Petition — Fetner v. Federal Land Bank

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IN THE

SUPREME COURT OF THE UNITED STATES

OCTOBER TERM, 1979

No. €9-138370

PHILIP JAY FETNER,

Petitioner,

FEDERAL LAND BANK OF BALTIMORE,

Respondent.

PETITION FOR A WRIT OF CERTIORARI

TO THE SUPERIOR COURT OF

PENNSYLVANIA

PAUL R. BECKERT, JR.

JACKSON, SULLIVAN & BECKERT

312 Oxford Valley Road

Fairless Hills, Pennsylvania 19030

Attorney for Petitioner

March 6, 1980

Washington, D.C. ¢ THIEL PRESS + (202) 638-4521

(1)

TABLE OF CONTENTS

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SSS CE Pe

QUESTIONS PRESENTED .. . 5 ../...0 cceecsccece

CONSTITUTIONAL AND STATUTORY PROVISIONS ...

STATEMENT OF THE GABE (2:0... Sw.

REASONS FOR GRANTING THE WRIT.............

BR ES I

TABLE OF AUTHORITIES

Cases:

Bowers v. Lawyers Mortgage Co., 285 U.S. 182 (1932) .....

Commonwealth v. Harrison, 228 Pa. Superior 412, 325

Re rere

Kaplan v. Loer, 327 Pa. 465, 194 A. 653 (1937)..........

Kornicki v. Abrams, 28 Bucks Co. L. Rep. 215 (1976) .....

Moore v. Howard P, Foley Company, 235 Pa. Super. 310,

ES re

Nissley v. Pennsylvania Railroad Company, 435 Pa. 503,

EE a a

Securities and Exchange Commission v. American Inter-

national Savings and Loan Association, 199 F. Supp.

I ae Ge hw he oh bd 0-0 20 2 oo he es oan

Securities and Exchange Commission v. Ralston Purina

Company, 334 U.S. $7 (1948) .......... Ne orca 0, 6

Spokane & Inland Empire Railroad Company v. United

OE

Valentine v. Federal Insurance Company, 111 Pa. Superior

ere ee eee

Veneziale v. Raudenbush, ___Pa. Commonwealth —_,

402 A.2d 295 (1979)...... 0 NS oa a

~ (it)

Constitution and Statutes: rege

Securities Act of 1933, 15 U.S.C.A. §§ 77 et

6 rk CR eR a Sb ee teuie pees 24, 25, 26, 27

Securities Exchange Aci of 1934, 15 U.S.C.A. §§ 78

OR a Gas 8 4 A ETS 0 C48 KOKO 25,27

Farm Credit Act of 1971, 85 stat. 583, 12 U.S.C.A.

oe EN Eon Pee ore or Car a nr 24

IN THE

SUPREME COURT OF THE UNITED STATES

OCTOBER TERM, 1979

No.

PHILIP JAY FETNER,

Petitioner,

FEDERAL LAND BANK OF BALTIMORE,

Respondent.

PETITION FOR A WRIT OF CERTIORARI

TO THE SUPERIOR COURT OF

PENNSYLVANIA

Petitioner Philip Jay Fetner respectfully prays that

a Writ of Certiorari issue to review the judgment and

opinion of the Superior Court of Pennsylvania in the

above-entitled case.

OPINIONS BELOW

The opinion of the Superior Court of Pennsylvania,

not yet reported, appears in the Appendix hereto. The

]

2

opinion of the Court of Common Please of Bucks

County, also unreported, is reprinted in the Appendix as

well.

JURISDICTION

The judgment of the Superior Court of Pennsylvania

was entered on September 14, 1979. A timely petition

for reargument was denied on January 9, 1980 by the

Superior Court. A petition for Allowance of Appeal was

denied on December 10, 1979, by the Supreme Court of

Pennsylvania, Eastern District. This Court’s jurisdiction

is invoked under 28 U.S.C. § 1257.

QUESTIONS PRESENTED

1. Whether the trial court by its regulation of pre-trial

discovery and conduct of the trial itself so abused its

discretion as to deny petitioner the due process of law

assured by the Constitution of the United States?

2. Whether the loan program of respondent is subject

to the anti-fraud and registration provisions of the

Federal Securities Act of 1933, as amended, and the

Securities Exchange Act of 1934, as amended?

CONSTITUTIONAL AND STATUTORY

PROVISIONS INVOLVED

Constitutional Provisions:

Fourteenth Amendment

United States Code:

Securities Act of 1933

Securities Exchange Act of 1934

Farm Credit Act of 1971

3

STATEMENT OF THE CASE

On June 5, 1974, petitioner entered into an Agreement

of Sale to purchase a farm in Bucks County, Penn-

sylvania. Sbusequently thereto, respondent agreed to

provide a first mortgage loan and made a number of

representations to petitioner concerning the Farm Credit

System.

In direct contravention of the Agreement of Sale, the

sellers in July of 1974 covertly granted an easement of

roads to the Pennsylvania Department of Transportation

(PennDot) across the land subject to sale. The deed of

easement was not recorded until October 1, 1974. On

October 9, 1974, petitioner made settlement on the

property. Petitioner was ignorant of the existence of the

deed of easement, and a policy of title insurance issued

to petitioner insuring him against any defect, lien or

encumbrance on the title failed to disclose the recorded

easement.

At closing, petitioner executed and delivered a Mort-

gage Bond to respondent in the principal amount of

one hundred seventeen thousand five hundred dollars

($117,500.00). The loan was made through the inter-

mediary of the Southeast Federal Land Bank Association.

