Lawyers USA Your Business Partner

A Kentucky jury has awarded $10.6 million to a real estate company owned by a couple who claimed they were defrauded by their bank, causing their business to fall apart.

In late 2001, Larry and Linda Thompson were convinced to consolidate their mortgages with a single bank, which was then Bank of Louisville and is now owned by BB&T Corp. According to the Thompsons’ attorney, Larry Zielke of Louisville, the bank intentionally misled the plaintiffs about what rights they had in real estate transactions, and led them to be subjected to taxes to the point that they could no longer sustain their business.

“There were a series of decisions made in which they stepped over the line and interfered with [the] borrowers’ business,” Zielke said.

Attorneys for the defense could not be reached for comment. According to Zielke, an appeal is expected.

‘Business as usual’

In 2001, at the time the Thompsons made the move to the Bank of Louisville, the couple held mortgages for 28 properties in eight area banks.

While speaking with the chief lending officer of the Bank of Louisville, they were told they could consolidate their mortgages into a larger blanket mortgage.

According to the terms of the deal, any sale would give them a partial release, an allocation of the property sale and a lowered interest rate over a 20-year term.

The Thompsons decided to move all of their mortgages to the new bank.

In early January of 2002, Larry Thompson handled a closing on a new property with a $160,000 release. The bank doled out $70,000 and the Thompsons received $90,000.

“It was business as usual,” said Zielke. “The way the Thompsons have always done it.”

But then in 2004, while selling a larger commercial property of about 46 units for just over $1 million, the Thompsons planned to use their partial release to buy another piece of property – a transaction that would cost around $1.03 million, and qualify them for a §1031 exchange under the Internal Revenue Code (meaning no additional taxes would be paid).

“It’s a business decision they’ve made many times before,” said Zielke. “It’s how good real estate companies are run.”

The bank, however, refused to allow the transaction, telling Larry Thompson it wouldn’t be a good buy. Instead, the bank took the entirety of the release and subjected the Thompsons to massive capital gains taxes because they were no longer eligible for tax breaks under §1031.

The Thompsons suddenly started to fall behind on their monthly payments and between 2004 and 2006 the Bank of Louisville took all profits the couple made on their company to pay off bank dues.

The final straw, Zielke said, came in 2006, when the Thompsons were told they had to auction off many of their properties. But when Larry Thompson arrived at the auction, the bank officer had stood him up.

Dueling timelines

For trial, Zielke produced a timeline illustrating every major event and transaction involving the Thompsons and the Bank of Louisville over a five year span, from the initial consolidation of mortgages to the liquidation of the Thompsons’ business.

For each significant transaction in which the bank took the Thompsons’ release money, Zielke attached internal bank documents that suggested decreasing Larry Thompson’s credit limit.

The timeline also included e-mails and other communications between the Thompsons and the bank.

Zielke said that attorneys for the defense argued that the Thompsons were continually late on their monthly payments, forcing the bank to decrease their credit limit and reduce the Thompsons’ role in their business.

The attorneys for BB&T presented a bar chart covering the five-year span from the time that the Thompsons moved their company’s mortgages to the Bank of Louisville in 2001 through 2006, showing how many days late Larry Thompson made the monthly payments.

However, what the chart failed to show, Zielke said, was that banks typically allow a 10-day grace period, and if the payment is made within that time there is no penalty or effect on the borrower’s credit.

To further his point, Zielke made a duplicate chart.

“I told jurors I liked [the defense’s] chart so much [that] I made one of my own,” he said. Zielke’s chart showed that the Thompsons always made their payments within the grace period.

Change in testimony

The turning point of the trial, Zielke said, came during the testimony of one of the bank officers, who claimed that the $90,000 release on the plaintiffs’ initial transaction was the bank’s money.

The testimony was interrupted for lunch, and when it continued afterward the officer changed his position, saying it was in fact the Thompsons’ money.

“Where did you all of a sudden get this revelation?” Zielke asked.

After a seven-day trial and three hours of deliberations, the jury awarded the Thompsons $10.6 million. Of that, $9 million was for punitive damages, and $1.6 million was for compensatories for the additional taxes the Thompsons paid as a result of the bank’s actions.

For Zielke, it was the largest verdict of his career, but he doesn’t believe the current state of the economy and national anger directed toward banks had much to do with the jury’s award.

“I think any juror gets upset when a bank acts as heavy-handed as this bank,” he said. “To hear that a guy is making his payments every month but they still decide to stop his business? And only two years into a 20-year loan they give up on him? I think any juror would be outraged.”

Plaintiff attorneys: Larry Zielke, Nancy J. Schook and David N. Hise of Zielke Law Firm PLLC in Louisville.

Defense attorneys: Mark Robinson, Daniel Albers, and Robert Wagner of Valenti, Hanley & Robinson PLLC in Louisville.

The case: Thompson v. BB&T ; March 30, 2009. Jefferson County Circuit Court in Louisville. Judge James Shake.

Questions or comments can be directed to the writer at: justin.rebello@lawyersusaonline.com

Close this Window Bookmark and Share This Page

Save to Browser Favorites / Bookmarks

Print RSS Feed Ask backflip blinklist BlogBookmark Bloglines BlogMarks Blogsvine BuddyMarks BUMPzee! CiteULike co.mments

Connotea del.icio.us Digg diigo DotNetKicks DropJack dzone Facebook Fark Faves Feed Me Links Friendsite folkd.com

Furl Google Hugg Jeqq Kaboodle kirtsy linkaGoGo linkedin LinksMarker Ma.gnolia Mister Wong Mixx MySpace

MyWeb Netvouz Newsvine oneview OnlyWire PlugIM Propeller Reddit Rojo Segnalo Shoutwire Simpy Slashdot

Sphere Sphinn Spurl Squidoo StumbleUpon Technorati ThisNext Tumblr Twitter Webride Windows Live Yahoo!

Email This to a Friend

Copy HTML: 

 If you like this then please subscribe to the RSS Feed.

More »