Chapter 5 $28 Million Punitive Damages Award for Bank's PL94Ch05

8/4/2019 Chapter 5 $28 Million Punitive Damages Award for Bank's PL94Ch05

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Chapter 5 $28 Million Punitive Damages Award for Bank'sInvolvement in Home Improvement Fraud

5.1 Complaint

This complaint was later amended to include Skopbank and USF Holding, Inc. as partiesdefendants.Eventually, Skopbank agreed to indemnify Union Mortgage for any judgment againstit in this case.

IN THE CIRCUIT COURT FOR BARBOUR COUNTY,ALABAMA CLAYTON DIVISION

LAURA BAKER, ANDREW PERSON, NANCY PERSON, BILL LAMPLEY, JENNIFERLAMPLEY, REGGIE TATUM, ANNE TATUM, WARREN HALL, AND DENISE HALL,

[vs.]

CHARLES HARPER, LAWRENCE CONSTRUCTION COMPANY, UNION MORTGAGECOMPANY, INC., Fictitious Defendant "A","B", and "C", those persons, firms, corporations orother entities that contributed to injuries and damages suffered by the Plaintiffs in this case whoseidentities are unknown at this time but will be substituted by amendment when ascertained,

CASE NO. CV-90 048

COMPLAINT

1. Plaintiffs Laura Baker is over the age of 19 years and resides in Barbour County, Clayton

Division, Alabama.

2. Plaintiff Charles Person is over the age of 19 year and resides in Barbour County, Clayton

Division, Alabama.

3. Plaintiff Nancy Person is over the age of 19 years and resides in Barbour County, Clayton

Division, Alabama.

4. Plaintiff Bill Lampley is over the age of 19 years and resides in Ariton, Alabama, in Dale

County.

5. Plaintiff Jennifer Lampley is over the age of 19 years and resides in Ariton, Alabama, in

Dale County.

6. Plaintiff Reggie Tatum is over the age of 19 years and resides in Montgomery County,

Alabama.

7. Plaintiff Anne Tatum is over the age of 19 years and resides in Montgomery County,


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Alabama.

8. Plaintiff Warren Hall is over the age of 19 years and resides in Montgomery County,

Alabama.

9. Defendant Charles Harper is over the age of 19 years and resides in Jefferson County,

Alabama. Said Defendant does business in Barbour County, Clayton Division, Alabama.

10. Defendant Lawrence Construction Company, believed to be a domestic corporation, is

located in Jefferson County, Alabama, and does business in Barbour County, Clayton Division,

Alabama.

11. Defendant Union Mortgage Company, Inc. is a foreign Corporation qualified to do

business in the State of Alabama and which does business in Barbour County, Clayton Division,

Alabama.

12. Fictitious Defendants "A", are those persons, firms, corporations or other entities that

contributed to injuries and damages suffered by the Plaintiffs in this case whose identities are

unknown at this time but will be substituted by amendment when ascertained.

13. Fictitious Defendants "B", are those persons, firms, corporations or other entities that



14. Fictitious Defendants "C", are those persons, firms, corporations or other entities that



15. At all times material hereto, Defendant Charles Harper was an agent of Lawrence

Construction Company and Union Mortgage Company, Inc. and was acting for said Defendants in

his dealings with Plaintiffs.

COUNT ONE

16. In September, 1990, in Clayton, Alabama, Defendant Charles Harper, acting as agent for

Lawrence Construction Company and as agent for Union Mortgage Company, Inc., entered into a

loan agreement with Plaintiff Laura Baker whereby Defendants agreed to loan her $8,000.00. In


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return, Ms. Baker was to give Defendants a mortgage on her home in that amount.

17. Ms. Baker later received a document showing she had borrowed $9,800.00.

18. Ms. Baker executed the mortgage to Defendants on her home in the amount of

$9,800.00.

19. Defendants subsequently delivered the sum of $4,000.00 to Ms.Baker from the loan

proceeds and kept the balance.

20. Defendants then told Ms. Baker that she only had to pay back the $4,000.00 she received

and Defendants would pay the rest.

21. Ms. Baker subsequently made, and is still making, monthly payments on the balance of

the mortgage to Defendants.

22. Defendants now claim a balance due in excess of $9,800.00 on the mortgage from Ms.

Baker.

23. Ms. Baker is now behind on her payments on the mortgage since Defendant did not make

any payments.

24. Ms. Baker contends that she does not owe Defendants anything on the mortgage.

25. Ms. Baker is informed and believed, and upon such information and belief, alleged that

Defendants have committed like or similar frauds on other and that the acts in this case were part of

a common scheme to defraud persons with limited education or understanding of financial dealings.

26. All Defendants entered into a scheme to defraud Ms. Baker by taking her money and by

leaving her indebted on a fraudulently obtained mortgage.

27. Ms. Baker was injured and damaged by losing the value of the money she paid and by

now having a mortgage on her home which is apparently unpaid and which constitutes a lien on her

home.

28. Defendant' acts were intentional, willful, reckless and/or malicious.

29. Defendants have entered into a pattern or practice of fraud or other intentional wrongful

conduct.

30. As a proximate consequence of the Defendant's wrongful acts, Plaintiff Laura Baker was


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injured and damaged as follows: She lost the value of her money and now has an unpaid mortgage

on her home; and she suffered mental anguish and emotional distress.

WHEREFORE, Plaintiff Laura Baker demands judgment against all Defendants for an

amount of compensatory and punitive damages which a jury deems reasonable plus her costs.

COUNT TWO

31. Plaintiff Laura Baker realleged paragraphs 1 through 30 of the complaint as if set out

here in full.

32. Defendants intentionally inflicted emotion distress upon Plaintiff Laura Baker.

33. Plaintiff was injure and damaged a alleged in paragraph 30 above.

WHEREFORE, Plaintiff Laura Baker demand judgment against all Defendants in an amount

a jury deems reasonable for compensatory and punitive damages plus costs.

COUNT THREE

33. Plaintiffs Andrew Person and Nancy Person reallege paragraph 1 through 15 of the

Complaint as if set out here in full.

34. In September, 1990, in Mount Andrew Community in Barbour County, Alabama,

Defendant Charles Harper, acting as agent for Lawrence Construction Company and as agent for

Union Mortgage Company, Inc., entered into a agreement with Plaintiffs Andrew Person and Nancy

Person whereby Defendants agreed to loan Mr. and Mrs. Person $9,450.00. In return said Plaintiffs

were to give Defendants a mortgage on their home in that amount.

35. Mr. and Mrs. Person were to use the loan proceeds for home improvements.

36. Mr. and Mrs. Person executed the mortgage to Defendants on Their home in the amount

of $9,450.00.

37. Defendants delivered the sum of $6,500.00 to Mr. and Mrs. Person from the loan

proceeds.

38. Defendants then told Mr. and Mrs. Person if they did not want to have the home

improvements done on their house they could return the loan proceeds and the loan would be paid

in full.


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39. Plaintiffs elected to return the money to Defendants.

40. Plaintiffs gave 43,500.00 to Defendant Harper for all Defendants which was never

credited by Defendants to Plaintiffs' account.

41. Plaintiffs subsequently made monthly payments on the balance of the money to

Defendant Harper none of which was credited to Plaintiffs' account.

42. Defendants now claim a balance due in excess of $9,500.00 on the mortgage from Mr.

and Mrs. Person.

43. Plaintiffs' house is now threatened with a foreclosure of the mortgage since defendants

did not make the payments.

44. Plaintiffs contend that they do not owe Defendants anything on the mortgage.

45. Plaintiffs are informed and believe, and upon such information and belief, alleged that

Defendants have committed like or similar fraud on others and that the acts in this case were part to

parcel of a common scheme to defraud persons with limited education or understanding of financial

dealings.

46. All Defendants entered into a scheme to defraud Plaintiffs by taking their money and by

leaving them indebted on a fraudulent mortgage.

47. Plaintiffs were injured and damaged by losing the value of the money and by now having

a mortgage on their home which is unpaid.

48. Defendants' acts were intentional, reckless and/or malicious.

49. Defendants entered into a pattern or practice of fraud or other intentional wrongful

conduct.