Every borrower, including petitioner, who obtains such

a loan automatically becomes a voting member of said

Association, which Association in turn is fully owned

by local stockholder members, by purchasing stock or

participation certificates equal to five percent of the

loan. Thus, on October 9, 1974, petitioner purchased

stock in the amount of Five Thousand Eight Hundred

Seventy-Five Dollars ($5,875.00).

In the spring of 1975, subsequent to taking possession

of the farm, petitioner learned of the easement. At the

4

same time, PennDot began the construction of a major

highway across petitioner’s property, destroying a natural

border of trees, shrubs and planting’, which severely

altered the character and reduced the value of said

property. Shortly thereafter, petitioner sued the sellers,

the real estate agents, PennDot and Commonwealth Land

Title Company for, inter alia, fraud and sought, inter ala,

rescission of the sale.

During subsequent discovery in that case, questions

were raised as to the possible complicity of respondent

and its local agent acting in concert with the defendants.

At the same time, ‘respondent acted in ways contrary to

its representations made in 1974 prior to the loan trans-

action. Lengthy discussions ensued, and _ petitioner

months later stopped mortgage payments.

During subsequent settlement discussions, respondent

commenced this action in mortgage foreclosure against

petitioner by complaint filed on March 16, 1977.

Respondent demanded judgment in the amount of

$137,195.45, representing alleged unpaid installments,

accelerated principal, default interest, certain real estate

taxes and attorney’s commission. Petitioner filed Prelimi-

nary Objections challenging plaintiff’s capacity to sue,

demanding a more specific pleading, asking to strike

the claim for 10% attorney’s fees and seeking a general

demurrer. Preliminary Objections were overruled by the

Court of June 23, 1977, whereupon petitioner filed an

Answer, New Matter and Counterclaim. The Answer

specifically denied respondent’s allegations. New Matter

reiterated the issues of the Preliminary Objections and

set forth the stockholder relationship between plaintiff

and defendant.

The Counterclaim, consisting of eleven counts,

generally alleged that material misrepresentations of

5

respondent fraudulently induced the mortgage contract,

that respondent tortiously harmed petitioner in attempt-

ing to cover up the original fraud and force foreclosure

and was in breach of the loan contract, and that respond-

ent also had violated the Federal Securities Laws.

Petitioner sought rescission of the entire transaction, plus

interest and damages.

Respondent filed a responsive pleading thereto in the

form of a general denial (Answer) without asserting any

further New Matter or raising any objection to the

Counterclaim as stated. The issues thus joined, petitioner

served upon respondent three sets of Interrogatories.

(Respondent took no discovery.) None were answered

in a timely fashion; the months’ delay went well beyond

the time allowed by the Rules of the Court. Moreover,

the interrogatories were answered in a most evasive

fashion. Documents produced were inaccurate or incom-

plete (e.g., the Indemnity Agreement produced in

response to Question No. 5 of the First Set). Many

questions were answered simply “not applicable,” or

“none.” Attempts to get at the substance of the trans-

action were met with the answers that the people involved

were not “employees” of plaintiff (they were, in fact,

employees of plaintiff’s agent) or similar tactics of

applying technical status identification to avoid answer-

ing the questions.

At one point (Answer No. 4 to the Third Set), plain-

tiff even declared that “there is no relationship, between

Russell Albright and The Federal Land Bank of Balti-

more,” quite an assertion in view of the fact that Albright

was employed by the Norristown Federal Land Bank

Association (later changed to ‘Southeastern Federal

Land Bank Association”), which was both an owner and

agent of the plaintiff.

6

Other answers appeared on their face to be falsehoods

(such as plaintiff mortgagee did not receive the prelimi-

nary title report or the property survey) and were in fact

directly contradicted by later testimony of plaintiff’s

agent. Counsel for the petitioner immediately telephoned

and wrote plaintiff’s counsel pointing out deficiencies

and asking that they be corrected without the necessity

of a Motions for Sanctions. No reply was ever received.

Moreover, it should be emphasized that the entire Third

Set was sent because of respondent’s failure to answer

adequately the prior two.

Based upon the “answers” to the First set, petitioner

sent to respondent a list of five individuals, all em-

ployees of plaintiff-respondent or its agent, as proposed

witnesses of whom he intended to take depositions.

Recognizing the business nature of the witnesses and

in some instances their distance from Bucks County,

petitioner asked for alternative dates so that depositions

would be taken at mutually convenient times. In fairly

reviewing the “jockeying”’ that followed between counsel,

two conclusions can be reached: on the one hand,

counsel for petitioner attempted to do everything possible

to satisfy the scheduling problems raised by respondent,

while, on the other hand, respondent’s counsel resorted

to a posture of utter non-cooperation. Initially refusing

to produce the witnesses, he later insisted that deposi-

tions be taken only in Baltimore, Maryland, and at the

sole convenience of plaintiff’s employees.

While this discussion as to depositions and the ade-

quacy of answers to Interrogatories continued, plaintiff

filed a Motion, under the affidavit of plaintiff’s counsel,

averring that discovery was not complete but requesting

that the Court limit the time »f discovery and thereafter

set a hearing date. Paragraph 6 of said Motion stated:

7

The Defendant has pursued a great deal of discovery

and intends to take deposition of various officers of

the Defendant [sic]. At the time of this Motion all

discovery has not been completed by the Defendant.

Plaintiff is willing to participate in reasonable dis-

covery proceedings.

Paragraphs 8 and 9 read:

Plaintiff believes that because of protracted dis-

covery proceedings by the Defendant, the setting

of a hearing date under normal court procedures will

cause an unnecessary delay.

