moyses (D) would enter Pratt's (D) office prior to completing the form and would return to his own desk to fill in an amount in excess of that which Ps requested. Ps claim they did not realize at the time that these excess amounts represented kickbacks, as they now allege. This same procedure was followed in Hibjay's second project, the renovation of the Masonic Temple. Hibjay borrowed approximately $428,213.00 from the Bank (D) in order to finish the Temple project. The Temple Building was owned by Kenneth Keith, who had purchased the property with money borrowed from the Bank (D). The Bank (D) maintained a mortgage on the property to secure the Keith loan. Ps knew that Keith had reached his lending limit on loans from the Bank (D), but they continued to borrow money to finance the Temple Project relying on representations by Moyses (D) and Pratt (D), who assured them that the Bank (D) would locate someone to purchase the structure from Keith. The Temple Building was purchased by Temple Associates in June 1983. Temple Associates evicted Hibjay from the premises, whereupon Hibjay filed a mechanics lien against Temple Associates for the amount of $615,703.45. Moyses (D) and Pratt (D) then attempted to coerce Ps into assigning the lien to the Bank by making a variety of promises and threats. They promised to cancel the debt Hibjay incurred in renovating the Temple Building, to return to Hibjay any money in excess of that amount, to finance the 'Brower Block project', which was another renovation project initiated by Hibjay, and to help obtain the support of the Bank (D) in the recovery of the financially ailing Kelly Lumber, which was owned by Ps. Pratt (D) and Moyses (D) threatened to withhold future loans and to call in all existing loans if Hibjay refused to assign the lien. In response to the promises and threats, Ps agreed to assign the mechanics lien to the Bank (D). The Bank (D) instituted an action in state court to foreclose on the Temple Building mortgage and to collect on the lien. The Bank (D) thereby received funds in excess of the amount owed by Hibjay, and it failed to refund any money to Hibjay. The Bank (D) reneged on its promises to finance future Hibjay projects and to assist in the financial recovery of Kelly Lumber, which subsequently filed for bankruptcy. The Bank (D) also refused to allow the lien to cancel the Hibjay debt unless Ps agreed to sign a release and covenant not to sue (jointly referred to as 'the release'), pursuant to which they waived all claims against the Bank (D) with relation to the Temple project. Ps signed a release and on the basis of the release, Pratt (D) moved for summary judgment against Hibjay, and Ps.