50. As a proximate consequence of the Defendants' wrongful acts, Plaintiffs were injured

and damaged as follows: They lost the value of their money and now have an unpaid mortgage on

their home, they also suffered mental anguish and emotional distress.

WHEREFORE, Plaintiffs Andrew Person and Nancy Person demand judgment against all

Defendants for an amount of compensatory and punitive damages which a jury deems reasonable

plus costs.


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COUNT FOUR

51. Plaintiffs Andrew and Nancy Person reallege paragraphs 1 through 15 and 34-50 of the

complaint as if set out here in full.

52. Defendants intentionally inflicted emotional distress upon Mr. and Mrs. Person.

53. Plaintiffs were injured and damaged as alleged in paragraph 50 above.

WHEREFORE, Plaintiffs Andrew Person and Nancy Person demand judgment against all

Defendants in an amount a jury deems reasonable for compensatory and punitive damages.

COUNT FIVE

54. Plaintiffs Bill Lampley and Jennifer Lampley reallege paragraphs 1 through 15 of the


55. In December, 1989, in Ariton, Alabama, Defendant Charles Harper, acting as agent for

Lawrence Construction Company and as agent for Union Mortgage Company, Inc. entered a loan

agreement with Mr. and Mrs. Lampley whereby Defendants agreed to loan Plaintiffs $7,900.00.

56. Mr. and Mrs. Lampley executed the mortgage to Defendants on their home in the amount

of $7,900.00.

57. Defendants delivered the sum of $2,900.00 to Mr. and Mrs. Lampley from the loan

proceeds and kept the balance.

58. Defendants now claim a balance due in excess of $7,900.00 from Mr. and Mrs. Lampley.

59. Plaintiffs' house is now threatened with foreclosure of the mortgage if they do not make

the payments.

60. Plaintiffs are informed and believe upon such information and belief, allege that

Defendants have committed like or similar frauds on others and that the acts in this case were part

of a common scheme to defraud persons with limited education or understanding of financial

dealings.

61. All Defendants entered into a scheme to defraud Mr. and Mrs. Lampley by taking their

money and leaving them indebted on a fraudulent mortgage.

62. Plaintiffs were injured and damaged by losing the value of the money and by now have


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a mortgage on their home which is unpaid.

63. Defendants' acts were intentional, reckless and/or malicious.

64. Defendants entered into a pattern or practice of fraud or other intentional wrongful

conduct.

65. As a proximate consequence of the Defendants' wrongful acts, Plaintiffs Bill Lampley

and Jennifer Lampley were injured and damaged as follows: They lost the value of their money and

now have an unpaid mortgage on their home; they also suffered mental anguish and emotional

distress.

WHEREFORE, Plaintiffs Bill and Jennifer Lampley demand judgment against all Defendants

for an amount of compensatory and punitive damages which a jury deems reasonable plus costs.

COUNT SIX

66. Plaintiffs Bill Lampley and Jennifer Lampley reallege paragraphs 1 through 15 and 55-65

of the Complaint as if set out here in full.

67. Defendants intentionally afflicted emotional distress upon Plaintiffs.

68. Plaintiffs were injured and damaged as alleged in paragraph 65.

WHEREFORE, Plaintiffs Bill Lampley and Jennifer Lampley demand judgment against all

Defendants in an amount a jury deems reasonable for compensatory and punitive damage, plus costs.

COUNT SEVEN

69. Plaintiffs Reggie Tatum and Anne Tatum reallege paragraphs 1 through 15 of the


70. On March 15, 1990, in Montgomery County, Alabama, Defendant Charles Harper, acting

as agent for Lawrence Construction Company and as agent for Union Mortgage Company, Inc.,

entered into a loan agreement with Plaintiff Anne Tatum and Reggie Tatum whereby Defendants

agreed to loan Plaintiffs $9,900.00. In return Mr. and Mrs. Tatum were to give Defendants a

mortgage on their home in that amount.

71. Plaintiffs later received a document showing that they borrowed $9,900.00.

72. Plaintiffs executed the mortgage to Defendants on their home in an amount of $9,900.00


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plus interest.

73. Defendants never delivered any of the $9,900.00 to Plaintiffs from the loan proceeds but

instead kept the loan proceeds.

74. Plaintiffs subsequently made and are still making monthly payments on the balance of

the mortgage to Defendants.

75. Defendants now claim a balance due in excess of $9,900.00 from Plaintiffs.

76. Plaintiffs content that they do not owe Defendants anything on the mortgage.

77. Plaintiffs are informed and believe and upon such information and belief allege that


of a common scheme to defraud persons with limited education of financial dealings.

78. All Defendants entered into a scheme to defraud Plaintiffs by taking their money and by

leaving them indebted on a fraudulently obtained mortgage.

79. Plaintiffs were injured and damaged by losing the value of the money they paid and by

now having a mortgage on their home which is unpaid and which constitutes the lien on their home.

80. Defendants acts were intentional, willful, reckless and/or malicious.


conduct.

82. As a proximate consequence of the Defendants' wrongful acts, Plaintiffs Anne Tatum

and Reggie Tatum were injured and damaged as follows: They lost the value of their money and

now have an unpaid mortgage on their home and they suffered mental anguish and emotional

distress.

WHEREFORE, Plaintiffs Reggie Tatum and demands judgment against all Defendants for

an amount of compensatory and punitive damages which a jury deems reasonable plus costs.

COUNT EIGHT

83. Plaintiffs Anne and Reggie Tatum reallege paragraphs 1 through 15 and 71 through 82

of the Complaint as if set out here in full.

84. Defendants intentionally inflicted emotional distress on Plaintiff.


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85. Plaintiffs were injured and damaged as alleged in paragraph 82.

WHEREFORE, Plaintiffs Reggie Tatum and Anne Tatum demand judgment against all

Defendants in an amount a jury deems reasonable for compensatory and punitive damages plus costs.

COUNT NINE

86. Plaintiffs Warren Hall and Denise Hall reallege paragraphs 1 through 15 of the


87. In February, 1990, in Montgomery County, Alabama, Charles Harper acting as agent for

Lawrence Construction Company and as agent for Union Mortgage Company, Inc., entered into a

loan agreement with Plaintiffs Warren and Denise Hall whereby Defendants agreed to loan Plaintiffs

$9,500.00. In return Mr. and Mrs. Hall were to give Defendants the mortgage on their home in that

amount.

88. Plaintiffs later received a document showing they had borrowed $9,500.00.

89. Plaintiffs executed the mortgage to Defendants on their home in the amount of

$9,500.00.

90. Defendants subsequently delivered the sum of approximately $3,000.00 to Plaintiffs

from the loan proceeds and kept the balance.

91. The Plaintiffs were forced to file bankruptcy to keep from losing their home as a result

of the mortgage placed on the home by Defendants.

92. Plaintiffs now claim a balance due in excess of $9,500.00 on the mortgage from

Plaintiffs.

93. Defendants now claim a balance due in excess of $9,500.00 on the mortgage from

Plaintiffs.

94. Plaintiffs were informed and believe that upon such information and belief allege


of a common scheme to defraud persons with limited educational understanding of financial

dealings.

95. All Defendants entered into a scheme to defraud Mr. and Mrs. Hall taking their money


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and leaving them indebted on a fraudulently obtained mortgage.

96. Plaintiffs were injured and damaged by losing the value of the money they paid and by

now having a mortgage on their home which is unpaid and which constitutes a lien on their home.

97. Defendants' acts were intentional, willful, reckless, and malicious.


conduct.

99. As a proximate consequence of Defendant's wrongful acts, Plaintiffs were injured and

damaged as follows: They lost the value of their money and now have an unpaid mortgage on their

home, suffered severe mental anguish and emotional distress, they were forced to file bankruptcy

because of the mortgage placed on their home.

WHEREFORE, Plaintiffs Warren and Denise Hall demand judgment against all Defendants

for an amount of compensatory and punitive damages which a jury deems reasonable plus costs.

COUNT TEN

100. Plaintiffs Warren Hall and Denise Hall reallege paragraphs 1 through 15 and 87 through

99 of the Complaint as if set out here in full.

101. Defendants intentionally inflicted emotional distress upon Plaintiffs Warren Hall and

Denise Hall.

