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BRUCHMAN v. STANDARD CHTD. BANK

March 17, 1998

WALLY BRUCHMAN and GEO. B. ZALOOM & Co., Inc., Plaintiffs, against STANDARD CHARTERED BANK, PLC, a public limited company, Defendant.


The opinion of the court was delivered by: LEISURE

 LEISURE, District Judge :

 Geo. B. Zaloom & Co., Inc. ("Zaloom") and Wally Bruchman (together, "plaintiffs") bring this action against Standard Chartered Bank, PLC ("SCB"), for fraudulent concealment in connection with two commercial transactions. Zaloom also claims against SCB under U.C.C. § 4-103(5), for failure to pay certain documentary drafts in a timely manner. Pursuant to Rule 56(b) of the Federal Rules of Civil Procedure, SCB moves for summary judgment on plaintiffs' claims. SCB also moves pursuant to Fed. R. Civ. P. 56(e) to strike the affidavits of four witnesses offered by plaintiffs in support of their claims. For the reasons stated herein, the Court grants in part and denies in part defendant's motion to strike, and grants defendant's motion for summary judgment.

 BACKGROUND

 At all times relevant to this action, Zaloom was a New York corporation with its principal place of business in Secaucus, New Jersey. See Defendant's Statement of Uncontested Facts ("Def.'s 56.1") at P 2. Zaloom's business principally involved importing and wholesaling handmade oriental rugs. See id. at P 6. Raymond Nargizian served as president of Zaloom at all relevant times. During 1990, Bruchman served as Vice President of Sales and Marketing for Amiran Corporation, another oriental rug importer. At the time of the filing of the Complaint in this action, he principally was involved in importing and wholesaling handmade oriental rugs. See id. at P 5.

 On August 25, 1988, Camisa submitted for approval by SCB's Area Credit Control a loan application for Zaloom to establish a line of credit with SCB. See Def.'s 56.1 at P 18. Zaloom was a new customer for SCB. The loan application was approved on September 12, 1988, and SCB established a line of credit for Zaloom by letter agreement dated September 23, 1988 (the "Letter Agreement"). See id. at PP 19, 22; see also Loan Approval Form, annexed as Exhibit 1 to Def.'s App.; Letter Agreement dated September 23, 1988, annexed as Exhibit 3 ("Ex. 3") to Def.'s App. The stated purpose of this credit facility was to finance Zaloom's purchase and import of oriental rugs. See Ex. 3 at 1. The Letter Agreement established an overall credit limit of $ 1.5 million, with a sub-limit of $ 250,000 for direct borrowing. See id. The Letter Agreement stated, "In accordance with our normal practice, this facility will expire August 31, 1989." Id. The 1988 Policy was in effect at the time that SCB and Zaloom entered into the Letter Agreement establishing Zaloom's credit facility with SCB. See Def.'s 56.1 at P 21.

 Oundjian, Inc. ("OI") also was an importer of oriental rugs. See Deposition of Raymond Nargizian ("Nargizian Dep.") at 27, annexed as Exhibit J to Def.'s App. At the time that Zaloom and SCB entered into the Letter Agreement, SCB had credit facilities with a number of other companies engaged in the oriental rug business, including OI. See Affidavit of Stephen Wahl ("Wahl Aff.") at P 4, annexed as Exhibit D to Def.'s App. At or around the time that SCB and Zaloom entered into the Letter Agreement, Wahl informed Nargizian that Haig Oundjian, who owned and ran OI, wished to divest himself of the assets of OI because he was in poor health. See Wahl Aff. at P 7; see also Nargizian Dep. at 109-10. Nargizian and Oundjian then negotiated Zaloom's purchase of some of OI's inventory. In January of 1989, Zaloom decided to purchase approximately $ 500,000 of OI's assets. See Nargizian Dep. at 173. On January 17, 1989, SCB's New Jersey LPO submitted an application to increase Zaloom's direct borrowing capability under the Letter Agreement from $ 250,000 to $ 750,000, in order to finance Zaloom's planned purchase from OI. See Wahl Aff. at P 8. The application was approved, and on May 8, 1989, OI and Geo. B. Zaloom & Co. of New Jersey, a new subsidiary formed by Nargizian, entered into an agreement pursuant to which Zaloom purchased certain assets from OI (the "Oundjian transaction"). See Purchase Agreement dated May 8, 1989, annexed as Exhibit 4 to Def.'s App.