Plaintiff requests a hearing date be scheduled at the

present time rather than waiting for completion of

discovery.

It is worth emphasizing at this point that so-called

“protracted discovery” at this time amounted to some

seven pages of widely spaced answers to Interrogatories

that would take a person of average intelligence no

more than five minutes to read. One of these pages, for

example, repeated the phrase ‘‘Not applicable” four times

(triple-spaced) and the word “None” nine times (double-

spaced). And, again, the Third Set of Interrogatories

was simply an attempt to get plaintiff to answer the

First Set.

To this Motion, counsel for the defendant sent a letter

to counsel for plaintiff and to the Court Administrator

advising that several “facts” set forth in the Motion

were disputed and that the matter was hardly ripe for

a hearing. No disposition was made of this Motion.

Unaccountably and shortly thereafter, without any

praecipe being filed, counsel for plaintiff filed another

motion indicating that discovery was now complete and

requesting a trial date. Plaintiff was well aware of the

disputed averments of the Motion, yet did not proceed

8

by Petition and Rule Returnable. A second letter of

protest was dispatched by defendant’s counsel. Equally

unaccountable, the Court then quickly set a trial date a

few weeks away.

Defendant thereafter filed a Motion for Sanctions.

This Motion was never disposed of.

Prior to the hearing date, at the request of counsel

for the defendant, a conference was held with the trial

judge, and a Petition To Strike the matter from the trial

list was handed up. No Rule Returnable was set and no

disposition of the Petition was made. The Court ordered

instead that the parties engage in good faith discovery

over the next week, that is, the week that preceded the

trial, and further permitted the deposition of only two

parties, Russell Albright and Richard Carpenter.

The deposition of Albright began on the following

Monday. On that day, a severe blizzard, one of the

worst in Bucks County history, hit the area, and the

Court House was closed at approximately 12:30 p.m.

and the deposition postponed. The Court House was

closed the next day, Tuesday, while the area struggled

to recover from the storm. On Wednesday, the deposi-

tion of Albright was resumed. Unfortunately, it had

to be interrupted so that the deposition of Richard

Carpenter could begin—Wednesday being the only day

that Mr. Carpenter, who had travelled from Baltimore,

was to be made available. The deposition of Carpenter

was only partially completed. Informal contract with

the trial judge indicated thai the trial would proceed

whatever the results of the deposition process. On

Thursday, the deposition of Russell Albright was sub-

stantially concluded. At the close of Albright’s deposi-

tion, counsel for plaintiff indicated that he would supply

a copy of a certain document (the appraisal report) in

9

plaintiff’s possession to counsel for defendant on Friday

afternoon.

On Friday afternoon, respondent’s counsel refused to

supply the promised documents.

No transcripts of the depositions were made available

prior to the trial. At the time of trial, a Petition to

Strike the matter from the list and a Motion for a Con-

tinuance were presented to the Court by petitioner. Both

were refused.

During the course of the trial, held on February 15,

‘978 without jury before Judge John J. Bodley, the

court made numerous evidentiary rulings contravening

the rules of civil procedure, refused to permit complete

cross-examination of witnesses, and refused to permit

testimony in support of the pleadings advanced by

petitioner in the Answer, New Matter and Counterclaim.

Indeed, no evidence on the Counterclaim was allowed

a all. Petitioner was ordered from the stand in mid-

testimony, whereupon the Court abruptly entered

judgment. Counsel was- not permitted to make any

final argument.

The trial judge simply viewed the case as a “straight-

forward mortgage foreclosure”—time and again, reference

was made to this theme and to some inability by peti-

tioner to make mortgage payments, an assumption that

was never pleaded nor as to which was a single word of

evidence offered:

“You know as well as I do that you [Defense

Counsel] and I would not live in our homes if

we did not pay our mortgage payments since last

July of °76.” [Trial Transcript, p. 105, lines

14-17.]

10

“. . . he can’t live on this place and enjoy the

property without paying for it, and he hasn’t paid

for it.” [Trial Transcript, p. 107, lines 23-25.]

“It’s somebody else’s money that’s being used to

permit him being there, not his.” [TT, p. 108,

lines 22-23.]

Interrupting the first witness for the defense:

“I have given you [Defense Counsel] the oppor-

tunity to establish this so-called fraud or fraudu-

lent inducement, and you haven’t done it, and

you're not going to do itt.” [TT, p. 109, lines

12-15.] [Emphasis added.]

and

“If I were to do anything more than to speak

bluntly to you about this situation, I just wouldn’t

be fair to myself, because I don’t believe in going

through motions where there is no merit in some-

thing.” [TT, p. 109, lines 16-20.]

Indeed, as Judge Bodley stated in his opinion:

“It should be added, gratuitously, that had Plaintiff

submitted a motion for a summary judgment upon

the pleadings prior to the trial, it would have been

granted forthwith.” [p. 11].

‘Does it matter how much a man, who cannot make

his mortgage payments, tries to put off fore-

closure?”’ [TT, p. 146, lines 20-22.]

“I don’t like hypocrisy. I find it all through that

Answer and New Matter. . . . I see a mortgagor

who has been unable to meet his payments. I’m

sorry for him.” [TT, p. 158, lines 3-4.]

“This is a financial institution that probably loaned

him more than they should have loaned him, as it

turns out. It is unfortunate for all parties.” [TT,

p. 158.]