102. Plaintiffs were injured and damaged as alleged in paragraph 99 above.

WHEREFORE, Plaintiff Warren Hall and Denise Hall demand judgment against all

Defendants in an amount a jury deems reasonable for compensatory and punitive damages plus costs.

COUNT ELEVEN

103. All Plaintiffs reallege paragraphs 1 through 102 of the Complaint as if set out here in

full.

104. The wrongful acts or omissions of Fictitious Defendants "A", "B", and "C" contributed

to cause damages to all Plaintiffs as alleged in the Complaint.

WHEREFORE, all Plaintiffs demand judgment against Fictitious Defendants "A", "B", and

"C" in such an amount as a jury deems reasonable for compensatory and punitive damages plus


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costs.

COUNT TWELVE

105. Plaintiffs reallege paragraphs I through 104 of the complaint as if set out here in full.

106. Defendant Skopbank is a foreign corporation doing business by agent in Barbour

County, Alabama.

107. Defendant USF is a foreign corporation doing business by agent in Barbour County,

Alabama.

108. Defendant UST is the holding company and sole owner of Union Mortgage Company,

Inc.

109. Defendant Skopbank is the holding company and sole owner of Defendant USF.

110. Defendants Skopbank and USF entered into a plan and scheme to defraud Plaintiffs and

others by taking their money and leaving them owing money on a fraudulent mortgage as alleged in

the original complaint.

111. Defendants Skopbank and USF set up several different companies in an effort to carry

out and effect their fraudulent actions.

112. As a proximate result of such fraud, Plaintiffs were injured and damaged as follows:

they lost the value of the money they paid on their respective mortgages; they now have mortgages

on their respective homes each of which is unpaid which constitutes a lien on their home; they have

suffered severe mental anguish and emotional distress and have been otherwise injured and damaged.

113. Defendants acts were intentional, willful, reckless and malicious.


conduct.

WHEREFORE, Plaintiffs demand judgment against Defendant USF Holding, Inc. and

Defendant Skopbank in such an amount a jury deems reasonable for compensatory and punitive

damages plus costs.

COUNT THIRTEEN

115. Plaintiffs reallege paragraphs 1 through 114 of the complaint and amended complaint


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as if set out here in full.

116. Defendants Charles Harper and Lawrence Construction entered into an agreement with

Defendant Union Mortgage Company whereby they agreed to sell Union Mortgage Company their

mortgages with Plaintiffs at a discount.

117. The discount rate of the sale of the mortgages were agreed upon prior to Defendants

Harper and Lawrence Construction actually procuring the mortgages from Plaintiffs.

118. The discount from Defendants Charles Harper and Lawrence Construction to Defendant

Union Mortgage Company was in effect a hidden interest charge to Plaintiffs in that Defendant

Union Mortgage Company was lending Plaintiffs money through Defendants Charles Harper and

Lawrence Construction Company.

119. Union Mortgage Company acted as the agent for Defendant Skopbank and Defendant

USF in its dealings as alleged above.

120. Defendants had a duty to disclose to Plaintiffs 11 at they were paying a hidden interest

charge and/or that the mortgages were pre-sold at a discount to Defendant Union Mortgage Company

and/or that Defendant Union mortgage company was actually lending them money.

121. All Defendants fraudulently failed to disclose to Plaintiffs that they were paying a

hidden charge.

122. Plaintiffs changed their position by entering into the mortgages.

123. Plaintiffs would not have entered into the mortgage if they had known of the hidden

interest charges.

124. Defendants entered into a pattern of practicing fraud or other intentional or wrongful

conduct.

125. Defendants' actions were intentional, willful, malicious and gross.

126. As a proximate result of such fraud, Plaintiffs were injured and damaged as alleged in

paragraph 112 above.

WHEREFORE, Plaintiffs demand judgment against all Defendants in the amount a jury

deems reasonable for compensatory and punitive damages plus costs.


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COUNT FOURTEEN



128. Defendants USF and Skopbank)mew or should have known that Defendant Union

Mortgage Company and/or Charles Harper and/-or Lawrence construction company entered into a

scheme to defraud or injure Plaintiffs.

129. Defendants negligently failed to inform Plaintiffs of the scheme to defraud or injure.

130. As a proximate result, Plaintiffs were injured and damaged as alleged in paragraph 112

above.

WHEREFORE, Plaintiffs demand judgment against all Defendants in an amount the jury

deems reasonable for compensatory damages plus costs.

COUNT FIFTEEN

131. Plaintiffs reallege paragraphs I through 130 of the complaint and amended complaint


132. Defendants intentionally inflicted emotional distress upon Plaintiffs.


above.



COUNT SIXTEEN



135. Defendants Charles Harper, Lawrence Construction Company and Union Mortgage

Company acted as agents of Defendant Skopbank and USF in perpetuating the fraud upon Plaintiffs

as alleged herein and in the original complaint.


above.


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COUNT SEVENTEEN

137. Plaintiff realleges paragraphs 1 through 136 of the complaint as if set out here in full.

138. All Defendants entered into a conspiracy to defraud Plaintiffs as aforesaid.

139. Plaintiffs were injured and damaged as aforesaid.



[PLAINTIFFS AMENDED THIS COMPLAINT TO INCLUDE SKOPBANK AND USF

HOLDING, INC. AS PARTY DEFENDANTS]

ATTORNEY FOR PLAINTIFF

JURY DEMAND

PLAINTIFF HEREBY DEMANDS TRIAL BY JURY ON ALL ISSUES OF THIS CAUSE.

OF COUNSEL

5.2 Default Judgment

IN THE CIRCUIT COURT FOR BARBOUR COUNTY,

ALABAMA CLAYTON DIVISION

LAURA BAKER, ANDREW PERSON, NANCY PERSON, BILL LAMPLEY, JENNIFER

LAMPLEY, REGGIE TATUM, ANNE TATUM, WARREN HALL, AND DENISE HALL,


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[vs.]

CHARLES HARPER, LAWRENCE CONSTRUCTION COMPANY, UNION MORTGAGE

COMPANY, INC., Fictitious Defendant "A","B", and "C", those persons, firms, corporations or

other entities that contributed to injuries and damages suffered by the Plaintiffs in this case whose

identities are unknown at this time but will be substituted by amendment when ascertained,

CASE NO. CV-90 048

MOTION FOR DEFAULT JUDGMENT

Pursuant to Rule 55(b)(2), Alabama Rules of Civil Procedure, Plaintiffs move this Court to

enter a default judgment against the Defendants Charles Harper and Lawrence Construction

Company in the above-styled case and for cause shows the following:

1. That the Defendants were duly served with a copy of the summons, together with a copy

of the Plaintiffs' complaint, on November 14, 1990.

2. That more than thirty days have elapsed since the date of which Defendants were served.

3. Defendants have failed to answer or otherwise defend as to Plaintiffs' complaint.

4. That the affidavit of Plaintiffs' attorney is attached hereto as Exhibit A.



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[vs.]





CASE NO. CV-90 048

APPLICATION TO CLERK FOR ENTRY OF DEFAULT

The Clerk is requested to enter a default against Defendants Charles Harper and Lawrence

Construction Company in the above-styled action for failure to answer or otherwise defend. In

support thereof, Plaintiffs submit the affidavit of their attorney attached hereto as Exhibit "A."


EXHIBIT A


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[vs.]





CASE NO. CV-90 048

AFFIDAVIT

My name is Tom Methvin, a licensed attorney in the State of Alabama, practicing law with

the firm of Beasley, Wilson, Allen, Mendelsohn & Jemison, P.C. The said firm is attorney of record

for Plaintiffs. On or about November 9, 1990, a complaint was filed on behalf of the above

mentioned Plaintiffs in the Circuit Court of Barbour County, Clayton Division, Alabama. Charles

Harper and Lawrence Construction Company were designated as parties-defendant in the said

complaint.

It is my information and belief, based upon communications with the Barbour County Circuit

Clerk, that Charles Harper and Lawrence Construction Company were served with a copy of the

complaint and summons on November 14, 1990. Said Defendants have failed to answer this

complaint or otherwise plead within the thirty days prescribed by law.

Defendant Charles Harper is not a minor nor an incompetent person.

