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RECREATION SERVS. v. UTAH MORTG. CO.

April 19, 1990

RECREATION SERVICES, INC. DEFINED BENEFIT PLAN, Plaintiff,
v.
UTAH MORTGAGE COMPANY, a Michigan corporation, and HARVEY M. AIDEM, Defendants


Brian Barnett Duff, United States District Judge.


The opinion of the court was delivered by: DUFF

BRIAN BARNETT DUFF, UNITED STATES DISTRICT JUDGE

 This suit came before this court for trial without a jury on January 29-31, 1990, and for a hearing on questions relating to this court's jurisdiction on March 15, 1990. The court has heard the evidence and has considered the testimony, exhibits, memoranda of law, and arguments of counsel. The court also has reviewed the motion of Utah Mortgage Company and Harvey Aidem to reconsider its pre-trial ruling barring Aidem from testifying in this action and a self-styled "Offer of Proof" as to Aidem's testimony. This court will rule on the motion to reconsider first, then deliver its findings of fact and conclusions of law pursuant to Rule 52(a), Fed.R.Civ.Pro.

 Motion to Reconsider

 The court heard considerable argument in open court on the motion of Recreation Services, Inc. Defined Benefit Plan (hereafter the "Plan") for sanctions under Rule 37 against Utah Mortgage and Aidem for Aidem's failure to appear at a deposition on January 26, 1990. The court will not repeat those arguments here, nor restate its reasons for barring Aidem from testifying at trial. The defendants' written motion reiterates the central arguments which the court has rejected already, and raises new arguments that should have been made previously, but were not.

 The court's second observation is that the defendants' proffer suggests testimony that would take much more time to present than the defendants had represented previously to the court. That the court believed that Aidem would not testify at length had no bearing on the sanction imposed on the defendants. Nevertheless, the defendants' proffer suggests that the defendants may have misrepresented the length of Aidem's testimony to the court -- a fault which, regrettably, is common among trial attorneys. The court trusts that counsel for the defendants will be more careful in future representations to any court, including this one.

 Findings of Fact

 Now fully advised in this matter, the full trial having concluded, the court finds these facts:

 1. The Plan is an employee benefit plan of Recreation Services, Inc. Recreation Services established the Plan pursuant to the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. §§ 1001 et seq. (1982). The trustees of the Plan are Larry and Patricia Donovan. At the time that the Plan filed this suit, none of the qualified participants in the Plan was a citizen of the State of Michigan.

 2. Utah Mortgage is a Michigan corporation which has its office and principal place of business in Michigan. Aidem is a Michigan resident. Aidem conducted all of Utah Mortgage's business, and was its president and sole director. The State of Michigan has licensed Aidem as a mortgage broker.

 3. The Plan and Utah Mortgage have had a continuous business relationship since 1981. Aidem and Larry Donovan also have conducted personal business between themselves.

 4. On May 24, 1985, Utah Mortgage assigned a promissory note from Phoenix Homes, Inc. to the Plan. The principal amount of the note was $ 30,000.00. Utah Mortgage also assigned to the Plan its interest in a guarantee from Phoenix Homes and a mortgage on a parcel of real estate located in Michigan. The guarantee and the mortgage secured the note. The Plan paid $ 30,000.00 to Utah Mortgage in consideration for the assignment of the note, the guarantee, and the mortgage. Under the Assignment, Utah Mortgage was to pass all funds which it received from Phoenix Homes to the Plan, less a $ 3.00 handling fee.

 5. On August 5, 1985, Utah Mortgage received and deposited in its bank account $ 45,000.00 from Phoenix Homes. That same day Utah Mortgage released the mortgage which secured the note described in Finding 4 above. Utah Mortgage did not inform the Plan of its action. An accountant for Recreation Services, John Ridge, testified that he had examined the books and records of Utah Mortgage for the period August 1985 through December 1986. He could not find any record of Utah ...


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