11

It must ruefully be admitted that petitioner-defendant

inadvertently fueled Judge Bodley’s prejudices. In an

attempt to show one element of the fraudulent induce-

ment or, alternatively, breach of the mortgage contract,

defendant introduced evidence concerning an earlier

period when, confronted with certain financial difficul-

ties, he was denied the much stressed leniency that

formed a cornerstone in the Land Bank’s mortgage

inducement. The distinction between that time, which

ended when defendant paid all arrearages pursuant to an

agreed upon workout arrangement, and the period after

July 1976 was, however, lost upon the trial judge.

On page 155 of the Trial Transcript occurs the follow-

ing exchange, in which defense counsel tries to establish

the events surrounding the earlier workout arrangement:

[Mr. Beckert] Did you [Defendant] ask Mr. Al-

bright whether the payments could be extended

beyond the March deadline?

[Mr. Hershenson] I object.

[Court] Sustained. Of course he asked right up

until the date of foreclosure, I suppose.

This remark illustrates well the problem of this trial.

“Of course,’ there was no such testimony indicating

anything of the kind—neither at trial nor during dis-

covery—and nothing in the pleadings so to indicate.

Quite the contrary.

Timely exceptions were filed with the Court en banc.

By decision dated September 8, 1978, Judge Bodley,

writing for the Court, dismissed the exceptions.

At no time did the Court address the Federal Securities

Law question raised. The Opinion is reproduced in the

Appendix.

12

Petitioner posted security and appealed. The appellate

court in essence refused to interfere with the discretion

exercised by the lower court. (The Opinion is reproduced

in the Appendix.) A number of issues were not even

addressed by the Superior Court, among them the Fed-

eral Securities Law questions. Petition to reargue was

denied. Allocatur to the Pennsylvania Supreme Court

was refused.

REASONS FOR GRANTING THE WRIT

| DUE PROCESS

At the outset, it must be admitted that due process

claims in civil cases do not have the same glamour as their

criminal counterparts. That may be unfortunate for

petitioner, given the fact that his home, substantial sums

of money and several years of endeavor are directly

involved. Nevertheless, petitioner is willing to assume a

heavier burden in demonstrating the importance of this

case: to allow the abuse of discretion shown here to

stand would give a trial judge, any trial judge, sitting

without a jury, the right to exercise virtual dictatorial

powers, unfettered by the basic safeguards of our civil

process.

Furthermore, what perhaps is difficult to convey

simply from reading the record was the harassing, sar-

castic and injudicious tone used throughout by the trial

judge. And not all the offensive remarks from the

bench, including sub votto asides, were recorded in the

transcript. In the aggregate, defense counsel was placed

under considerable strain in attempting intelligently to

pursue his case.

In order to place the necessity for fair discovery in

this case in its proper context, it should be emphasized

13

that this was in large part a fraud case. The Counter-

claim alleged throughout that plaintiff had knowingly

participated in a fraud upon defendant and that, when

defendant suspected or discovered the fraud, employees

of plaintiff had sought to force foreclosure in bad faith

in an attempt to moot possible liability for the fraud.

Fraud is difficult to prove in any case but ever more so

when a corporation, bank or other institution is involved.

Numerous diverse matters, documents, statements and

the like would normally be required to challenge the

‘party line.’ Institutions and/or their agents can be

expected to proceed with some sophistication and draw

the wagons in a tight circle. What might seem routine

or be alleged as routine may appear wholly different

in its proper context if the internal workings of the

institution and its paper work were understood. More-

over, the case also involved securities law questions, and

the relationship of the various components of the Land

Bank system to each other and to the defendant were of

crucial significance.

It should, moreover, not be necessary to note that

discovery need not be absolutely related directly to a

relevant fact but would be appropriate if it could lead

to probative information. And this case is vritually

a textbook example of the need for intelligent and

thorough discovery.

Counsel is aware of the very real and necessary concern

in the legal community that the discovery process is

now being overused. Wild fishing expeditions, since any

material which might lead to the discovery of admissible

evidence is discoverable, seem to be all too common.

Unnecessary intrusions into privacy, high costs, and the

unfair use of the discovery process as a lever for settle-

ment have come to be part of some lawyers’ trial strategy.

14

In no sense, however, was the discovery sought here by

defendant even remotely a fishing expedition. For

example, all the questions asked during depositions

laregely met without objection, went directly to the

Complaint and Answer, New Matter and Counterclaim.

Every attempt was made to promote the early identifi-

cation of issues in a potentially complex litigation both

to reduce the cost of discovery and to expedite litigation.

Discovery allowed in this case was, however, a sham.

Plaintiff successfully answered Interrogatories in mani-

festly bad faith, obscuring the identity of witnesses,

documents and relevant transactions and repeatedly

ignoring the plain meaning of the questions. Plaintiff

successfully blocked depositions by filing inconsistent,

under affidavit of counsel, Motions, proceeding by

Motions rather than Petition and Rule in violationg of

the express provisions of the local Rules of Court. Even

the briefest perusal of the allowed deposition transcripts

will show that Albright frequently resorted to “‘stone-

walling,’ incredible lapses of memory about the most

basic aspects of his job (including such matters as the

limits of his discretionary authority), and to pleading

ignorance of the most elemental facts. At one point, he

even went so far as to say that he simply could not tell

what the “Farm Credit Service” was, although his picture

appeared under that caption in a bimonthly publication

prepared by his employer and the phrase also appeared

on his own stationery. Predictably, the testimony indi-

cated the need to depose others, in particular Albright’s

immediate superior, Herbert Kratz.