 On October 18, 1989, Camisa prepared an application to extend the credit facility established pursuant to the Letter Agreement. See 1989 Loan Renewal Application, annexed as Exhibit 5 to Def.'s App. On November 6, 1989, SCB's Area Credit Control approved the application, which stated that it "conforms to Credit Policy USA". Id. In an updated letter agreement, SCB renewed and expanded its lending to Zaloom, with Zaloom's overall credit limit increased by $ 500,000 and its sub-limit for direct borrowing increased by $ 1.25 million. See Letter Agreement dated November 14, 1989, annexed as Exhibit 6 to Def.'s App. The letter agreement of November 14, 1989, stated, "The credit facilities described herein will expire on October 31, 1990." Id.

 On October 24, 1990, Camisa again prepared and submitted an application to renew Zaloom's credit facility. See 1990 Loan Renewal Application, annexed as Exhibit 7 to Def.'s App. Camisa proposed to renew the existing agreement without amendment. See id. at 5. However, Brian Taylor, a Credit Appraiser for SCB, recommended qualified approval of the application. In a memorandum dated October 30, 1990, Taylor noted that Zaloom was in an industry projected to decline, the company lacked cash flow, and its revenues and net profitability had reversed. See Annotated Loan Application Review, annexed as Exhibit 8 to Def.'s App. Therefore, Taylor concluded, "Approval [is] recommended on the understanding that an exit is being sought and we will be out by next year." Id. Paul Bridges, Head of Area Credit Management, agreed that SCB needed to implement an exit strategy. See id. Accordingly, SCB renewed Zaloom's credit facility subject to the requirements that Zaloom pay down its indebtedness to SCB and attempt to obtain alternative means of financing. See Wahl Aff. at P 12. Unable to obtain alternative financing, Zaloom continued to borrow against its credit line with SCB until July of 1992. See Nargizian Dep. at 281-82.

 Starting in 1989, Zaloom utilized its credit facility with SCB for, inter alia, the purchase of goods from suppliers in India and China. Suppliers would present a draft to SCB's New York Branch and demand payment. When Nargizian or another Zaloom employee confirmed the transaction and approved the requested payment, SCB would debit Zaloom's account and pay the draft. See Complaint at P 26. According to an operations officer in SCB's trade services division, SCB processed, on average, fifteen to twenty documentary drafts per business day for its customers during the period from 1990 through 1993. See Affidavit of Lauro Clemente at P 3, annexed as Exhibit C to Def.'s App.

 Between 1989 and 1993, SCB processed over 200 documentary drafts for Zaloom. See List of Documentary Drafts, annexed as Exhibit 10 ("Ex. 10") to Def.'s App. In the Complaint, Zaloom identified eight drafts that it claims were not paid in a timely manner after Zaloom had authorized payment. See Complaint at P 27. While the parties dispute the timeliness of payment, there is no dispute that SCB did pay these drafts. See Ex. 10 to Def.'s App. *fn1" Following an internal investigation, SCB acknowledged in April of 1991 that it had not paid a draft to Vandana International Exports ("Vandana") that had been authorized three months earlier (this is the third draft identified in paragraph 27 of the Complaint). SCB then paid Vandana in full, including interest. See Affidavit of Marc Chait at P 12 ("Chait Aff."), annexed as Exhibit B to Def.'s App.

 In the summer of 1990, a group entered into negotiations to purchase certain assets of Parvizian. Bruchman joined the group in forming Par-Inco, Inc. ("Par-Inco"), to effect the transaction. See Deposition of Wally Bruchman ("Bruchman Dep.") at 72, annexed as Exhibit G to Def.'s App. Bruchman is a 10% shareholder in Par-Inco. See Affidavit of Wally Bruchman at P 1, annexed as Exhibit C to the Appendix to Plaintiffs' Opposition to Defendant's Motion for Summary Judgment ("Pl.'s App."). While Bruchman relied on his partners to work out the banking arrangements for the potential purchase, see Bruchman Dep. at 43, he claims that Wahl stated that SCB intended to provide continued financing to the successor-in-interest to Parvizian. See Bruchman Aff. at P 4.

