Wright v. National Bank of Stamford

600 F. Supp. 1289
District Court, N.D. New York·Decided January 2, 1985·No. 83-CV-528·Published·Cited by 18 cases

Opinion

MINER, District Judge.

This action, alleging various federal constitutional deprivations, arises out of a defaulted loan and a private lender’s attempt at collection through repossession of collateralized property. The action is brought pursuant to 42 U.S.C. § 1983, and jurisdiction is predicated upon 28 U.S.C. §§ 1331, 1343. Before the Court is a motion by the defendant law firm Govern, McDowell & Becker (“GM & B”) for summary judgment, Fed.R.Civ.P. 56(b), as well as a motion by defendants The National Bank of Stamford (“Bank”), Einar Eklund and John *1291 H. Friedmann for summary judgment, Fed. R.Civ.P. 56(b). 1 Oral argument on the motions was heard by the Court on June 22, 1984. Decision was reserved pending the submission by the parties of then untranscribed deposition transcripts. The final submissions of the parties were received by the Court on August 28, 1984, and the Court was advised of such by plaintiffs’ counsel on September 6, 1984. 2

II

Plaintiffs Earl and Katherine Wright own a dairy farm in Roxbury, New York. Plaintiffs Burr and Byron Wright are two of Earl and Katherine’s adult sons, residing and working on the farm. Defendants Eklund and Friedmann are respectively President and Vice-President of defendant Bank, located in Delaware County, New York. Defendant GM & B is a law partnership serving as counsel to the Bank. One of the firm’s partners, Robert H. McDowell, was a member of the Bank’s Board of Directors and owned a large share of its stock. He also held the office of County Attorney for Delaware County. Another partner, Carl F. Becker, held the post of Assistant County Attorney.

In connection with the operation of their farm, Earl and Katherine, in 1977, opened a line of credit at the Bank. In that same year, they signed security agreements collateralizing various farm equipment and their dairy stock. The security agreements provided that any sale of collateral without the Bank’s consent would constitute default, and in the event thereof, the Bank would retain all remedies available under the Uniform Commercial Code.

In 1979, plaintiffs’ dairy herd became infected with mastitis. Pursuant to New York law, seriously infected animals were required to be removed from the herd in order to avoid contaminating the milk supply and the other animals. By August of 1980, plaintiffs removed a majority of the animals from the herd, sold them for salvage, and replaced them with healthy animals. The sums received from the salvage sales were insufficient to replace all of the removed animals by outright purchase of healthy cows, and, therefore, plaintiffs replaced some of their herd with leased animals. According to the complaint, plaintiffs kept Bank officials aware of these events.

On August 13, 1980, Earl and Katherine executed a promissory demand note for $143,204.89, representing a consolidation of their total indebtedness to the Bank. According to plaintiffs, there also was executed a new security agreement which allegedly superseded the 1977 agreements. Unlike the earlier agreements, the 1980 agreement is said not to have specified sale of collateral as a grounds for default. 3

The Bank had become aware of plaintiffs’ sale of cattle and considered the note in default. It demanded payment on November 21, 1980, but was refused. On November 25th, on behalf of its client, GM & B prepared and served a summons and complaint on Earl and Katherine, demanding immediate possession of all the collateral. Also served was an Order to Show *1292 Cause, returnable the following day, temporarily restraining Earl and Katherine from disposing of any other collateral. Because of the short notice, plaintiffs were unable to retain counsel to appear on their behalf on the return date of the Order to Show Cause. They themselves appeared, however, and the court granted the Bank its requested injunction, restraining plaintiffs’ sale of any collateral.

That evening (November 26th), defendant Friedmann, accompanied by Carl Becker of GM & B and two uniformed deputies of the Delaware County Sheriff’s Office, arrived at the Wright farm with a cattle truck. According to defendants, Friedmann and Becker went to the farm for the purpose of securing the remaining cattle pursuant to the Bank’s “common law rights as a secured creditor and the aforesaid security agreement.” Simmons affidavit, ¶ 14. The law firm requested the presence of the deputies allegedly in fear of possible violence or breach of the peace. According to the complaint, “[o]ver the objection of plaintiff Earl Wright, and over the telephonic objection of his counsel, agents of the bank under the direction of Carl F. Becker and defendant Friedmann entered and remained upon plaintiffs’ property and loaded nine of plaintiffs’ cows onto the truck.” Complaint, II44.

Twenty-one days had now elapsed since plaintiffs had been served with the summons and complaint on November 25, 1980, and plaintiffs had yet to hear from their counsel. New counsel was retained, who received a two day extension of time — until December 17th — to answer the complaint. On December 18, 1980, one day after the extended time to answer had expired, GM & B applied for and obtained an ex parte default judgment. The order awarded to the Bank possession of various chattels, including the nine previously repossessed cows. According to the complaint, that order was based upon defendants’ representations that the Bank’s rights were governed by the 1977 security agreements rather than the 1980 agreement which assertedly would have disclosed to the judge that plaintiffs had substantial defenses to the Bank’s claim.

On December 19th, plaintiffs retained new counsel, who managed to obtain a stay of execution of the judgment and who moved by Order to Show Cause to vacate the default. That application was denied and the stay was dissolved on January 2, 1981. 4 That same day, GM & B, acting in lieu of the county clerk pursuant to N.Y. Civ.Prac.Law § 5280(b), see infra note 10, prepared a writ of execution and delivered it to the sheriff. Pursuant to that writ, deputy sheriffs and defendants Eklund, Friedmann and GM & B appeared at plaintiffs’ farm and removed the remaining cows and most of the remaining equipment and machinery. Most of these items were later sold at public auction. On January 12, 1981, Earl and Katherine Wright filed a petition for bankruptcy.

This rather prosaic factual background lays the predicate for a host of constitutional and state law challenges.

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Wright v. National Bank of Stamford, 600 F. Supp. 1289 (N.D.N.Y. 1985).

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