Grantors to the Silresim Site Trust v. State Street Bank & Trust Co.

No. 88-1324-K (D. Mass. November 24, 1992)

In a bench ruling, the court holds that a bank is not liable for cleanup costs under the Comprehensive Environmental Response, Compensation, and Liability Act at a Massachusetts Superfund site. The court holds that the bank, which granted loans to the site owner secured by mortgages and 90 percent guaranteed by the Small Business Administration, used its indicia of ownership of the site only to protect its security interest. The court rejects contrary testimony by the borrower's owner and an individual allegedly authorized by the bank to operate the site, finding their testimony incredible, inconsistent with documentary evidence, self-contradictory, and impeached by the witnesses' deceptive acts and practices. The court rejects the argument that the bank attempted to continue the borrower's operations to "bleed" it of its assets, because this would reduce the likelihood that the bank would recover its unguaranteed loans and involved additional lending. The court also finds that the bank attempted to collect on accounts receivable that secured the borrower's loans solely to protect the bank's security interest, and this did not constitute control of the borrower or the site.

Counsel for Plaintiffs
Louis N. Massery, Roy P. Giarrusso
Cooley, Manion, Moore & Jones
21 Custom House St., Boston MA 02110
(617) 737-3100

Counsel for Defendants
Edward J. Barshak, Paul E. White
Sugarman, Rogers, Barshak & Cohen
33 Union St., Boston MA 02108
(617) 227-3030

Francis K. Monarski
550 Merrimack St., Lowell MA 01854
(508) 458-4528

[23 ELR 20428]

Keeton, J.:

THE COURT: I will state my decision first, and then I will be stating my findings and conclusions. For convenience, I'm going to refer to parts just as to enable some cross references. I will not be identifying by numbers beyond that. I will state first that the defendants' motion for judgment under Rule 52(c) will be granted.

In Part 1 of my statement of findings and conclusions, I will address some legal issues briefly and then will be referring to them again from time to time in other parts.

I begin seeking my guidance in the statute in Section 9607(a)(2) that declares that liability not withstanding any other provision or rule of law and subject only to the defenses set forth in Subsection B of this section which are not applicable to our case rests upon any person who at the time of disposal of any hazardous substance owned or operated, and I emphasize the words "owned or operated" a facility of which such hazardous substances were disposed of.

I take note of the fact that, in order to find the verb in that sentence, you have to go a way down a bit farther after you've had Subdivision 4, but the meaning even though it takes a little time to extract the critical parts of the sentence is clear that phrase "owned or operated" though not formally defined anywhere in the statute is effectively defined for us by the provisions in 42 United States Code Section 960120(a) which formally defines "owner or operator" as meaning in the case of an on-shore facility as distinguished from a vessel any person owning or operating such facility.

Of course, there's a circularity in the definition thus far, but the last sentence of Subsection 20(a) gives considerably more guidance. That sentence is "such term does not include a person who without participating in the management of a vessel or facility holds indicia of ownership primarily to protect his security interest in the vessel or facility."

And it is that sentence from which I must take primary guidance in deciding this case. There's a host of interesting questions thus far undecided about the meaning of both 9607(a)(2) and 960120(a) that I need not consider in this case because of the facts as I find them they would not make a difference whichever way they were received.

Among those issues are the concerns about whether the agency rule adopted after, long after all of the events in this case is either binding on this court or should be given some degree of deference by this court in arriving at an appropriate interpretation of the statute to the extent that that interpretation is critical in the decision of this case.

I need not decide that question because when I look to the statutory language itself with such guidance as we can get from legislative history and from the precedence thus far interpreting the statute, I will for the reasons I will be explaining decide the case for the defendants.

If instead I concluded that I should give some deference or should be bound by the agency rule most recently promulgated, it would simply be an a fortiori case because that agency rule as I read it is as applied to the facts of this case more favorable to the defendants even than what one might conclude is the applicable set of legal standards without the benefit of an agency expertise and interpretation.

So I will simply not be addressing the aspects of the agency rule that tend to focus in particular in explaining participation in the management upon a closer examination and analysis of management with respect to its relationship to the handling and disposal of hazardous waste.