 On August 8, 1990, Wahl sent a letter to Abdi Parvizian, the president of Parvizian, in which Wahl stated that SCB wished "to formally express our interest in providing financing for the new entity" that would succeed Parvizian. See Wahl Letter dated August 8, 1990, annexed to Bruchman Aff. Wahl added, "This is a letter of interest based on information currently available to the Bank. It is not a commitment to lend nor in any way to be interpreted as a formal offer to extend credit . . . ." Id. On October 4, Ferrise followed up with another letter to Abdi Parvizian, stating:

 
I am writing this letter to you as an indication of the interest Standard Chartered Bank has in providing the working capital financing requirements for the newly formed Par-Inco, Inc., the successor to Parvizian Inc. of New York.
 
We envision a financing proposal very similar to our existing commitment . . . to Parvizian, Inc. in terms of the amount, formula borrowing base, and the continuing guarantees of the principals. In addition, the Bank would require the additional personal guarantee of John Ansari and corporate guarantee of B. Ansari.
 
Furthermore, the Bank would require sufficient details of the purchase agreement for us to adequately appraise the transaction. . . .
 
Please understand this letter is not a commitment, a contract, or an offer to enter into a contract and should not be deemed to obligate the Bank in any manner whatsoever. Our consideration for your financing request is subject to a credit approval and the satisfactory negotiations of a loan agreement with terms and conditions satisfactory to the Bank, which may not be limited to those requirements mentioned above.

 Ferrise Letter dated October 4, 1990 (the "Ferrise Letter"), annexed as Exhibit 11 to Def.'s App.

 At his deposition, Bruchman stated, "I think I read this letter just before the closing, as I recall. In other words, we received the letter, we read it. . . .just before we signed." Bruchman Dep. at 58. He added, "We were waiting for this letter, we got this letter and then basically we went in and did the closing." Id. at 59. The parties closed on the transaction transferring certain Parvizian assets to Par-Inco ("the Par-Inco transaction") immediately after receiving, and reading, the Ferrise Letter. See Deposition of Abdi Parvizian at 147-149, annexed as Exhibit K to Def.'s App; see also Par-Inco Purchase Agreement, annexed as Exhibit 13 to Def.'s App.

 In an internal memorandum to SCB Area Credit Management dated November 9, 1990, Wahl noted, "Our revised North American credit policy necessitates the formulation of an exit strategy for the oriental rug industry, which no longer qualifies for financing." Memorandum dated November 9, 1990 ("Wahl Memo"), annexed as Exhibit 36 to Wahl Dep. Wahl explained that the then-ongoing economic recession had led to a slowdown both in sales of oriental rugs by wholesalers such as Zaloom and in wholesalers' collection of receivables from oriental rug retailers. See id. Wahl went on to detail a strategy pursuant to which SCB would discontinue its lending to businesses in the oriental rug industry, including Zaloom and Par-Inco. See id. On December 6, 1990, Ferrise wrote to Abdi Parvizian informing him that SCB had declined to renew Parvizian's $ 3.8 million line of credit and requesting that Parvizian develop a plan to pay down its obligations to SCB. See Letter dated December 6, 1990, annexed as Exhibit 16 to Def.'s App. On April 18, 1991, SCB and Par-Inco entered into a loan agreement whereby Par-Inco assumed $ 1.35 million of Parvizian's outstanding debt to SCB and gained access to $ 1.85 million in credit from SCB. See Loan and Security Agreement at 2, 12, annexed as Exhibit 17 to Def.'s App.

 On January 3, 1995, plaintiffs filed their Complaint in this Court, alleging that defendant is liable for fraudulent concealment and for violations of U.C.C. § 4-103. As there exists diversity of citizenship and the amount-in-controversy requirement is satisfied, jurisdiction in this Court is proper pursuant to 28 U.S.C. § 1332. Defendant has moved for summary judgment on plaintiffs' claims, ...


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