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September 16, 1970


The opinion of the court was delivered by: Decker, District Judge.


Trial was held to the court, sitting without a jury, on January 19th through 22d 1970. Post-trial memoranda and proposed findings of fact and conclusions of law have been filed, and the following constitutes the court's findings and conclusions in compliance with Rule 52(a) of the Federal Rules of Civil Procedure.

Defendant Keller and a group of other investors purchased plaintiff Bank in 1964. In September of that year Keller was named Executive Vice-President, and he became President in January, 1965. He retained this position until his resignation on September 1, 1966. From the time of his acquisition of an interest in the Bank until his resignation, defendant was a member of the Board of Directors of the Bank.

The loans which are the subject of this lawsuit, and which were not repaid in their entirety, were made over a period of time extending from July 6, 1965 to June 10, 1966. They were made to six different, but related, obligors — Albert Heisler, Mel Goldman, Ronald M. Brown, Automatic Accounting Corporation ("Automatic Accounting"), PMC America, Inc. ("PMC"), and Sports Packaging Corporation ("Sports Packaging"). The three named individuals each owned one-third of the shares of Automatic Accounting, which in turn owned 75% of the shares of PMC and 50% of the shares of Sports Packaging. The remaining unpaid loans to these obligors are as follows: Automatic, Accounting $21,808.39; PMC, $107,186.92; Sports Packaging, $77,854.54; Goldman, $14,370.22; Heisler, $13,005.41; Goldman, Brown and Heisler as a group, $15,262.50.

Count 1

The statutory violation alleged in count 1 is that set out in 12 U.S.C. § 84, which provides in relevant part:

  "The total obligations to any national banking
  association of any person, copartnership,
  association, or corporation shall at no time exceed
  10 per centum of the amount of the capital stock of
  such association actually paid in and unimpaired and
  10 per centum of its unimpaired surplus fund. The
  term `obligations' * * * shall include in the case of
  obligations of a copartnership or association the
  obligations of the several members thereof and shall
  include in the case of obligations of a corporation
  all obligations of all subsidiaries thereof in which
  such corporation owns or controls a majority

Civil liability is imposed by 12 U.S.C. § 93:

  "If the directors of any national banking association
  shall knowingly violate, or knowingly permit any of
  the officers, agents, or servants of the association
  to violate any of the provisions of this
  chapter * * * every director who participated in or
  assented to the same shall be held liable in his
  personal and individual capacity for all damages
  which the association, its shareholders, or any other
  person, shall have sustained in consequence of such

The threshold question is thus whether the "total obligations" of any "person, copartnership, association, or corporation" exceeded the ten percent limitation. Because section 84 requires that the obligations of a corporate subsidiary be included with those of the parent if it "owns or controls a majority interest," it is clear that the obligations of PMC at any one time must be included with those of Automatic Accounting, which owned 75% of PMC. It is plaintiff's further contention that the obligations of Sports Packaging and the three individuals must also be added to those of Automatic Accounting and PMC in determining whether the debt limit was exceeded.

Despite the fact that Automatic Accounting owned only 50% of Sports Packaging, evidence was offered to show that it controlled a majority interest. Thus it was established that Automatic Accounting, PMC and Sports Packaging all shared the same business address and that funds were occasionally transferred between Automatic Accounting and Sports Packaging. Brown testified that the "fiscal decisions" of Sports Packaging were made by Heisler, and that Phil Teitlebaum, who owned Voedisch Bros., Inc., which in turn owned the other 50% of Sports Packaging, handled the sales and manufacturing aspects of the business.

Contrary to this evidence of control by Automatic Accounting, however, is the fact that Teitlebaum, his wife, and one of his associates constituted three of the six directors of Sports Packaging. Moreover, Mel Goldman testified that all corporate functions other than administration were conducted by Teitlebaum and that Teitlebaum was "involved in" corporate decisions.

It is apparent to this court that plaintiff has failed to show that a majority interest of Sports Packaging was controlled by Automatic Accounting. No evidence supports the suggested conclusion that Teitlebaum was a mere nominee or puppet of Automatic Accounting, and indeed the evidence points to the contrary. The only reasonable conclusion that can be drawn is that Teitlebaum's power and authority within Sports Packaging were equal to that held by Automatic Accounting.

Entitled to some weight in this regard, although not binding upon the court, is the interpretation placed on this part of the statute by the Comptroller of the Currency. At the time of the loans here involved, the following interpretative regulation was in effect:

  "2. Loans to one corporation, half (or less) owned by
  each of two parent corporations, are not combined
  with the obligations of either of the parents." (3
  CCH Fed.Banking L.Reptr. ΒΆ 59,711, ...

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