Also, I need not decide and will not decide the interesting question about burdens because on the evidence before me I do not find any issues of fact that are relevant to this decision that seem to me to be close as to which a burden will be relevant.

I will be making all of the findings I state positively on a preponderance of the evidence and indeed on a heavy preponderance of the evidence in favor of the findings as I state them, so I need not and do not address those questions, burdens.

Now, that completes my brief preliminary statement about the legal issues, and I turn next to Part 2 of my findings in which I will be addressing the key issues of credibility of the two key witnesses — Miserlis and Pace.

This is a case in which as fact finder I have the view on the law that, if I resolved all of the credibility issues in favor of believing all that those two witnesses say, it would establish liability of the lender.

I think it is also clear, however, that I cannot accept the credibility of either of those two witnesses. It is deeply undermined and in each instance for four sets of reasons.

Number one, the overall version of events each of these witnesses tells is inherently incredible. I will be saying more about some aspects of the story, the two different versions, Pace's version and Miserlis' version, as I speak in more detail on some of the subsidiary findings.

Second, the overall version of events each of these witnesses tells is inconsistent with the documentary evidence that can only be explained reasonably in a different way from the way each of these witnesses explains it. In some instances, these witnesses are taking the documentary evidence and distorting it, adding to it in a way that is not credible.

In other instances, they are directly defiant even in the instance of Miserlis after seeing his own signature and recognizing it nevertheless testifying inconsistently with his own prior statement in that documentary evidence in evidence before me.

Third, there are numerous and significant self contradictions including some retractions and revisions that previous testimony in the testimony of each of these two witnesses.

And fourth, the credibility of each of these witnesses is significantly impeached by evidence of his engaging in deceptive acts and practices.

For example, as to Miserlis, the unimpeachable evidence of his primary area of responsibility for the conversion of funds that Silresim had agreed to deliver directly to Union National Bank for application toward paying off loans is severely damaging to his credibility.

His persistence in trying to excuse or explain his conduct with a variety of varying and inconsistent explanations makes the impeachment even stronger.

As to Pace, his grudging acknowledgement of the terms and the grounds of the SEC order based upon his conduct enhances the impeachment of his credibility based on the other things, the other grounds I have already noted.

Now, I state those four points in this general way. I will be [23 ELR 20429] referring to some illustrations of them as I proceed through my findings and conclusions.

I state them in this general way to emphasize that, of course, this is a case for the fact finder because it depends so much on the credibility of these two witnesses.

But the, and I recognize that the plaintiffs have argued that even if I discredit all of this testimony there is still enough left in other sources of evidence to support a finding for the plaintiffs on what might be regarded as a kind of an alternative ground, but I do not find that sufficient, and I emphasize that I have rarely had before me evidence of witnesses that was so thoroughly impeached and not credible as the testimony of these two witnesses.

Now, I turn to the third part of my findings in which I will be making some findings regarding the Union National Bank's holding of indicia of ownership primarily to protect its security interest and not as participation in the management and that it did not participate in the management of Silresim.

And to be explicit, I do find by a strong preponderance of the evidence that at no time did the Union National Bank participate in the management of Silresim in the sense relevant to this statutory phrase.

I begin to address this question to explain my findings on this subject by speaking of the chronology surrounding Pace's arrival. There were many allusions to this in the course of the testimony dating it in other ways and less precisely.

But the documentary evidence is very compelling as to the fact that there had been no previous contact between any representative of the bank and Pace before Miserlis brought Pace to the bank.

So some earlier suggestion that somehow or other there had been some previous association, affiliation, or something of that kind is simply not supported by the evidence.

Miserlis was the one who as a result of his efforts to find financing from other sources was put in touch through an intermediary with Pace. It isn't exactly clear whether Miserlis knew that Pace was about to show up before Pace shows up in Miserlis' office at Silresim.

But when he comes, he has had no kind of introduction or participation in any way in his being there with the Union National Bank.

Moreover, the chronology supports the proposition, and I find it on the basis of the evidence as a whole, that the bank had not in any way undertaken to express any interest in Pace's becoming involved in Silresim until after the decision had been made by the Silresim board to make some kind of, have some kind of understanding with Pace.