Pursuant to the foregoing, a judgment of default is due to be entered on behalf of all Plaintiffs


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against Defendants Charles Harper and Lawrence Construction Company.


[notarized]





[vs.]





CASE NO. CV-90 048

DEFAULT JUDGMENT

This action came on the motion of Plaintiffs for default judgment pursuant to rule 55(B)(2)

of the Alabama Rules of Civil Procedure, and Defendants Charles Harper and Lawrence

Construction Company having been duly served with the Summons and Complaint and not being

an infant or an unrepresented incompetent person, and having failed to plead or otherwise defend,

it is hereby, ORDERED and ADJUDGED that a judgment of default be entered against Defendants

Charles Harper and Lawrence Construction Company.

It is further ordered that the amount of damages shall be determined at a later date.


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DONE this the __ day of December, 1990.

CIRCUIT JUDGE

5.3 Brief in Response to Motion to Dismiss



LAURA BAKER, et al.

[vs.]

CHARLES HARPER, et al.

CASE NO. CV-90 048

SUPPLEMENTAL BRIEF TO DEFENDANTS'

MOTION TO DISMISS

This Court denied Skopbank's and USF's motion to dismiss in an identical case in Bullock

County. Defendants filed a Writ of Mandamus asking the Alabama Supreme Court to direct this

Court to dismiss the case for lack of jurisdiction. The petition for Writ of Mandamus was denied.

This alone is sufficient to deny Defendants' Motion to Dismiss.

The crux of Defendant USF Holdings and Skopbank's argument is that they are due to be

dismissed because this Court does not have jurisdiction over them. At the outset, it must be noted

that this is a Motion to Dismiss and that they must only be dismissed if there is no conceivable set

of facts or circumstances which could hold them liable. The crux of our argument is that Defendant

USF Holding and Defendant Skopbank are the alter ego of Union Mortgage. In other words, Union

Mortgage, USF Holding and Skopbank are really one entity. They could spin off as many

corporations as they wanted to, but the manner in which they operate their business makes them one

legal entity.


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The main point which shows they are one legal entity is the fact that Sakari Virolainen was

the CEO of Union Mortgage and USF Holding and was on the Board of Directors of both companies

while he was being paid by Skopbank. In other words, he was an employee of Skopbank while he

was running the two companies. I have attached a copy of his employment contract with Skopbank

which is written in finnish [not reprinted infra]. I have also attached a translated copy. (Exhibit One)

[not reprinted infra]. In this contract, Skopbank is referred to as the "employer" and Sakari is

referred to as the "employee". I also attached Plaintiff's Exhibit Five which shows Skopbank

definitely paid Sakari's salary [not reprinted infra].

Defendants Skopbank and USF Holdings state that Sakari did not run the day to day

operations of the companies so even though he was receiving compensation from them, he was not

their employee. Composite exhibit number 2 shows all of the documents that Sakari either wrote

or received a copy of while he was the CEO of Union Mortgage and USF Holdings. Many of the

documents have to do with day to day business operations and show that Sakari was in control of

the companies.

You will also see attached as Exhibit Three documents with the letterhead Union Mortgage

Company which had been marked out and USF Holdings has been written in its place [not reprinted

infra]. These companies mixed business back and forth, used each others papers, shared secretaries,

(deposition of Sakari) and are definitely one business entity. Also Exhibit Four are documents on

the Union Mortgage letterhead which came from USF Holdings. Again, USF Holdings used Union

Mortgage Stationary as its own. (See Exhibit Four [not reprinted infra]).

Plaintiff's composite exhibit 6 are the USF Holdings Board of Director's minutes. All of the

members of USF Holdings board are employees of Skopbank. As you can see from looking at the

first page of each Board of Director's minutes, most all the directors of Union Mortgage were finnishpeople [not reprinted infra]. Further, they were employees of Skopbank. (See Deposition of Sakari

[not reprinted infra]). How could the businesses possibly be separate? On page four of the May 7,

1990 board meeting, paragraph 7 it states:

Mr. Virolainen explained USF's current operations stating that the accounting,


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financial planning and funding activities for the whole conglomerate were alreadybeing done on USF level.

This shows that USF Holdings' board was handling the above activities for Union Mortgage.

On the May 31, 1990 meeting, page 3, number 8, Mr. Virolainen stated that USF should

consider Union Mortgage's selling practices. The USF board is telling Union Mortgage what to do.

Mr. Riikonen who is a member of the board and an employee of Skopbank states that Union

Mortgage cannot sell with recourse on a permanent basis.

At the USF Holdings' board meeting of May 7, 1990, page 2, at the top of the page, Ralph

Black, the president of Union Mortgage, requested permission from USF to sell loans. The USF

board decided to allow him to sell certain loans. In that same paragraph, the board also decided

which accounting procedures Union Mortgage was to use.

On the delegation order from USF Holdings, Inc. which is attached to the May 31, 1990

Board of Director's minutes under heading Union Mortgage at the bottom of the page, it states:

Either one of the ASS.VP's and the VP must approve loans over $25,0000.00. Loansover $35,000.00 must be approved by the president or in his absence the executiveVP or the CEO of USF [not reprinted infra].

Again, USF board which is made up wholly of Skopbank employees is running the operations

of Union Mortgage.

In the November 19, 1990 Union Mortgage meeting, page 3, number 9, Plaintiffs Exhibit 10,

it states:

Mr. Huhtamaki was authorized to hire a corporate counsel for USF and a legal traineefor Union.

Mr. Huhtamaki was on the Board of Directors of USF Holding and that board decided what

employee Union Mortgage should hire. This is certainly too close a connection.

The Union Mortgage Company audited financial statements of December 31, 1990 (Plaintiff's

Exhibit Seven) on page 9 under note 6, states that in 1989 the company received management

services from two key employees whose salaries were provided by Skopbank. It is clear that

Skopbank employees were running Union Mortgage Company at the time of the fraud. This is

enough to establish alter-ego at the motion to dismiss level.


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Plaintiff's Exhibit Eight, a telefax message dated August 16, 1990, from Skopbank to Union

Mortgage Company. It is to the attention of Olli Reinikka who at the time was not employed by

Union Mortgage but was employed by USF Holdings. Again, this is further evidence that all three

defendants are really one entity.

Also in Plaintiff's Exhibit Nine, which is a Union Mortgage Company newsletter, it states

on page 2 in the middle column, first full paragraph:

From day to day management point of view there are a number of things that aremore efficiently handled in a centralized fashion rather than letting each of thesubsidiaries allocate resources to the same task. Some of the areas are obvious,consolidated accounting, purchasing materials, personnel, funding, etc. As theperson running these operations, I find some of the areas basically challenging.

The person who wrote this is the Chief Financial Officer of USF Holdings. He is running the day

to day operations of Accounting,

purchasing, personnel and funding of Union Mortgage while being the Chief Financial Officer and

on the board of USF Holdings. Further, he was receiving a salary from Skopbank (Deposition of

Sakari Virolainen).

In the June 28th, 1989, Union Mortgage Company board of Directors meeting, which is also

under Plaintiffs Exhibit 10, underneath number 10, it states:

Mr. Sukselain stated that UMC is part of the "corporate bank" and should be treatedon the "best client basis" when borrowing money from the parent company.

Again, this shows the connection between Union Mortgage and Skopbank is more than that

of a parent subsidiary. The minutes from the board of directors meeting clearly show that Union

Mortgage is part of the "corporate bank" and that they are really one entity.

Defendants rely primarily on the case ofMatrix-Churchill v. Springsteen, 461 So.2d 782

(Ala. 1984). It must be noted that that case did not involve fraud as is the case here. Further, it dealt

with a successor corporation, which is the opposite of what we have here. Here, we have the

corporation still viable, but wholly owned by another corporation.

Lastly, this is a Motion to Dismiss. This issue can be looked at again at the Summary

Judgment level after full discovery has been completed.



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5.4 Selected Discovery Concerning the Parent Bank



LAURA BAKER, et al.

[vs.]


CASE NO. CV-90 048

INTERROGATORY TO DEFENDANT SKOPBANK

1. State the name of every member of the board of directors of this defendant since

Skopbank purchased Union Mortgage, including the time period which the person was a member

of the board of directors of this defendant.