Richard Carpenter, for his part, was totally unrespon-

sive, to the point where it may be seriously questioned

whether counsel] for plaintiff did not knowingly mislead

the Court during the conference that preceded ordering

15

the truncated depositions where he made several repre-

sentations as to the competence and appropriateness of

deposing Carpenter (to the exclusion of other officers or

employees of plaintiff). Much of Carpenter’s testimony

related as to how the questions asked were better directed

to others! At the very best, his testimony indicated the

wisdom of seeking originally to depose the five employees

of plaintiff or its agent already mentioned. And, pre-

dictably, plaintiff’s counsel during the deposition process

was less than cooperative—even to the point of breaking

a promise made to produce certain records.

The original injustice of limiting drastically defend-

ant’s discovery was compounded time and again as the

seemingly inexorable trial date approached. Only maxi-

mum cooperation by plaintiff would have proved even

remotely satisfactory in such a brief period. Although

the Court did not have the transcripts to rule on the

Motion for Continuance presented at the trial, there was

nothing in the history of the case to suggest that such

cooperation would be forthcoming. To the contrary,

the entire course of conduct by plaintiff showed that it

feared and did everything to prevent any sort of good

faith discovery. And the plain fact was that the weather

prevented the deposition from being concluded. —

While it may readily be admitted that the trial judge

has wide discretion in ruling on such a Motion, can it

be doubted that the discretion was manifestly abused

here? In light of Judge Bodley’s view of this case, is

there any doubt that had the weather cancelled the

depositions altogether the trial would still have pro-

ceeded? The lack of transcripts (a partial transcript was

provided during the luncheon recess, see TT, pp. 24-25)

were brushed aside by the Court at the opening of the

trial as meaningless.

16

That the events of the trial challenge all semblance of

fairness and judicial propriety is an understatement.

Petitioner’s first set of interrogatories to respondent

requested, under Interrogatory No. 11, the name and

address of all witnesses whom respondent planned to

call at the trial of this matter. Respondent-plaintiff

responded as follows: ‘“‘Unascertainable at this time.

Plaintiff will furnish Defendant with a list of witnesses

when ascertained.” No supplemental answer was ever

filed listing said witnesses, nor was this ever done infor-

mally. Plaintiff’s counsel called two witnesses to the

stand, and defendant objected based upon this failure

to disclose. Said objections were brushed aside by the

Court, in clear violation of current procedural practice.

The seminal case on this point is Nissley v. Pennsyl-

vania Railroad Company, 435 Pa. 503 (1969). In ruling

that a surprise witness could not testify even when the

interrogatory requesting the name of witnesses was

overbroad, the Court stated in part:

The several revolutions which have occurred in

the field of procedure, insofar as they relate to

problems of pre-trial discovery, have had as their

principal focus the desire that a case should be an

inquiry into the facts of the case with each party

in a position to examine the evidence upon which

a decision will rest. We have moved away from what

was described as the “sporting theory of justice”

and have embraced a theory of wide ranging and

mutual discovery. One advantage of discovery is

the protection it gives the adversary against surprise

evidence which can be proven false or which can

be put in a truer or less damaging light if there is

opportunity to investigate the matter and produce

rebutting or qualifying facts.

435 Pa. at 507.

17

The Nissley decision has been followed recently in the

matter of Moore v. Howard P. Foley Company, 340 A.2d

519 (1975).

In the case before us, especially as to the witnesses

John R. Wright, respondent’s sole explanation was that

Mr. Wright was unknown to them as a witness until just

prior to the date of trial! But Mr. Wright is the Manager

of Data Services for the computer company employed

by respondent. This is not a matter of an unknown

witness suddenly appearing, but of respondent simply

refusing to disclose his name prior to trial. Such strategy

does not permit defendant any opportunity to depose

said witness, for example, to understand the manner in

which plaintiff’s books were kept to determine whether

they were accurate in light of the testimony offered by

this witness.

The first witness testified to the nature of the Federal

Land Bank of Baltimore as an “instrumentality” of the

Federal government. The importance of: this question

and the self-serving character of the testimony is beyond

doubt. When petitioner on cross-examination sought

to question this concept, Judge Bodley declared that

beyond the scope of cross-examination and a matter

which ought to be presented by way of defense (TT,

p. 12). Plaintiff’s steady stream of objections to any

questions dealing with the nature of the Farm Credit

system were sustained. (Subsequently, however, when

defendant tried to introduce the subject by way of direct

testimony in defense, the Court ruled it out of order!)

What sort of information was given to the public through

published brochures, the Bank’s functioning as a private

corporation, whether it actually received any money

from the Federal government—all this and more were

not permitted.

18

The second witness introduced by plaintiff testified

as to the procedures and accuracy of the billing system

(both challenged by defendant in his responsive plead-

ings). He sought to establish the amounts and character

of the alleged defaults but admitted that neither he nor

his organization (a regional computer service) had any

way of knowing if these amounts actually belonged to

defendant or his property except as reported by plaintiff

(TT, pp. 22-23, 27). The computer service was merely

mechanical and the accuracy of their records depended

entirely upon information supplied by the local Federal

Land Bank Association (TT, pp. 30ff).

Defendant’s attempt to show errors in computation

was not allowed by Judge Bodley as having “‘nothing to

do with default or no default” (TT, p. 43). The Court’s

view was that in the face of “default”—1.e., a computer

record of non-payment—nothing further need be said,

not even as to the particular figures which were stated as

those upon which the default was alleged to have been

predicated. The Judge even went so far as to state that

defendant “acknowledged default” (TT, p. 44, lines

8-9), which was absolutely false as a reading of the

pleadings and testimony will readily show.

In the middle of cross-examination, Judge Bodley

simply excused the witness (TT, p. 46). Whereupon,

plaintiff rested his case.