As a matter of fact, it took quite a long time into December for that to be accomplished, the board meeting having been held on August 6th, 1975 as reflected in Plaintiff's Exhibit 5.

But the simple point I'm making is that this was not a case in which the bank went out looking for someone, found Pace, and thrust him upon Silresim.

Instead, Miserlis was out looking, perhaps not fully understanding, very likely not fully understanding the nature of Pace's interest, hoped to obtain additional financing from Pace or through him.

It was obvious as the events unfolded to us as a matter of hindsight that he was not going to get any additional financing from him, but he might still have hoped that through Pace he would get additional financing by Pace's loan investors into the matter.

The way that relationship developed and the nature of the bank's interest I think is reflected not only in the documentary evidence which I credit but also in the testimony of Pollock.

I understand Pollock's testimony to be although he phrased it frequently as saying that the bank was demanding that Pace be in charge, I understand his testimony to be, and this includes his responses to specific questions that I put to him, that the bank was insistent that Miserlis not be in charge.

That was what was going on, and the reason for that was explained by Pollock rather dramatically more than once in his testimony. At one point, he said it this way, the Miserlis brothers were out of trust with the bank.

At another point, he explained more than once at other points, and more than once, he explained that the conversion that Miserlis had been primarily responsible for in which he had misapplied funds coming into his hands that should have been applied to the bank debt which first became known to the bank in this early August period.

There's some suggestion it may have been another time, but I think on the evidence as a whole that it occurred either from the accountant or from Pace that the bank first learned about it and within this period in early August of 1975, and that was a very serious matter.

The bank felt it necessary quite appropriately to report it to the SBA. The bank also at that point felt that they could not trust Miserlis with the financial control, and therefore, it were insisted that they would not continue the lending relationship unless somebody else was placed in control by Silresim rather than Miserlis being the person they would have to count on as being responsible and that no further mishandling of funds occur.

Also by that time, it had become very apparent that the bank assessed Miserlis' effectiveness as an operational manager as well as a financial manager as questionable.

They were primarily interested in the financial management and the cash flow problems and the ability to handle the debt. The debt has been frozen even before these dramatic events including the disclosure of the conversion, and it was in that context that the events of August through December of 1975 were occurring.

That is the context in which I find that the way the bank was behaving was entirely consistent with its using the indicia of ownership primarily to protect the security interest of the bank and that it was not behaving in a way that constituted participating in the management of Silresim.

At this point, I take note also of one of the inherent improbabilities of Pace's version of events to which I referred in Part 2 of my statement of findings.

Pace essentially tells a conspiratorial theory that he was in there to bleed the assets of Silresim on behalf of the bank or to put it in his more provocative terms to rape Silresim. That doesn't make any sense.

The exposure of Union National Bank at that point was limited by its SBA guaranties, 89 to 90 percent respectfully, so at that point, it's undisputed and shown by the documentary evidence indeed documentary evidence offered by the plaintiffs that the exposure beyond the guaranty was less than a hundred thousand dollars.

It's a matter of extraordinary suggestion that in those circumstances the bank officers would see it as an opportunity to make more by putting somebody in charge of Silresim to bleed its assets because, of course, if that happens, Silresim becomes less viable instead of more viable.

It reduces the likelihood that the bank will ever recover its nonguaranteed portion of the outstanding loans, and also as events unfold, it involves additional lending, which increases the exposure as did occur.

So the version that Pace tells by the time his deposition is taken after he's gone through the whole sequence of events and has had his own falling out with everybody including Miserlis and others at Silresim and the Union National Bank, that story that he tells is simply not a credible story in itself.

On the other hand, it is quite credible, and I think it was supported both by the documentary evidence and by Pollock's testimony, that the bank would have been willing to have some other responsible person, would have been willing to make additional lending and to forbear going to SBA and causing the loans to have been closed down if Silresim had somehow managed to get someone else in charge who had not lost trust with the bank. Miserlis was not such a candidate.

Now, as I anticipated, I'm not going to be able to finish my findings before I have another matter on the calendar. We'll break at this point and resume at 2 o'clock.