LAURA BAKER, et al.

[vs.]


CASE NO. CV-90 048

PLAINTIFFS' SECOND REQUEST FOR PRODUCTION

TO DEFENDANT UNION MORTGAGE COMPANY

Plaintiffs specifically requests that the Defendant produce the following documents and

things:

1. All documents, notes, correspondence, memos, diagrams, etc., that mention Skopbank or

that come from Skopbank to this Defendant or that Skopbank has had in its possession before that

this Defendant has now.

2. All documents that mention USF Holding, Inc.


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3. All articles of incorporation of this Defendant and Defendant USF Holding, Inc.

4. All minutes of meetings wherein any employee or director of this Defendant discussed

incorporation, purpose or duties of Defendant USF Holding, Inc., or Defendant Skopbank.

5. All memos, notes, correspondence or other documents mentioning the corporate purpose

of Defendant USF Holding, Inc.

6. All stock certificates of Defendant USF Holding, Inc.

7. All documents evidencing debts of Union Mortgage Company or USF Holding, Inc., paid

by Skopbank.

8. Annual reports of this Defendant for the years of 1985 and 1990.

9. All documents evidencing the relationship between this Defendant, Defendant USF

Holding, Inc., and Defendant Skopbank.

10. All agreements, contracts, indemnity agreements, stock purchase opinions, or any other

type of agreement whatsoever between this Defendant and Defendant USF Holding, Inc., or

Defendant Skopbank.

11. Any document that has any of the Plaintiffs names on it.


5.5 Plaintiffs' Answer to Defendant's Interrogatories and Request forProduction



LAURA BAKER, et al.

[vs.]


CASE NO. CV-90 048


25/53

PLAINTIFF LAURA BAKER'S ANSWERS TO DEFENDANT SKOPBANK'S FIRST

INTERROGATORIES AND REQUEST FOR PRODUCTION

Comes now, Plaintiff, Laura Baker, and answers Defendant Skopbank's First Interrogatories

and Request for Production as follows:

1. You contend in your complaint that this Defendant's actions in this case were "part of a

common scheme to defraud persons with limited education or understanding of financial dealings."

With regard to that contention, please state:

a. The facts upon which you rely in making that contention.

ANSWER: Numerous Plaintiffs have made the same allegations and I believe they were

doing this to others who have not yet filed complaints. Most of the complainants have a low level

of education.

b. The names, addresses, business addresses, home telephone number of each witness

now known to you who will support this contention [addresses and telephone

numbers not reprinted infra].

ANSWER: Warren Hall, Bill & Jennifer Lampley, Reggie L. Tatum, Nancy Persons, Ms.

Bernice Crenshaw, Ms. Cynthia Brown, Ms. Shirley Truitt, Rosa Vera Hopson, Charles and Jo Ann

Lewis. This will be supplemented at a later time.

c. Identify and produce any document now known to you upon which you rely in

making the above contention.

ANSWER: All documents supporting these contentions are in your possession.

2. You contend in your Complaint that Defendant's actions in this case were intentional,

willful, reckless and/or malicious. With regard to this contention, please state:


ANSWER: The action of having Charles Harper, Lawrence Construction Co. and Union


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Mortgage Co. as the agents of the Defendants.

b. The names, addresses, business addresses, home telephone number and business

telephone number of each witness now known to you who will support this

contention.

ANSWER: See answer #1b.



ANSWER: See answer #1c.

3. You contend in your Complaint that Defendant has entered into a pattern and practice of

fraud or other intentional wrongful conduct. With regard to this contention, please state:


ANSWER: The facts are evident by the consistency of the concurring complaints by each of

the Plaintiffs in this lawsuit and other lawsuits in Alabama.



contention.


c. Identify and produce any document now known to you which you rely in making the

above contention.


4. You contend in your Complaint that Defendant intentionally inflicted emotional distress

upon you. With regard to this contention, please state:


ANSWER: I lost the value of my money and now have an unpaid mortgage on my home; and

I have suffered mental anguish and emotional distress because I thought I might loose my home, my

credit, and my health.



27/53


contention.





5. You contend in your Complaint that Defendant entered into a conspiracy to defraud you.

With regard to this contention, please state:


ANSWER: This Defendant conspired with the other Defendants to defraud me. Other

claimants have made allegations consistent with mine.



contention.





6. Identify each person now known to you who has factual information in support of the

claims stated by you in this complaint.

ANSWER: My attorneys and the other Plaintiffs in this lawsuit.

7. State the names and addresses of any and all persons now known to you with whom you

have consulted as an expert witness.

ANSWER: Bill Crosby from Atlanta, Georgia.

8. In regard to expert witnesses consulted by you, describe

in detail the qualifications including educational background and experience of each such expert

witness omitting no material fact from that description.


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ANSWER: This will be supplemented before his deposition.

9. In regard to expert witnesses consulted by you, state the subject matter on which each such

expert was consulted and if you expect that expert witness to testify in support of the allegations

made in your complaint, please state the subject matter upon which each such expert is expected to

testify.

ANSWER: See answer #8.

10. In regard to expert witnesses consulted by you, summarize the substance of the facts and

opinions to which any such expert witness is expected to testify or of which he has knowledge,

including in your answer a summary of the grounds for the opinion of each such expert.

ANSWER: See answer #8.

11. Identify each and every person, firm or corporation you have used to collect information

for the preparation or for the trial of this case.

ANSWER: I object to this question on the grounds that this would be considered work

product.

12. If the persons identified above have given opinions on the merits of this case or any of

your allegations, please provide a precise summary of the opinions given by these persons, firms or

corporations.

ANSWER: I object to this question on the grounds that this would be considered work

product.

13. Do you intend to rely upon any statue, ordinance, regulation or law in support of the

contentions made by you in your complaint? If so, please state:

a. The precise citation of such statute, ordinance or law.

b. The way in which you contend such statute, ordinance or law supports the allegations

made by you in your complaint.

ANSWER: The law of fraud in the state of Alabama.

14. Do you intend to rely upon any text, statute, ordinance or law in your cross-examination

of this Defendant's experts? If so, state:


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a. The exact title of each text upon which you intend to rely.

b. The name and address of the publisher of each such text.

c. The date upon which each such text was published.

d. The name of the author of each such text.

e. List and identify all tests, treatises, or documents which you or your experts have

relied upon in arriving at conclusions or opinions in this case or which may be

referred to in testimony of you or your expert or which may be introduced in the trial

of this case.

ANSWER: I do not have this knowledge at this time.

15. If you intend to use an expert witness in the trial of this case, please list and identify each

and every article that has been written by your expert witness, the date of the article was published,

and the name of the publication.

ANSWER: I have no knowledge of this information at this time.

16. In regard to each item of damage claimed by you in this complaint, please state:

a. The nature of the damage;

ANSWER: The damage was monetary, mental and emotional in nature.

b. The monetary amount of the damage;

ANSWER: Whatever the jury thinks I am entitled to receive.

c. The method you used to arrive at the monetary amount of the damage.


17. Please state your full name, date of birth, present address and present occupation [address

not reprinted infra].

ANSWER: Laura Louise Baker BD 10-6-26

My occupation at this time is being a housewife.

18. Please list each place of employment for the last preceding ten years furnishing the dates

of employment, rate of pay and reason for leaving.


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ANSWER: In January 1987 through December 1989 I worked as a dental assistant making

$270.00 to $280.00 per week until I had to quit due to health problems.

19. Please itemize fully your educational background.

ANSWER: I attended school through the 12th grade lacking the final quarter, so I did not

graduate.

20. If you have ever been charged with or convicted of any criminal offense including traffic

violations please state the name of the offense, the state, county and city in which you were charged,

the date of the charge, and the sentence or fine imposed.

ANSWER: N/A.

21. Please list each and every mortgage on real property which you have taken out and have

been personally liable for or signed for setting forth the name and address of the lender, the amount

of said mortgage, the date of said mortgage, whether it presently is a valid mortgage or if it has been

satisfied.