Defendant called Albright “‘as on cross’’ and proceeded

to attempt to prove the misrepresentations that arguably

gave rise to fraudulent inducement. Whereupon, the

Court sustained all objections to relevant matters: how

Albright represented the Land Bank system to defendant

and what was told defendant in discussions with Albright.

“Let us get to the fraud” (TT, p. 59) became the battle-

cry of the Judge, but his bias that the entire hearing was

19

a waste of time became a self-fulfilling prophecy when

he refused to allow any questions that went to what

Albright actually said or did. At one point, Judge Bodley

went so far as to say: “whatever representation was

made, it would not amount to fraud.” (TT, p. 62, lines

24-25). Furthermore, the Court permitted no testimony

on any matters after the settlement date.

Albright was also excused by the Court in the middle

of cross-examination.

The Court’s rulings as to cross-examination cannot

be justified under even the most stringent view of that

aspect of trial practice. Cross-examination is appropriate

to elicit the circumstances that would explain direct

testimony, to impeach credibility or show bias, or to

test the witness’s knowledge or recollection of matters.

See, e.g., Kaplan v. Loer, 327 Pa. 465 (1937); Valentine

v. Federal Insurance Company, 111 Pa. Superior 311

(1934). Moreover, at several points, the Court, always

condescendingly, suggested to counsel for defendant a

manner of cross-examining these witnesses. Matters of

credibility and fraud are particularly difficult to deal

with in terms of a corporate organization. Neither can

be discovered or fully documented in a trial where the

witnesses who are to be cross-examined know that the

judge has taken the attitude that the likelihood of fraud

is non-existent and that he is not going to permit any

sort of cross-examination into the matters in question.

The method of cross-examination is not really a matter

of evidentiary proceedings, but more a matter of trial

strategy and tactics. That, as well, was limited by the

Court, even where the substance of the matters to be

pursued was apparently unobjectionable.

When Defendant was put on the stand, the trial

judge made it impossible for him to tell the facts of the

20

dispute. Defendant was not allowed to testify as to

conversations with Albright. And all contacts between

the Land Bank and petitioner after settlement were

foreclosed (TT, p. 138). The Court then went on to

rule that it would permit no evidence to be introduced

on the Counterclaim, a ruling that also negatively

affected petitioner’s defense of the Complaint, since

several of the issues raised in the Counterclaim and New

Matter related specifically to the defense of the claim.

The Court even declared that it was irrelevant that the

Counterclaim was not challenged by way of Preliminary

Objections—‘“‘a very sensible decision on the part of

plaintiff’: counsel in order to get the matter disposed

of” (TT, p. 161, lines 23-25).

It is submitted that all such evidence, if testimony

were permitted thereon, would have been of a character

which, if accepted and believed, would have established

a cause of action against the plaintiff on behalf of the

defendant.

The hearing ended rather dramatically: without much

further ado, the Court ordered defendant to step down,

threatened defendant with contempt when he [confused]

hesitated, foreclosed all other questioning, lectured

defendant and his counsel and accused them of not

believing their own defense (TT, p. 160) and attempting

to “kid” him (TT, p. 162). He ordered judgment for

plaintiff, not permitting counsel at any time to make

final argument on any matters of law or law and fact.

There can be no doubt that a trial court has general

and wide authority to conduct an actual trial; that

authority is necessary at the least to preserve order and

decorum. Nonetheless, the basis of our system of justice

and our adversary proceeding is the right of cross-

examination. That right, apart from the question of

21

any evidentiary rulings made, was denied petitioner by

dismissing witnesses before the conclusion of their

cross-examination. The Court made no justification for

these rulings, nor explained them in any way. Rather,

it merely dismissed those witnesses over the objection of

counsel]. It is difficult to understand how an adversary

hearing can be held if such a position is tolerated.

Moreover, the refusal to permit defendant to complete

his own testimony is perhaps the most inexcusable of all.

In the middle of the defendant’s testimony, when he

stated that he believe that he was not actually in default,

to force him to leave the stand and to allow him to say

nothing further on his own behalf, and then to refuse

an additional testimony that might have been offered

on defendant’s behalf, totally usurped from counsel and

totally denied the defendant the right to a full and

complete hearing. No amount of discretion could pos-

sibly permit such a standard. To allow such conduct

would permit any trail court, sitting without a jury, at

any time, to excuse any witness or exclude consideration

of any other testimony ‘without knowing the nature of

that testimony and to decide the case in the ensuing

vacuum.

The Court also foreclosed entirely the right to-present

final argument. While, in a trial before a judge only, the

right of final argument is not absolute, in a case where

the pleadings raised substantive legal issues, as here, it

would be extraordinary were not the right to conclude

offered. The conclusion of this trial speaks for itself.

- Due process has perhaps been most eloquently de-

scribed by Daniel Webster as “a law which hears before

it condemns; which proceeds upon inquiry, and renders

judgment only after trial.” It is that fundamental

standard which regretfully petitioner must submit was

22

not adhered to in this case. As early as page 2 of the

transcript and certainly by page 3, the Court was appar-

ently taking the position that the proceedings were

merely an exercise in futility. As the trial progressed,

it was abundantly clear that in terms of an orderly

disposition of the matter, there were not two adverse

parties and a disinterested trier of fact, but a trier of

fact who throughout the case seemed to indicate that

the matter had already been resolved. For example,

beginning on page 103, the Court purported to sum up

a stream of facts, some of which are simply non-existent

in the record and some of which the Court apparently

inferred from the pleadings or some other source, which

led to the conclusion that, irrespective of the pleadings

and irrespective of the fact that testimony had hardly

been completed, it had foreclosed the weighing of any

further evidence and had purely and simply decided the

matter at issue. It would be hard to imagine a situation

more violative of the notion of judgment only after

trial.

