Date: 08-06-2007

Case Style: Ronald Licciardi Corp d/b/a Honey Dew Donuts v. Chittenden Corp. d/b/a Ocean National Bank

Case Number: CV-05-112

Judge: Paul Fritzsche

Court: York County Superior Court Maine

Plaintiff's Attorney:

Mark L. Randall, Conley, Randall & Wirick, Portland, Maine for Plaintiff

Defendant's Attorney:

Peter Culley, Pierce Atwood, Portland, Maine for Defendant

Description:

In 1998 Mr. Licciardi was in the process of building the first Honey Dew Donuts franchise in the State of Maine on property he personally owned, which was a Small Business Administration approved project in Sanford, Maine. Construction financing was provided by another Bank and Ocean National Bank agreed to provide equipment financing. The Bank issued Licciardi a commitment letter for a $94,000 equipment loan with one of the conditions requiring it be an SBA guaranteed loan. The SBA issued a Guarantee Authorization to Ocean National Bank for a 75% guarantee of the $94,000 equipment loan to Ronald Licciardi Corp. The SBA Authorization required the Bank to pay an SBA guaranty fee of $2115 to the United States within 90 days from the date of issuance of the Authorization or the guaranty would terminate. The Bank, however, never paid the fee which caused the SBA guaranty to terminate within 40 days after the due date. The Bank did not disclose to Mr. Licciardi its failure to pay the guarantee fee and the resulting termination of the SBA guarantee causing Mr. Licciardi to proceed as though the SBA loan still existed and was on course.

After being aware that the SBA loan was terminated and without informing Mr. Licciardi, the Bank advanced the Licciardi Corporation $37,000 for deposits on the Honey Dew Donuts equipment in February 1999, representing to Mr. Licciardi that the $37,000 loan would be paid off with the SBA guaranteed loan.

The Bank scheduled the $94,000 loan to close on April 16, 1999, but on the day of the closing cancelled the transaction without giving any reason to Mr. Licciardi. This gave Mr. Licciardi no way to repay the $37,000 equipment deposit. Throughout the trial the Bank blamed Mr. Licciardi for the cancellation of the closing. The Bank's own expert, however, conceded at trial that if the Bank had closed the $94,000 loan on April 16, 1999 it would not have been SBA guaranteed because of the failure to pay the guarantee fee. Despite the cancelled loan closing Mr. Licciardi and his corporation opened the Honey Dew Donut shop on May 10, 1999 and quickly developed a loyal customer base.

Ocean National Bank then sued the Licciardi Corporation on the $37,000 "advance" in July 1999 and obtained a court judgment, because the Bank never informed Mr. Licciardi that the SBA loan was "dead" and therefore Mr. Licciardi was unable to defend against the Bank's law suit. Consequently, the Bank obtained a court order allowing for the repossession of all the business property of the Honey Dew Donut shop in Sanford. The Bank's judgment interfered with Plaintiff's efforts for refinancing and soon all the equipment vendors had asserted liens. In early May of 2000 the Bank secretly sold its repossession rights for $1,350 to a Saco, Maine equipment dealer who was owed money and had claimed the Bank had caused him to install the equipment without receiving full payment. On May 5, 2000 the equipment dealer, acting upon the Bank's court order, tore out every single fixture, piece of furniture, and all the equipment and removed it from the Honey Dew Donut business in a few hours closing the business.

The Plaintiff assert a claim of breach of contract and fraud based on the Banks failure to close the equipment loan and failure to inform the Plaintiff that it had failed to pay the SBA guarantee fee as required. Plaintiff asserted loss of the business as its damages and presented business valuation loss evidence.

Outcome: Plaintiff's verdict for $460,000.00.

Plaintiff's Experts: Randall Dunham, CPA, Portsmouth, New Hampshire

Defendant's Experts: Nancy Fannon, CPA, POrtland, Maine

Comments: None