ANSWER: I owned a house located at 3817 Carey, East Chicago, Ind. which I sold in 1975

when we moved to Alabama. I also have a first mortgage on my present home with First Family

Mortgage Financial Service, 2700 Hwy. 280 SSTE 104, Birmingham, AL 35223. This is for

$42,430.86.

22. Please list each and every credit obligations which are presently in your name including

but not limited to credit cards, loans for vehicles and household goods, etc., setting forth for each

obligation the following:

a. The name of the institution issuing such credit.

b. The balance of your obligation to such creditor.

c. The interest rates and other terms of credit.

ANSWER: I owe $75.00 for an air conditioner to the Alabama Power Company in Clayton,

Alabama and I have $160.00 loan for my car at the Money Tree in Eufaula, Alabama. I also have

an account with Cox & Cox Trailer Company in Clio, Alabama.

23. Please state whether you have ever filed for bankruptcy relief. If so, please state the date


31/53

of filing and the type of relief sought.

ANSWER: N/A.

24. You contend in your Complaint that Union Mortgage Company acted as an agent for this

Defendant. With regard to this contention, please state:


ANSWER: We believe that this Defendant conspired with the other Defendants to defraud

us. Other claimants have made allegations consistent with ours.



contention.


c. Identify and produce any document now know to you upon which you rely in making

the above contention.


25. You contend in your Complaint that this Defendant failed to disclose a hidden interest

charge or the fact that the mortgages were pre-sold at a discount to Union Mortgage and/or that

Defendant Union Mortgage was actually lending them money. With regard to this contention, please

state:


ANSWER: Charles Harper and Lawrence Construction Co. entered into an agreement with

Defendant Union Mortgage Company whereby they agreed to sell Union Mortgage Company their

mortgages with Plaintiffs at a discount. The discount rates of the sale of the mortgages were agreed

upon prior to Charles Harper actually procuring the mortgages from the Plaintiffs.



contention.



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26. You contend in your Complaint that this Defendant failed to disclose to Plaintiffs that

they were paying a hidden interest charge. With regard to this contention, please state:


ANSWER: All Defendants fraudulently failed to disclose to us that we would be paying

hidden interest charges.



contention.





27. You contend in your Complaint that Defendant Union Mortgage acted as an agent of

Defendant Skopbank and U.S.F. Holdings, Inc., in perpetuating an alleged fraud on Plaintiffs. With

regard to this contention, please state:


ANSWER: We were under the impression from what Charles Harper told me that he worked

for Union Mortgage Company. USF, Skopbank, and Union Mortgage Co. are the alter-egos of each

other.



contention.




33/53



28. You contend in your Complaint that this Defendant entered into a conspiracy with the

other named Defendants to defraud Plaintiff. With regard to this contention, please state:


ANSWER: This Defendant conspired with the other Defendants to defraud me. Other

claimants have made allegations consistent with mine.



contention.




ANSWER:: See answer #1c.

PLAINTIFF

[notarized]


5.6 Affidavit of Expert Witness



LAURA BAKER, et al.

[vs.]


CASE NO. CV-90 048


34/53

AFFIDAVIT OF WILLIAM D. CROSBY

Before me, the undersigned, a Notary Public in and for the State of Tennessee at Large,

personally appeared William D. Crosby, who is known to me and who being by me first duly sworn,

on oath deposes and says as follows:

My name is William D. Crosby and I am over the age of 19 and of sound mind and

competent to testify. I make this affidavit based on facts known to be true by me.

I have a bachelor of business administration/finance which I received in 1976 from the

University of Georgia. I have attended and completed numerous domestic and international banking

schools. I received my national bank examiner commission in 1981 from the secretary of the

treasury.

From July 1990 to present, I have been Vice President of U.S. Banking Alliance, Inc. We

provide consulting service for banks. From September 1988 to July 1990 I was a director of

regulatory relations and acquisitions for the Enterprise Network, Inc.

I have assisted approximately 25 organizing groups in forming new banks since 1987. I have

qualified to testify as an expert witness on banking relations and corporate identity in court, and have

served on numerous occasions as an administrative hearing officer on these subjects.

I have reviewed all the documents that are produced by Union Mortgage Company, USF

Holdings, and Skopbank in their response to Plaintiff's request for production of documents. I have

reviewed all depositions taken in this case.

It is my opinion that Skopbank is the alterego of Union Mortgage Company. It is also my

opinion that USF Holding is the alterego of Union Mortgage Company. It is my opinion that Union

Mortgage, USF Holding and Skopbank are in fact one business entity.

I base this opinion upon several factors. The board of directors of Union Mortgage has at one

time or another been made up of entirely Finnish employees of Skopbank. Further, Skopbank's

employee was the CEO of Union Mortgage and USF Holding while he received payment from

Skopbank. Further, at the time of the fraud, Union Mortgage had a $200,000,000.00 unsecured line


35/53

of credit with Skopbank which could be raised upon request. There is no loan agreement evidencing

the repayment plan of this money nor stating what the consequences are if it is not repaid.

After USF Holding was formed by Skopbank to purchase Union Mortgage, Union Mortgage's

unsecured line of credit with USF Holding has been raised to $500,000,000.00. USF Holding in turn

has a $500,000,000.00 unsecured line of credit with Skopbank. Accordingly, the money is still

coming indirectly from Skopbank to Union Mortgage with no security. On the rare occasion that

Union Mortgage borrows money from other sources, Skopbank fully guarantees the note.

Union Mortgage considers its financing from Skopbank to be loans and not capital. If this

is the case, it is my opinion that Union Mortgage is undercapitalized. This is far below the normal

amount of capital that a company of this size has in the mortgage business. If the unsecured money

is looked upon as capital, then Skopbank and USF Holding are directly financing the acts of Union

Mortgage.

As can be seen from the board of directors minutes of USF Holding, it controls Union

Mortgage. Further, when a company like Skopbank lends unsecured money in large amounts with

no written document evidencing payments, certainly they have control of where the money goes.

The connection between these three companies is such that they are really one in the same company

all being controlled and operated by Skopbank. Union Mortgage is referred to as part of the

"corporate bank" in the documents.

Both USF Holding and Union Mortgage are in the same building in Texas and share

employees.

WILLIAM D. CROSBY

[notarized]


36/53

5.7 Indemnification and Settlement Agreement With Parent Bank



LAURA BAKER, et al.

[vs.]


CASE NO. CV-90 048

INDEMNIFICATION AND SETTLEMENT AGREEMENT

The undersigned Skopbank (hereinafter referred to as "Bank"), hereby agrees to indemnify

and hold harmless the defendant named and designated as Union Mortgage Company, Inc. against

any judgment rendered or entered against Union Mortgage Company and in favor of any one or more

of the Plaintiffs in this action as set out herein below.

It is understood and agreed that:

1. Bank will pay each judgment in this action in full, including accrued interest to the date

of payment, without exception, reservation or qualification, as and when such judgment finally

becomes due and payable against Union Mortgage Company.

2. No judgment shall be deemed due and payable until the judgment becomes final under

Alabama law after all post-trial motions and exhaustion of appeals. If Union Mortgage Company

files any type bankruptcy prior to a judgment covered hereunder becoming final, the obligations of

Bank shall immediately accrue and become due upon the occurrence of such filing unless Bank shall

have filed a supersedeas bond to be approved by the Court superseding any judgment that might be

rendered against Union Mortgage Company in this action within fifteen (15) days of the filing of any

bankruptcy as aforesaid. The parties agree that the supersedeas bond to be filed will be sufficient

if it is issued by an insurance company rated by Best Insurance Rating with a Best Rating of A+13

or better and approved by any Circuit Court of the State of Alabama. It is the intent of the parties


37/53

that Skopbank may either pay the judgment orsupersede the judgment, but would in no event be

required to do both at that stage of the proceedings. It is further understood that the terms supersede

or supersedeas used herein shall be construed according to and as set out in the Alabama Rules of

Appellate Procedure.

3. This agreement is for, and shall accrue to, the benefit of each of the plaintiffs in this

action.

4. This agreement shall not be assignable by any of the Plaintiffs other than as provided

herein.

5. The indemnification agreement shall have full force and effect regardless of any action

taken by Union Mortgage Company to avoid payment of any such judgment including bankruptcy,

receivership, or any other like judicial or quasi-judicial proceeding. However, the foregoing does

not apply to post-trial motions after a jury verdict and/or an appeal resulting after judgment.