(Recess)

THE COURT: I had stated three parts of my findings and conclusions before the recess. I resume now with the fourth part which concerns the developing conditions on the property during the period just preceding and then the period following Pace's appearance in early August of 1975.

The documentary record again gives me a compelling basis for finding that the versions somewhat different of Pace and Miserlis about what was going on in Miserlis' case before as well as after and Pace's case after he arrived are not credible in themselves and are [23 ELR 20430] contradicted by the documentary evidence as well as by evidence from other witnesses.

I find that the accumulation of waste materials that were not within that category as to which Miserlis had plans for reclamation and had put into effect some capacity for reclamation of waste especially the chlorinated compounds, but only part of what was being brought on board was brought onto the premises and stored there.

There's in addition the plans not executed for incinerating some additional waste, and that plan in effect was partly being placed into operation so that some waste was then in that category would be brought onto the property.

I do find that things got worse during the period after Pace arrived, but in no way was the Union National Bank participating in the decisions of management of Silresim that produced that result.

Also, to some extent, what was going on was being withheld from Union National Bank's representatives both by Pace and by Miserlis. This is another illustration of the fact that despite his testimony at trial that he saw himself as an agent of Union National Bank. He did not contemporaneously see himself as such an agent.

Had he done so, he would have been committing fraud against his principal by not disclosing what was in fact a part of his knowledge.

I take note as one small incidental in that connection that one of the conflicts between the evidence of Miserlis and Pace goes out of the assertion by Pace that at a bit later time he observed Miserlis engaged in putting waste down the sewer, also mixing it with water so as to dilute it.

Miserlis denies that that ever occurred, and Pace never suggests in his testimony nor is there any other indication anywhere that he ever thought it appropriate for him to report that promptly as he should have done, of course, if he was an agent for Union National Bank.

So those are simply illustrations of the point that contemporaneously with the events Pace did not view himself as an agent, and when he testifies to the contrary on his deposition, it is simply false testimony.

I take note also with respect to the developing conditions on the premises of the testimony of the witness Haskett. I find it rather striking that the point is emphasized by his testimony and by counsel that he is the one person who knows most about what was going on in the yard, and then along with that, he has an extraordinary absence of memory about a great number of details, about what other waste materials were coming onto the property not being processed or reclaimed and nothing being done to get them back off the property.

I simply find it incredible that Haskett could have that deep a loss of memory even given the number of years involved when alongside it he had such good memory about the things to which he testifies on direct examination in his appearance.

I take note also that the subsidiary findings I have made in this Part 4 are in a sense reinforcing of the findings I make about what was the actual relationship between Pace, Silresim, and Union National Bank, but they do not go directly to any of the central issues in the case.

For that reason, I do not undertake to tie them specifically to my more precise fact findings on the issues that are presented under the legal test that I must apply to the case.

Now, I turn to Part 5 and make more findings with respect to the developing and changing relationship among the various parties after Pace appeared on the scene in early August of 1975.

Here, too, the versions of events given by Pace and Miserlis have in common that each tries to paint a picture that Union National Bank was controlling things, a picture I find incredible, but that's about the only thing they agree upon.

They present sharply different versions of the control and management of Silresim, and indeed the documentary evidence and the testimony of Pollock confirms that this was a period of very strong tension between them, a period in which quite early as the relationship had begun to develop they were talking about a buy-out arrangement that would get Pace out which was never consummated and delaying the execution of the voting trust until the time in December of 1975.

As time went on, I find that the bank was increasingly placing less trust in Miserlis and more in Pace, and that continued in its way without the basic change in relationship that would constitute participation in the management even through the time period when based on that confidence Union National Bank had developed in Pace they put him into a very different kind of relationship with SDM in which he was an agent of the bank.

I think it's implicit in what I've been saying before, but I make it very explicit before at no time was Pace ever in the position of agent for the Union National Bank. He did not so regard himself contemporaneously. The bank did not, and I find that he was not an agent.

In contrast, there was an agency relationship created between Pace and SDM or between Pace and the bank in relation to the control over the SDM operations.

