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Needham v. The Provident Bank5/6/1996
HARPER, Judge.
Plaintiffs-appellants, William J. Needham and Lucy M. Needham ("appellants," collectively, or "W. Needham" and "L. Needham," individually), appeal from the granting of summary judgment in favor of defendant-appellee, The Provident Bank, by the Court of Common Pleas of Cuyahoga County. Appellants submit that genuine issues of material fact remain for litigation regarding their lender liability claims against Provident. A careful review of the record compels affirmance.
W. Needham's uncle was the founder and original owner of Communication Systems and Services Company ("CSSC"), an Ohio corporation. CSSC sold, installed and maintained a variety of telephone, sound and voice communication systems. W. Needham became CSSC's president in 1983 when he purchased fifty percent of the corporations shares of stock. He became the sole shareholder in 1990 upon the purchase of the remaining fifty percent shares of stock from Hank Dickey.
W. Needham formed Communication Financing Corporation ("CFC") in early 1989 to act as CSSC's financing arm. This structure enabled CSSC to offer lease financing and compete for customers seeking larger communication systems. CFC first purchased leases from CSSC in March 1989.
W. Needham first sought business financing from Provident in August 1988 when CSSC's then commercial lender, American National Bank, could not meesCSSC's financial needs. Provident granted CSSC three forms of financial assistance--a demand line of credit for CSSC, an installment loan for CSSC, and a line of credit for CFC.
W. Needham applied for CSSC's demand line of credit on or about October 19, 1988. The bank granted a $150,000 revolving line of credit for working capital. Advances, determined by monthly borrowing base reports, were limited to eighty percent of eligible accounts receivable and fifty percent of inventory. W. Needham, as CSSC's president, executed a revolving promissory note and signed a security agreement on October 19, 1988. Pursuant to the note, CSSC was required to pay principal on demand and make monthly interest payments beginning on November 30, 1988. The security agreement granted Provident a substantial security interest in CSSC's assets.
Appellants and CFC, after its formation, guaranteed CSSC's demand line of credit. Appellants' guaranty was secured by a mortgage on their personal residence. CFC guaranteed the line of credit by executing a secured unlimited guaranty on December 12, 1989. This guaranty was secured by granting Provident a substantial security interest in CFC's assets.
Provident increased CSSC's demand line of credit to $200,000 in late December 1989, subject to the same terms and conditions as the pre-existing line of credit. W. Needham, as CSSC's president, signed a revolving promissory note and security agreement for the increased line of credit on or about January 3, 1990. The payment terms of the note and the security interests granted by the agreement were the same as those contained in the October 1989 documents.
W. Needham signed a new guaranty agreement on January 3, 1990, and L. Needham signed one on August 27, 1990. Appellants also granted Provident a junior mortgage on their personal residence in the amount of the increased credit limit, $200,000. CFC likewise remained a guarantor on the $200,000 demand line of credit, the guaranty secured by CFC's assets.
Provident informed appellants through a letter dated December 28, 1989 of the increased credit limit. The bank also informed appellants through the letter that the credit was subject to review for continuation by October 31, 1
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