6. The filing of bankruptcy or any other like proceedings by Union Mortgage Company shall

have no effect on the obligations of Bank under this agreement.

7. This agreement shall not be interpreted so as to preclude Bank from purchasing any

judgment owned by the Plaintiffs against Union Mortgage Company. Upon the purchase of a

judgment, or upon payment of a judgment, Bank or its assigns may require the involved Plaintiffs

to transfer any rights that the Plaintiff may have against Union Mortgage Company.

8. Bank does hereby waive the provisions of any laws of Finland or otherwise that would

alter, modify, or restrict its ability or requirement to pay any judgment covered under this agreement.

9. Bank shall pay the full amount of each such judgment directly to Beasley, Wilson, Allen,

Mendelsohn, Jemison & James, P.C., in trust, as attorneys of record for each plaintiff.

10. If there is a judgment in favor of Union Mortgage Company, as to any Plaintiff, this

agreement shall be null and void as to that specific Plaintiff only. It shall remain in full force and

effect as to all other Plaintiffs.

11. If judgment be rendered in favor of one or more Plaintiffs, and against any other Plaintiff

or Plaintiffs in this action, then the indemnification shall survive only to the Plaintiffs receiving


38/53

judgment against Union Mortgage and shall be void as to each Plaintiff against whom Union

Mortgage prevailed.

12. This agreement shall also have full force and effect as to the settlement of this civil

action to the extent that Union Mortgage Company defaults in the payments agreed to be made by

Union Mortgage Company.

13. This agreement shall be governed by and interpreted pursuant to the laws of the State of

Alabama.

14. All disputes arising in connection with this Indemnity Agreement shall be resolved under

the Rules of Conciliation and Arbitration of the International Chamber of Commerce by three

arbitrators appointed in accordance with said rules. Each party shall name one arbitrator and the two

so named shall name the third arbitrator who will act as Chairman. All arbitrators shall be citizens

of the United States of America. It is the intent of the parties that this arbitration provision shall be

binding upon Skopbank and shall allow for the enforcement of any judgment in Finland or the

United States through arbitration. It is also the intent of these parties that this arbitration provision

shall preclude the necessity of the parties relitigating any issue of fact or law under this

Indemnification Agreement, or under the underlying cases (the subject of this agreement), in a court

of law in the country of Finland or otherwise. Plaintiffs agree that, in the event any of said plaintiffs

are awarded a judgment against Union Mortgage Company, they will not place Union Mortgage

Company in involuntary bankruptcy.

15. This agreement shall be filed with the Court with the understanding that the agreement

shall be kept sealed by the Court and confidential as to any third party.

16. The attorneys representing the Plaintiffs and the named Plaintiffs agree that, after this

agreement is executed, they will not mention the name of Bank or its relationship with Union

Mortgage Company in the news media.

17. The contents of this agreement or the existence thereof shall not be disclosed to any third

party by the parties or their attorneys.

18. Notwithstanding anything herein to the contrary, should a judgment be rendered in favor


39/53

of Union Mortgage Company or a judgment be rendered in favor of one or more Plaintiffs and said

judgment be superseded with a bond approved by the Court, then Bank will have no further

obligations as to that specific judgment (which was superseded) under this agreement.

19. In consideration of this agreement, the Plaintiffs in this cause agree to dismiss Bank and

USF Holdings, Inc. as parties defendant from the civil actions in which the Plaintiffs named herein

are parties.

20. In the event Union Mortgage Company files any type bankruptcy prior to judgment in

this action, Bank and USF Holdings, Inc. shall be reinstated as parties Defendant in the action.

21. The parties state and certify that this agreement is for a valuable consideration and is

valid to the best of their knowledge under the laws of the Republic of Finland, the United States, and

the State of Alabama.

Dated: July , 1991.

Skopbank

By:

as its President

ATTEST:

Secretary

APPROVED AND AGREED TO:

Attorney for Plaintiffs

APPROVED:

Attorney for Skopbank


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5.8 Order and Judgment



LAURA BAKER, et al.

[vs.]


CASE NO. CV-90 048

ORDER AND JUDGMENT

This day in open court came the parties with their attorneys and this cause coming on to be

heard and issue having been joined between the Plaintiffs and Defendant and this cause having been

regularly set for trial the 22nd day of July, 1991, thereupon, in open court on this day, in the presence

of both the parties with their attorneys, came a jury of good and lawful persons, to-wit: Charles

Beasley and eleven others, who, having been first duly impaneled and sworn, according to law, and

who having heard the evidence and the charge of the court, upon their oaths, in open court on this

day in the presence of the Plaintiffs, Defendant,

and their attorneys, to say:

"We the jury find in favor of the Plaintiff Laura Baker and against Union Mortgage Company

and assess damages as follows:

$1,000,000.00 compensatory damages

$8,000,000.00 punitive damages

"We the jury find in favor of the Plaintiffs Warren Hall and against Union Mortgage

Company and assess damages as follows:



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"We the jury find in favor of the Plaintiffs Nancy and Andrew Person and against Union

Mortgage Company and assess damages as follows:



"We the jury find in favor of the Plaintiffs Reggie and Anne Tatum and against Union

Mortgage Company and assess damages as follows:



"We the jury find in favor of the Plaintiffs Bill and Jennifer Lampley and against Defendant

Union Mortgage Company and assess damages as follows:



/S/ Charles H. Beasley

FOREPERSON

It is therefore

ORDERED AND ADJUDGED by the Court that judgment be and it is hereby entered in

favor of Plaintiffs and against the Defendant as found by the Jury in this cause, and all costs in this

cause be taxed against the Defendant for the recovery of which let execution issue.


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ENTERED this the day of July, 1991.

CIRCUIT JUDGE

cc: Attorney for Plaintiff

Attorney for Defendant

5.9 Order Denying Defendant's Post-Judgment Motions



LAURA BAKER, et al.

[vs.]


CASE NO. CV-90 048

ORDER DENYING DEFENDANT'S POST-JUDGMENT MOTIONS

There is currently presented to the Court Defendant Union Mortgage Company, Inc.'s Motion

for Judgment Notwithstanding the Verdict or, in the Alternative, Motion for New Trial or, in the

Alternative, Motion for Remittitur. Union Mortgage Company contends there was insufficient

evidence to submit the case to the jury. Union Mortgage Company also claims that the damages

awarded were excessive and raises numerous other grounds it contends justifies a new trial.

A hearing was held on the motions on October 2, 1991. AHammondhearing was held on

October 25, 1991. For the reasons stated below, the Court is of the opinion that Defendant Union

Mortgage Company's motions are due to be DENIED, but that denial of the Motion for New Trial

should be conditioned on Plaintiffs' acceptance of a remittitur of the jury verdicts in the amount of

$4,700,000 each or a total of $16,500,000 resulting in verdicts of $5,700,000 each for the five sets

of Plaintiffs.

MOTION FOR JNOV


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Defendant Union Mortgage contends that Plaintiffs submitted insufficient evidence to submit

their separate claims to the jury. Under Alabama law Plaintiffs must submit substantial evidence in

support of each element of their claim in order to justify denial of a Motion for Directed Verdict.

On the other hand, if the evidence is in conflict the issues must be submitted to the jury.

Defendant's primary argument surrounds the issue of agency. Defendant denies that Charles

Harper was acting as its agent in his dealings with Plaintiffs. Except in the most unusual case, the

issue of agency is for the jury. Turner v. Deutz-Allis Credit Corporation, 544 So.2d 840 (1989).

This Court finds there was substantial evidence as to agency and that it correctly denied Defendants'

motion for directed verdict on this issue.

Charles Harper told each of the Plaintiffs that he worked for Union Mortgage Company.

When Mr. Harper first came to meet with each of the Plaintiffs he brought certain documents

including a credit application, retail installment contract, and mortgage. Each of those documents

had been prepared by Union Mortgage Company and provided to Mr. Harper for his use. Most, if

not all, of the documents were Union Mortgage Company forms with the Union Mortgage Company

name clearly stated at the top of each document.