But that did not carry over to any change in the relationship with respect to Pace's position in management of Silresim and Union National Bank continuing to deal with that matter in a way that was entirely consistent with its sole motivation being one to protect its interest in the security.

Now, Part 6. I will make some further comments with respect to legal issues and their applicability to the facts of this case.

Plaintiffs' counsel has in effect argued as I understand it that any effects on management decisions of Silresim incident to actions taken by Union National Bank solely for the purpose of protecting security interest would convert that action to acts taken to, taken in as part of the participation in management.

Now, I know you haven't expressed it that way, but I think that is the effect of what you have argued in arguing that all that's required is that the bank be in a position to affect the decisions of management of Silresim and that its conduct besets that it has the capacity to affect the decisions of the operator who is in control.

Now, that is I think plainly a misreading of the statute. If the statute were read that way, the effect would be that all lenders would be participating in the management every time they made any financial decision with respect to insisting on payments being made on time or financial decision to allow a delayed payment or to increase the line of credit. Each of those could have an affect even though the bank did not know what that effect was.

It could have the effect on the management decisions of the persons in charge in this instance of the Silresim site, that is plainly not an appropriate reading of the statute, and I find specifically that throughout the period Pace was there and afterwards as well until the abandonment of the project finally.

The bank's demands with respect to collateral, with respect to security, and its forbearance from time to time and increases of line of credit were all conducted consistently with the sole purpose of protecting the security interest and did not at any time amount to participation in the management of Silresim.

In this connection, I take note that plaintiffs have sought to argue both ways in a sense that, if Union National Bank exercised any forbearance deferred going to the SBA with its demand for the SBA to make good on the guaranty, then it was causing an effect and participating in the management of the site.

And on the other hand, if it did anything rather than forbearing, it was having an effect and thus participating in the management.

If I accept both sides of that argument as consistent with the statute, there's nothing whatsoever left of the statutory provisions that there are some circumstances in which the lender is not an owner or operator, or owner operator, or owner and operator, however you want to phrase it.

My finding that the Union National Bank was holding its indicia of ownership primarily to protect its security interest is reinforced by the fact that it could always have done so and did in fact eventually simply pull out and call on the SBA to make good its guaranty up to 89 percent in relation to part of the obligation 90 percent of the other part of the obligation.

Given those circumstances, it would make no sense for Union National Bank to hazard its 89 to 90 percent guaranty by taking a [sic] long longshot at making the profit on what I suppose one might call an investment by using its indicia of ownership for the purpose other than protecting its security interest.

The suggestion that Pace makes in his testimony was that [sic] there were doing it to bleed or rape Silresim. I suppose one could also imagine circumstances in which indicia of ownership might be used to maintain a very high interest loan for a longer period of time in order to receive extra returns in that way.

[23 ELR 20431]

There is no support in the evidence before me that any such motivation played any part in the way in which Union National Bank monitored and dealt with the borrower and its management in this case.

And as I have stated, I find specifically that Union National Bank was motivated not just primarily but solely by the purpose to protect its security interest in the way it handled its loans.

Part 7 I think I should speak briefly at least about the events after Pace's departure. This is another point at which plaintiffs have argued that Union National Bank's forbearance should somehow be found by the court to constitute action that in one way or another made Union National Bank an owner or operator.

I find instead that the Union National Bank's decision having been made to call on SBA to make good on its guaranty, it was consistent with its contractual relationship with SBA for Union National Bank to continue its efforts to collect on collateral including accounts receivable such as those from Polaroid and others with respect to which it undertook to make arrangements that would meet some of the Polaroid plans, for example, so that collection of those receivables could be made and applied toward the outstanding obligation.

I find that action also was taken solely to protect security interest and did not constitute participation in the management of the Silresim corporation or the Silresim site.

Now, Part 8, a few miscellaneous matters that might have been included earlier but weren't and then a summary. The efforts to treat the voting trust as a document created for the benefit of Union National Bank or to interpret it in that way failed completely.

That is the document that was negotiated among persons having the formal and real ownership interest in Silresim along with their attorneys including Pollock and the attorney for the corporation, Curtis. None of them represented the bank in those matters.

