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Richfield business owner says he makes payments, but bank still calls in total he owed
By Paula Schleis
Beacon Journal business writer
Published on Wednesday, Apr 30, 2008
Dick Wright said he was numb with shock when he listened to his voice mail in the spring of 2005 and learned that his bank wanted a $300,000 business loan repaid in 90 days.
The word came from a bank officer Wright had played golf with, representing an institution he'd patronized for more than a decade, on a loan he diligently paid on time each month.
What followed, Wright said, was two years of struggle that would send him to the hospital twice and threaten to destroy a company he had worked 18 years to build.
Now Wright, 57, wants a jury to agree that he was wronged.
Wright, founder of Wright Safety Co. in Richfield, sued U.S. Bank in Summit County Common Pleas Court, saying the bank's treatment of him violated its own code of ethics.
A 13-page complaint alleges everything from denial of due process to breach of good faith. Greg Ferrence, the
bank officer who handled Wright's loan, and Martin Durkin, the payment collector Wright was turned over to, are also listed as defendants.
The Akron Beacon Journal placed more than a dozen calls to U.S. Bank seeking comment, but the bank has not made anyone available to respond to the allegations.
The lawsuit was assigned to Judge Paul Gallagher and is awaiting his decision on U.S. Bank's request that it be dismissed.
Document's effect
U.S. Bank's argument hinges on a document called a ''cognovit note,'' something virtually all business lenders in Ohio must sign.
The note says that if the debtor falls into arrears, the creditor can obtain a judgment against the person without notification to the debtor. Case closed.
The U.S. and Ohio Supreme Courts have upheld cognovit notes, although most states have outlawed their use and Ohio does not permit their use in consumer transactions.
Although he says he never missed a payment, Wright technically fell in arrears after U.S. Bank asked for all of its money back at once and he was unable to comply.
Wright said he understood the meaning of the cognovit note when he signed it. What he didn't realize, he said, was how the specter of that document would keep him from fighting back as his business and personal life deteriorated.
Wright's attorney, John Daily of Akron, said the issue of the cognovit note aside, U.S. Bank didn't follow its own ethics policy in handling Wright's case.
An internal document by U.S. Bank President Richard K. Davis outlining ethical guidelines says, ''The guidelines that follow are what we believe are the right things to do — not just what we may have a right to do under the law.''
Wright and Daily said that kind of guidance should have applied in Wright's case, since he had managed to pay back all but $40,000 of the original loan when U.S. Bank took the cognovit note to court to win judgment.
''Former bankers advised us that this is not their procedure,'' Daily said. And the law requires banks to treat lenders equally, he said.
''Why call this loan? His equity position was still well within the framework of the loan criteria,'' Daily said. ''He had plenty of equity and no default.''
Loan a threat?
Wright said his saga began in 2005, when Ferrence called and left a voice mail saying that a one-year credit line of $650,000 would not be renewed and that Wright had 90 days to find another bank.
Wright had borrowed about $300,000 on that credit line.
''He said sales are down, profits are down, and based on what we see, you've got 90 days to find another bank,'' Wright recalled.
Over the next four months, Wright said, he made the rounds to various lending institutions, but no one wanted to touch a loan that another bank was dropping. It didn't matter that he had already taken out and fully repaid a $300,000 five-year term loan with U.S. Bank before.
John Nassos, who worked at U.S. Bank and approved the $300,000 term loan for Wright, said Wright had the ''three C's'' that lenders look for: character, cash flow and collateral.
Nassos said that while U.S. Bank had every right to ask for its money back on the credit-line loan, he disagrees with the aggressive way the bank pursued Wright.
''The whole objective of the bank is to protect the assets of the bank. They're going to try to do that legally and in the best way possible,'' Nassos said. ''But if that's their motivation, how did Dick threaten that? I don't know.''
Nassos said that at Wright's request, he reviewed several years of the company's statements and found that although profits had dipped in 2005, ''I saw nothing that would have stopped me from wanting to have Dick Wright as a bank customer.''
Making his case
After the bank's deadline passed, Wright was turned over to Durkin in the credit division.
Wright said that as he looked for ways to pay back the bank — all the while keeping up his monthly payments — he also tried to convince the bank that he was good for the loan.
His companies, Wright Safety Co. and Wright Rental Co., sold and rented safety equipment. A third company, Save a Life, was selling defibrillators.
The federal government had recently passed legislation guaranteeing that 3 percent of all government business would go to service-disabled veterans. Being a disabled vet, Wright expected to take advantage of that.
He also tried to pass on research showing how the defibrillator market was growing, with the heart-starting devices becoming commonplace in schools and offices.
''At this point, it's clear they don't care about anything I have to say,'' Wright said. ''I assume (Durkin) gets rewarded for cleaning my clock.''
Over the next two years — a time in which he was admitted to the hospital twice because of stress — U.S. Bank tacked $40,000 in fees and penalties onto the original debt.
Wright said he felt coerced into signing additional collateral that far exceeded the actual loan, and agreeing to pay the bank's attorney fees to get the loan extended.
Meanwhile, the bank increased the interest rate from 0.25 percent over the prime lending rate to 10 percent over prime, he said.
''I did what I had to do because I had signed a cognovit note and I know they have the power to hurt me,'' Wright said.
Bank goes to court
Still, Wright had managed to sell enough assets and raise enough money to pay the debt down to just $40,000 when U.S. Bank finally took the cognovit note to court in May 2007 and won immediate judgement for more than $58,000, which included the attorney fees.
Wright learned of the action only when opportunists began calling to sell him financial debt services.
The judgment allowed U.S. Bank to take $17,000 that was in Wright's business operating account, his monthly disability check and a few hundred dollars in a joint account Wright shared with his son.
''During all of this, I'm trying to do business on my own. I have no bank. I'm letting employees go,'' Wright said.
The cognovit note action revealed something else: The bank complained that Wright's use of the loan to support his newest company, Save a Life, violated the loan's terms.
Wright said that had never been mentioned before, and that Ferrence — who annually looked at his company's statements before renewing the loan each year — knew all about his defibrillator business.
In addition to how U.S. Bank treated Wright during the two years, Daily said, he's personally outraged at the attorney fees it was charging him.
The bank demanded payment of about $20,000 in attorney fees, an amount that Daily called ''extortion.''
Wright said he was never provided an itemized statement on the fees and felt like someone ''was just plucking numbers out of thin air.''
Still, his banking contacts told him to just pay it and get out.
''They said look at your options later if you want, but make this go away now,'' Wright said.
Jury trial sought
Today, the bank loan and attorney fees have been satisfied, in part because Wright sold a home he had purchased for his parents.
Wright said he's survived, and his companies were profitable in 2007.
He said he didn't have much money to pursue a lawsuit, but he feels confident that if he can get a jury trial, his peers would agree that what he went through was unjustifiable.
''I don't think there is a bank in Ohio who would look at someone who has a history with my kind of background and does what I did to get that loan down to $40,000 and then really ram it down.
''None of this makes sense,'' Wright said. The bank ''knew I was working with them. There was no risk or exposure for them, not once, so why would they hurt me? I just don't understand.''
Paula Schleis can be reached at 330-996-3741 or pschleis@thebeaconjournal.com.
Dick Wright said he was numb with shock when he listened to his voice mail in the spring of 2005 and learned that his bank wanted a $300,000 business loan repaid in 90 days.
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