Tales from a Law Office--Lender Liability

Our office was involved in a multi-million dollar lawsuit against one bank, and defending against another, and I was assigned to lead the case.

     Our client, Dave VanderSanden, was a highly successful mobile home dealer at a time when mobile homes were a hot, hot commodity. He was an intense, demanding, “Type A” personality. He was selling units so fast that even before he sold one, he had to be sure to get his order for his next unit, “a floor,” about two months before it would be delivered to his sales lot. The Peoples Bank financed the sale, fronting the money for the new floor and collecting when he sold. That was called the “flooring agreement.” He sold to a customer by using “chattel paper,” a promissory note for time payments, secured by title to the unit. Then he sold that chattel paper to CitiBank “without recourse,” meaning that if the customer failed to pay, that was the bank’s problem, not his.

        A new banker was assigned to his account, and she did not understand “flooring.” She refused to front the money for a new unit until one was sold and removed from the dealer’s lot, so that his inventory dwindled and looked bare. Empty lots didn’t draw customers, and soon his business was ruined. He suffered a profound “nervous breakdown,” to use an old-fashioned term. He was diagnosed with depression so severe that he took to his bed, and barely moved for a year. He told me that he was so idle that his self-winding watch failed to wind. The medical establishment tried everything on him except electric shock. That was next on the agenda when Prozac was introduced, and it worked on him well enough that he was able to return to his home from the hospital and to resume moderate activity.

      We sued the bank under a theory of “Lender Liability,” which was a fad at the time, but I don’t know if it has any currency. We alleged that dishonoring the flooring agreement had cost VanderSanden his business. (It could have been a simple breach of contract case.) But as soon as he sued, CityBank came back against him, trying to recover their loss on those chattel papers that they had purchased, purportedly without recourse, but for which the client had defaulted.  There might have been as many as fifty of them. At $50,000 per mobile home, that was $2,500,000 dollars.

     Charlean Bianci VanderSanden took over gathering documents for our case.  She had been the employee of an escrow company that handled Dave VanderSanden’s sales contracts when he was still a real estate broker, at the time she had met him.  His intensity drove people nuts, so she took over his accounts.  She checked the status of the accounts every morning, and telephoned him every morning before he could call her. And obviously, they married.

     We entered the “Discovery” stage of each lawsuit. We took sworn statements from everybody who had worked on VanderSanden’s account, and our opposing counsel took statements from Dave and Charlean. It seemed like every banker we spoke to held the title of Vice President.

    Charlean looked little and unassuming, but she was efficient.  She had tracked the movement of each and every mobile home from its first site through any further moves.  She relied on permits from the State that require a permit to move a mobile home. She could prove that CitiBank's repossession processes were completely improper. Some mobile homes were taken off site without permits, not re-registered, and somehow, disappeared into the ether.The Olympic Peninsula is probably still loaded with mobile homes that somebody bought for a pittance in cash, having no title or registration.

     The attorney from CitiBank was due to appear at my office.  I was still young and new, and intimidated. Weren’t white males from major firms all the power actors behind the law? But the guy who walked in was a short man no older than I, with a dark stain on each earlobe.  I recognized them in an instant as the mark of cheap earrings. We talked, and I found out that he was a “Deadhead,” a follower of the “The Grateful Dead,” a band that toured the west coast regularly, followed by its fans in wildly-painted hippie vans. Any and all intimidation disappeared, forever.

     The next to give a deposition (sworn statement) was the notoriously arrogant CPA for the bank. The bank had identified him as their expert witness opposing VanderSanden’s claim for damages. Preparation is the name of the game at law, and I was ready for him, but this guy knew nothing. He didn’t know what he was supposed to opine upon. He had reviewed no records. He had no opinions. I terminated the deposition.

            I returned to my desk and had begun drafting a motion to exclude any testimony from the purported expert when I received a fax from opposing counsel. “I understand that you were not ready for the deposition,” he started. “We will give you another opportunity….” I laughed him off.

            But Dave was suffering. He could not sustain attention to business without breaking down into tears.  His rehabilitation was suffering.  He told me about choosing just one chore per day to work through, to recover his inability to concentrate, which was a part of his depression. One day he agreed to take their little dog Ernie to the vet for routine shots. He drove there, remembering the route. Then he looked around.  Ernie was not in the car. Dave had driven off without him. Dave would not be able to withstand the stresses of trial.

            Abruptly, the whole scenario changed.  The Peoples Bank had been sold, and a new bank official wanted to meet with us to see what we could work out. Charlean asked, "Is he a real vice president, or a bank vice president?"  And Citibank was willing to drop their suit, on the condition that Charlean VanderSanden not help any other dealer trace the disposition of the mobile homes they had sold to the bank, with recourse. 
            Dave VanderSanden (and Charlean, and I) met with a new bank representative who was a man of Dave’s social class-that was important to Dave. The Banker apologized, and we negotiated to a reasonable settlement. The Bank gave up its claim to Dave’s sales lot,  which it had held as security for his flooring agreement, when it became obvious that the release of the lot to the bank was based upon a false signature bearing a false notary’s seal. (Rarely do you encounter such patent fraud.)  Dave told me later that he would gladly have given up the whole suit earlier, if somebody had just apologized sooner.

            Dave encountered a former business associate, and marveled that the two of them could now relate over the cultivation of roses. But his body failed him:  He developed kidney cancer. After he and Charlean considered the risks, probabilities, and side effects, he decline treatment.  Charlean told me that he died without ever uttering a complaint. The last time I ran into her, Charlean had remarried, this time to a local man with a name as Italian as her own.