It was a matter in which the bank was interested in the outcome because, A, of its interest in having someone to whom they could look with whom there was some trust, the complete loss of trust with respect to the Miserlis brothers having occurred, but the bank was not a party and was not a beneficiary of that agreement.

Likewise, when disputes arose and in a document drafted by Pollock there were provisions for someone at Union National Bank to serve as an arbitrator, that was done I find without the agreement of Union National Bank.

And when it was brought to the bank's attention and a request was made for intervention to serve in that role, the bank declined as they were entitled to do and as they appropriately did.

Now, I think it's implicit in all that I've said, but I make it explicit as well, that I find that State Street Bank & Trust Company had no involvement with the Silresim operations.

Indeed, I find that it was not even involved in the loans and certainly not in any of the activities of the Union National Bank in relation to the protection of its security interest once the loans had been made.

So there's no basis I find by a preponderance of the evidence, strong preponderance of the evidence indeed overwhelming for any claim that the plaintiffs have against State Street Bank.

One small footnote, I observed that the agency rule, 40 CFR, is it Chapter 1, I think it's Chapter 1, Subpart L, Section 300.1100 then following starts with the interesting usage Section 300.1100 security interest exemption.

I suppose in that respect, if I place some reliance on that, it would seem to me to be helpful to the plaintiffs here, but I take it you disavowed seeking any support in that rule.

But I would have to say I don't criticize your disavowal of it because, of course, if I look at the matter more closely, the rule does require more in the way of a relationship to constitute participating in the management in a relevant sense here than at least one might arguably read the statute as required.

That's the reason I said quite earlier in my statement of findings and conclusions that, were I to conclude that I should be guided by the agency rule or even bound by it in some respect in its interpretation of the statute, it would force me even more strongly to the findings I have made quite independently of the application of that rule.

Now, before I give directions to the clerk for entry of final judgment on these findings and conclusions, I will first invite each of you to call my attention to anything in the case whether we've talked about it in this phase of the trial or not that remains for decision.

I am not aware that there is any other aspect of the case that remains material in light of the findings and conclusions I've made here, but if either of you contends otherwise, I want to know about it because, of course, a final judgment cannot enter until everything is dealt with.

MR. MASSERY: I just spoke with Mr. Barshak before we came on, your Honor. I don't know that we've ever marked Mr. Pace's deposition or actually inserted it into the transcript. I think perhaps it is best to insert it into the transcript but whatever the court wishes.

THE COURT: Well, I think that's appropriate. We can do it either way. We did not mark it an exhibit, the more usual way, well, wait a minute. Let's talk about this for a minute because I don't want you to incur needless legal expense for the appellate record.

If you quote insert it into the transcript, are you suggesting that a court reporter is going to have to sit down and copy it. I don't think we need that. It's here in documentary form.

MR. MASSERY: Yes.

THE COURT: And so I think we can have an understanding that the documents that you've placed before me and I have read may simply be, I'll tell you what I think we should do. Let's make them exhibits. That clearly makes them a part of the record without having to give them docket numbers or something of that kind.

MR. MASSERY: Very well, your Honor. My only concern is are there portions of that transcript that ought to be stricken so that they're not visible on the appellate record? That's my only concern.

I'm not clear on what is in fact then considered by the court, what has been stricken, and if we are striking it, then I think it ought to be deleted so it's not visible in any form.

THE COURT: Why is there any more problem on the appellate record than there was with me? The way you did it was to make designations which are explained in the documents as to what was being offered and what was not. I think we can simply leave it that way.

MR. MASSERY: That's fine, your Honor.

MR. GIARRUSSO: I guess, your Honor, just to follow up on the Pace deposition, based on the court's findings, did the court not need to enter a provisional ruling?

THE COURT: Thank you, yes. I do want to be very explicit about that. I will not rule on the objections to evidence because the central findings that I make about Pace's testimony are so overwhelmingly supported almost compelled by the testimony that was not within the scope of any of the objections that my findings would remain the same whether I consider everything that would come in if I overruled all objections as well as the part that was not objected to or instead excluded all or part of what was objected to. That being so, there's no need to rule on the objections.