Moreover, it is submitted, that what we find here is

perhaps more harmful where the judge is also the trier

of fact than where he is merely presiding over a jury

trial. As was stated by the Superior Court in Common-

wealth v. Harrison, 228 Pa. Superior 412, 323 A.2d

72-24 (1974):

Although the cases dealing with a trial Judge’s

conduct generally involve jury trials, the principle

they express cannot be limited to jury trials. If

anything, it is more compelling in a non-jury trial.

If it is ground for a new trial, that a Judge has

conducted himself in such a way as might influence

the jury to render a decision that is not impartial,

it certainly is ground for a new trial when a Judge

« = mal

23

sitting as a jury demonstrates that he is, in fact,

not impartial ....

After this matter was argued before the Superior

Court, the Commonwealth Court decided Veneztale v.

Raudenbush, _. Pa. Commonwealth —_, 402 A.2d

295 (1979). At a preliminary injunction hearing before

the same trial judge, Judge Bodley, sitting as Chancellor

in Equity, the Court did not permit cross-examination

or allow the defendants to testify. The Commonwealth

quickly overruled:

“Whether or not Appellants’ position was ‘illegal,

unjust and unconscionable,’ as the Chancellor

. found, the Appellants were nevertheless entitled

to a fair hearing which encompasses at the very

least the right to cross-examine witnesses and

present testimony.” [p. 296]

Moreover, the latitude of a Chancellor, given his broadest

equitable powers, exceeds that of a judge sitting without

a jury in a civil case.

FEDERAL SECURITIES LAW

Each Federal Land Bank is made up of Associations.

Its loans are made through the Associations servicing the

territory in which the real estate offered by the applicant

is located. These Associations are private cooperatives,

owned by the borrowers, who are farmers, ranchers and

owners of rural homes. Each Association, and the

Southeast Federal Land Bank Association here was no

different, solicits, promotes, services and generally

provides information relating to the advantages and

different aspects of the Farm Credit system.

Although the matter was squarely established by the

pleadings, the trial court refused time and again to

consider whether the Federal Securities Laws were

applicable and no evidence thereon was permitted at

trial. The petitioner directly raised the issue of the

24

applicability of the Federal Securities Laws at every stage

of the appellate process, Nevertheless, the appellate

courts unaccountably ignored the issue altogether.

Counsel for respondent apparently agreed (in briefs)

that the sale of a “security” as understood by the 1933

Act is involved, that the Association/Land Bank is an

“issuer” and/or “controlling person” under the Act, and

that petitioner is a “purchaser.” Stock in the Association,

which in turn owns and is supervised by the Land Bank,

is issued on the gross amount of the mortgage at the rate

of 5% of value—that is, the borrower purchases a $5

share for every $100 borrowed. The argument made by

plaintiff’s counsel was that respondent was a “‘federally

chartered instrumentality of the United States” and is

therefore exempt from the 1933 Act requirements under

Section 3(a)(2). That Section reads in part “any security

issued or guaranteed by the United States . .. or by

any person controlled or supervised by and acting as

an instrumentality of the Government of the United

States ...” is exempt (emphasis added).

In the first place, it may be readily conceded that

the Farm Credit System Act states that the land banks

“shall continue as federally chartered instrumentalities

of the United States” (12 U.S.C.A. § 2011). Moreover,

it is also true that the statute provided that each land

bank is subject to the supervision by the Farm Credit

Administration, which is an independent agency of the

executive branch of the Federal government. That does

not settle the question, however.

The Supreme Court has repeatedly held that ex-

emptions from a regulatory statute are to be strictly

construed and that the burden of proof rests upon

the party who claims the exemption. Securities and

Exchange Commission v. Ralston Purina, 334 U.S. 37,

44-45 (1948); Spokane & Inland Empire Railroad

a

25

Company v. United States, 241 U.S. 344, 350 (1916).

Furthermore, and most importantly, in determining

whether a corporation is entitled to such an exemption,

the character of business actually done by the corpora-

tion controls, not its name or charter powers. Bowers

v. Lawyers Mortgage Co., 285 U.S. 182, 188; Securities

and Exchange Commission v. American International

Savings and Loan Association, 199 F. Supp. 341, 347

(1961).

The issuer in this case is an association that functions

as a private cooperative. There was a plethora of infor-

mation available from deposition that respondent and

its agent-owner at every opportunity emphasized the

private nature of the system. An interview with Russell

Albright that appeared in a magazine was introduced

at depositions. A quotation from that article was

as follows: ‘Farmers and land owners still confuse

Albright’s giant multimillion dollar Farm Credit Service,

a private cooperative (owned by its shareholders and

borrowers) with the Farm Home Association (FHA),

a government-owned agency.” (See Deposition of

Russell Albright, p. 25). Albright admitted in deposi-

tion that he told defendant that the lender was a private

cooperative and not a governmental entity, and that

the United States government did not guarantee the

obligations of plaintiff (its bonds, etc.). Moreover, the

record will show that not only is plaintiff represented

by a private attorney in this suit, but the mortgages

and bonds of the Federal Land Bank of Baltimore are

prepared by private attorneys as well.

Moreover, it has always been clear (see Rule 131

under the 1933 Act and Rule 3b-5 under the 1934 Act)

that any part of an obligation issued in the name of a

government or governmental instrumentality which is

payable from funds generated by a private enterprise is

26

a non-exempt security within the meaning of the 1933

Act. Thus, Congress in 1970 changed the law specifically

to exempt industrial revenue bonds.*

Respondent admitted in deposition that it had never

received a specific exemption or opinion from the SEC

nor has it ever registered its securities or furnished

prospectuses to purchasers in connection with a sale.