Perhaps the most compelling evidence on this issue was provided by Jim Curtis, a former

employee of Union Mortgage Company. According to Mr. Curtis, who served as manager of the

Birmingham branch, Union Mortgage solicited Mr. Harper, placed him in business, provided him

with all necessary forms, placed a quota on him for the number of loans to obtain, supervised him

in every aspect of his job, and as Mr. Curtis put it, "controlled" Mr. Harper.

There was also evidence that Plaintiff Laura Baker heard a radio advertisement for Union

Mortgage and after she called Union Mortgage, Charles Harper came out to meet with her. Plaintiff

Nancy Persons heard another radio advertisement which also linked Charles Harper and Union

Mortgage.

While Union Mortgage witnesses denied any agency relationship with Charles Harper, this

Court is firmly of the opinion that the evidence presented provided more than the substantial

evidence necessary to submit the agency issue to the jury. It was very clear that Charles Harper was


44/53

only one of a number of less-than-desirable persons recruited by Union Mortgage Company to carry

out its overall scheme.

Charles Harper could not have done what he did without the active participation of Union

Mortgage Company.

MOTION FOR NEW TRIAL

Defendant Union Mortgage raises several issues which it contends entitles it to a new trial.

Although the court does not find any of Union Mortgage's contentions to have merit or to entitle it

to a new trial, the Court will comment on some of its arguments.

THE JUROR ISSUE

Union Mortgage contends it is entitled to a new trial because Kathleen Shepherd was

unqualified to be a member of the venire and to serve on the jury. During Voir Dire examination,

Ms. Shepherd, a bona fide resident of Barbour County, indicated that she was a resident of Eufaula.

There is no contention that Ms. Shepherd was not a resident of Barbour County or that she was

otherwise disqualified to serve as a juror. There was evidence presented at the first post-judgment

hearing that indicated that this juror's legal residence was in fact within the Clayton division of the

Court.

Defendants rely on Acts of Alabama No. 195, 1953 in support of their position that Ms.

Shepherd was unqualified to serve as a juror. In 1973, the State Legislature passed Act No. 1051

known as the Judicial Article. This Article was enacted as amendment No. 328 to the Alabama

Constitution. The Judicial Article was passed to establish a new judicial department. Its passage

as a constitutional amendment repealed and superseded all laws related to the judicial system ineffect at that time.

Amendment No. 328, 6.04 established circuit courts "having such divisions and consisting

of such number of judges as shall be provided by law." With the passage of this Article, both Act

No. 195 and Code of Alabama 12-16-44 were repealed.


45/53

Subsequently, legislature enacted a statute to provide for the qualifications of jurors. Acts

1978, No. 594 codified as Code of Alabama 12-16-60 (1978). It is very clear that Ms. Shepherd

met all the qualifications of that code section. This Court is of the opinion that 12-16-60 is

controlling and that this juror was well qualified to serve.

In this Court's opinion, the manner in which Defendant raised this issue at trial is also

determinative. At the time Ms. Shepherd indicated she resided in Eufaula, Defendant Skopbank (this

Defendant was dismissed after jury selection but prior to trial) indicated a challenge without citing

any grounds. Skopbank was represented by Jack W. Wallace, who served as judge of this circuit for

many years. No one in the courthouse, including this Judge and Judge Wallace, knew anything about

the 1953 statute which Defendant now cites. It is obvious Defendant's challenge at that time was not

based on that statute.

Perhaps more importantly, Defendant used its last preemptory strike to remove Ms. Shepherd

as a juror. This allowed her to be seated on the jury as the first alternate. Later, a member of the

petit jury was excused by agreement of the parties and Ms. Shepherd was then allowed to serve. No

objection to her qualifications was made at that time by Union Mortgage nor at the time the jury

retired for its deliberations. Ms. Shepherd was allowed to serve on the jury by tacit agreement of the

parties since no objection was made. There was a second alternate available to serve at the time Ms.

Shepherd became a juror. Had Defendant raised the issue at the time, the second alternate would

have served rather than Ms. Shepherd.

This Court is firmly of the opinion that Defendant did not sufficiently preserve this issue for

review on Motion for New Trial. Without the agreement of Defendant, Ms. Shepherd would never

have served on the jury in this case. Union Mortgage thereby waived any possible error that may

have occurred during jury selection.

No other potential disqualification of this juror was made known to the Court. It is

inconceivable that a bona fide resident of Barbour County would, in any event, be disqualified to

serve as a juror in this Court.


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CONSTITUTIONAL ISSUES

Union Mortgage Company has raised a number of contentions that the award of punitive

damages in this case violates its constitutional rights. A number of these challenges are inapplicable

in this case.

Union Mortgage Company argues that certain protections normally afforded in criminal cases

should have been afforded in this case. These included an enhanced burden of proof, and a "limit"

on the amount of "punishment." In this Court's opinion, these issues are not properly raised because

Defendant Union Mortgage Company did not request any jury charge requiring proof beyond a

reasonable doubt. Our Supreme Court has held that in the absence of requested jury charges, these

alleged constitutional violations are waived. Alfa Mutual Insurance Company v. Northington, 561

So.2d 1041 (Ala. 1990).

Each of the constitutional challenges raised by Union Mortgage have previously been rejected

by the Supreme Court of Alabama. In addition, the United States Supreme Court has now

determined that the system for the award of punitive damages in Alabama is constitutional. Pacific

Mutual Life Insurance Co. v. Haslip [Mo. 89-1279, Mar. 4 1991] __ U.S. __, 111 S.Ct. 1032 (1991).

MOTION FOR REMITTITUR

Defendant Union Mortgage contends that the jury verdict was excessive both as to the

compensatory damage awards and the punitive damage awards.

The Court will first consider the compensatory damage award of $1,000,000 to each Plaintiff

family. The fraud perpetrated by Union Mortgage resulted in a mortgage being placed on each

family's home. There is a long line of cases from the Supreme Court of Alabama recognizing that

it should be reasonably expected that injuries or damage to one's home will likely result in substantial

mental anguish. B & M Homes, Inc. v. Hogan 376 So.2d 667 (ala. 1979). There was substantial

testimony from each of the Plaintiffs that he or she suffered mental anguish as a result of concern,

anxiety, and worry over possible loss of their home. The jury could have certainly concluded that

each of these Plaintiffs suffered tremendous mental pain and anguish and emotional distress. The


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helpless feelings of the Plaintiffs were evident at trial. It would have been very easy for the

Defendant and its representative (Mr. Harper) to dupe these people. They surely suffered greatly as

a result of their dealings with Union Mortgage Company.

Under the facts and circumstances of this case, this Court concludes that there is no basis for

any reduction in the compensatory award as to any of the Plaintiffs.

Defendant Union Mortgage also challenges the punitive damage award. In each of the five

cases, the jury awarded $8,000,000 as punitive damages. The Supreme Court of Alabama has

prescribed the standards this Court should apply in considering the Motion to Reduce the punitive

damage award in its decision inHammond v. City of Gadsden, 493 So.2d 1374 (Ala. 1986) and

Green Oil v. Hornsby, 539 So.2d 215 (Ala. 1989).

I. THE HARM WHICH OCCURRED AND THE HARM

WHICH IS LIKELY TO OCCUR.

It was very clear to the Court that Union Mortgage Company solicited dealers such as Charles

Harper, who could not do business with any other lending institution and who were extremely poor

credit risks themselves, and turned these people loose to in turn solicit prospective customers with

limited educations and in financial need. There was evidence at trial and subsequently at the post-

judgment hearings that Union Mortgage Company made thousands of loans similar to those made

to Plaintiffs using various dealers with backgrounds identical to that of Harper. Each family in the

instant case received little, if any benefit, from placing a mortgage of approximately $10,000 on their

home. Instead, they now find themselves saddled with debts and mortgages after having paid

varying sums of money on the mortgages.

The Court believes that the scheme of Union Mortgage Company is not restricted to that

company alone. Testimony at the Hammondhearing indicated that other companies are doing

similar things throughout the country. Unless this type conduct is stopped, thousands of citizens

throughout the land will be victimized in the future by companies that operate in

Documents

Chapter 5 $28 Million Punitive Damages Award for Bank's PL94Ch05