MR. GIARRUSSO: Are we given an opportunity to discuss with the court at this time the court's findings or just any administrative matters with regard to what's in the record?

THE COURT: I'm giving you the opportunity now to do two things, one, if there's any, first, let's address this question.

These findings and conclusions haven't been made in my determination for the defendant, defendant Union National Bank and State Street accordingly. Doesn't it follow that that's the whole case that there are no other remaining issues to be decided so it's appropriate for me to direct judgment to be entered by the clerk forthwith for the defendants?

MR. GIARRUSSO: Yes, we believe it does. Just to clarify the record, there are three defendants, and I believe if you did find the way you have found for Union National Bank and State Street Bank & Trust that you would also find the same way for State Street Boston Corporation.

MR. BARSHAK: When your Honor was talking on Part 8, you only mentioned one of the two State Street entities.

THE COURT: I make the same finding with respect to the others. I meant to include both State Street entities.

MR. GIARRUSSO: Fine. Then I don't think the plaintiffs don't think that there's anything further that needs to be done in this case in terms of any other issues that would exist notwithstanding the judge's findings.

[23 ELR 20432]

THE COURT: All right. Now is the time if you want to ask me to modify or clarify or add to any of these findings to tell me.

MR. GIARRUSSO: What we have heard, your Honor, is that you have specifically found that Neil Pace was not the agent of Union National Bank. We have not heard your Honor's finding with respect to whether or not Pace had any affiliation to or any connection to Union National Bank.

THE COURT: Well, I though I had done that, but I will speak more fully to that. There is a sense in which any lender and the borrower have some affiliation with each other.

They have a contractual relationship with each other, and if that's when you mean by affiliation, then there was that kind of affiliation.

I find that Neil Pace in relation to Silresim in contrast with SDM had no affiliation or relationship of any kind with Union National Bank other than that he was in the management and the chief person in the management of Silresim who was a borrower from Union National Bank and they were having transactions with each other in that relationship.

And I find that that relationship never got outside of a relationship in which the Union National Bank was dealing with him solely for the purpose of protecting its security interest.

MR. GIARRUSSO: Your Honor, you also specifically found as I recall, I just want to make sure I'm correct on this, that based on your reading of the statute that the capacity to affect the operator that is in control of the site is a misreading of the statute.

THE COURT: Well, let me ask you to clarify your argument. When you were arguing to me taking off from some things said in Fleet Factors that all that's required to make the lender liable is that it [sic] have the capacity to affect the operations, were you saying that makes the lender an owner or operator?

MR. GIARRUSSO: Yes. I'm saying it makes an owner, an owner.

THE COURT: Okay, all right. Then, now, what I am saying in response and this is partly a legal conclusion of the proper interpretation of the statute but also made very easy, the legal problem is made very easy by the overwhelming evidence here as to what the relationship actually was.

It is not enough that the financial stress incident to having a loan outstanding and somebody who may call the loan or threaten to call it to constitute having a capacity to affect operations that would make any person having that capacity an owner.

If we read the statute that way, then that would wipe out any protection for an insured lender, all insured lenders, I'm sorry, all —

MR. GIARRUSSO: Secured.

THE COURT: — secured lenders have that relationship and that capacity. It's capacity interest to acting solely to protect the security interest, and that is not what the statute means.

Now, the reason I don't find it necessary to settle a lot of other issues that might arise about where along the spectrum that line is found to be drawn under this ambiguous statute is that all the facts here what I've said is enough because I don't read it as pushing that far.

I find the facts here would not support a determination of lender liability on a somewhat less extreme interpretation of the statute from that.

MR. GIARRUSSO: One last question. Does the court specifically reject the holding in Fleet Factors?

THE COURT: I'm not rejecting any holding in Fleet Factors. I don't think there's anything in Fleet, any holding in Fleet Factors that's inconsistent with my decision.

I think instead that neither I nor the First Circuit on appeal will need to resolve all these interesting questions. If they choose to do so, I'll be happy to have their guidance, but I'm not about to try to set out that guidance at this point.

I don't need it for deciding this case, and I have enough to do without trying to help other people decide other cases on issues that are as abstruse and interesting as these are.