But the most important consideration at this point is

that petitioner was prevented in discovery and at trial

from testing respondent’s contention in this regard and

from building a record sufficient to prove that the

system actually operates as a private entity and therefore

its securities are non-exempt. Indeed, a reading of the

answers to Interrogatories and the deposition transcript

shows that discovery in this area was what respondent

feared most.

Petitioner contends that it can be shown that the

Farm Credit System has changed drastically from its start

*In fact, the exemption most nearly in point is that provided

by Section 3(a)(5)(A), which refers to securities issued by a

“ . . cooperative bank, homestead association, or similar insti-

tution ... .” This Section is important because basic rules of

statutory construction do not ordinarily allow for overlapping

exemptions—if an issuer falls without an exemption designed for

him “but for ...,’”” he would normally be foreclosed from stating

that the relevant test was irrelevant because the exemption was

co-opted by another exemption. The Section 3(a)(5)(A) exemp-

tion is unavailable because the issuer here takes from the total

amount paid or deposited by the purchaser (“‘by means of any fee,

cash value or other device whatsoever, either upon termination

of the investment at maturity or before maturity”) an aggregate

amount in excess of 3 percent cf the face value of security. Simple

math will show that this is so: the interest charged on the loan is

charged the $5 shares as well (that is, the interest is charged on

the total amount of the loan); a pro rata computation over the

life of the loan well exceeds three percent.

27

in 1966, when it was capitalized and tightly scrutinized

by the U.S. government, to the essentially private,

self-sustaining system that it is today, a more or less

standard lending operation that is owned 100% by its

borrowers. There is good reason why Congress would

make the non-disruptive declaration that the prior

federally chartered Land Banks should continue. It is

quite another matter to hide behind that designation for

Federal Securities Law purposes. Moreover, it is critical

to recognize that the class of people who borrow from

the Land Banks—farmers and the like—are precisely

the type of investors who are entitled to and need the

disclosure protection provided by the Federal Securities

Laws.

Petitioner’s denial here had other repercussions as well.

Failure to register and furnish a prospectus are grounds

for rescission. But whether or not petitioner is entitled

to rely on Section 3(a)(2), that section does not exempt

any security from the antifraud provisions of Section

10(b) of the Securities and Exchange Act of 1934 and

Rule 10b-5 thereunder. But exclusive jurisdiction for

Section 10(b) actions rest in the federal courts (1934

Act, Section 27). Consequently, had adequate discovery

indicated the applicability of Section 3(a)(2) of the 1933

Act, defendant may have been expected to sue in Federal

Court, an avenue that may or may not now be foreclosed

by the applicable statute of limitations.

Another antifraud protection is still provided by Sec-

tions 12(2) and 17(a) of the 1933 Act, which encourage

state court jurisdiction (see Section 22(a)). And proof

of reliance by defendant upon a false or misleading

statement or omission is not necessary to rescind. Counts

I and VIII of the Counterclaim state in essence that

respondent knew of a material fact, knew it to be

material, knew petitioner was ignorant of it and did not

tte a

28

inform him of said fact and may even have conspired

with the seller of the Property, the title company, the

real estate agents, and/or PennDot in keeping the matter

from petitioner. The limited discovery permitted suggests

strongly that the allegations of Counts I and VIII are

true.

The Trial Court cited Kornicki v. Abrams, 28 Bucks

Co. L. Rep. 215, 218 (1976), for the proposition that a

mortgagee has no duty to inspect mortgaged premises

for the protection of the mortgagor. What this has to '

do with the case at hand escapes petitioner altogether.

The fraud issue is whether, knowing of the easement— A P Pp E N D I X

knowing of a fact that would have kept petitioner

from buying the property and borrowing money from

respondent (thereby purchasing a security)—there was

a duty to disclose.

CONCLUSION

The issues of due process presented by this case are

substantial. The applicability of the Federal Securities

Laws is an equally important question. For the reasons

set forth, this Petition for Certiorari should be granted.

Respectfully submitted,

PAUL R. BECKERT, JR.

JACKSON, SULLIVAN & BECKERT

312 Oxford Valley Road

Fairless Hills, Pennsylvania 1903(

Attorney for Petitioner

March 6, 1980

—-——->.

la

APPENDIX A

IN THE

SUPERIOR COURT OF PENNSYLVANIA

PHILADELPHIA DISTRICT

OCTOBER TERM, 1978

No. 2096

[Filed: Sept. 14, 1979]

J. 192/1979

FEDERAL LAND BANK OF BALTIMORE,

Appellee,

Vv.

PHILIP JAY FETNER,

Appellant.

APPEAL FROM THE JUDGMENT OF THE

COURT OF COMMON PLEAS OF BUCKS

COUNTY, CIVIL ACTION-LAW, AT .

NO. 77-2577-04

| Before: VAN DER VOORT, HESTER and WIEAND, JJ.

OPINION BY VAN DER VOORT, J.

This is an appeal from a decision of the Court of

| Common Pleas of Bucks County, sitting without a

| jury, in. a mortgage foreclosure actions, in favor of the

plaintiff/appellee, Federal Land Bank of Baltimore

2a

(hereinafter, the Bank) and against defendant/appellant,

Philip Jay Fetner (hereinafter, appellant or Fetner), in

the sum of $137,194.45, plus interest and costs of

foreclosure. Counterclaims by the appellant were dis-

missed. Appellant appeals both from the judgment

against him and the dismissal of his Counterclaims.

The Bank’s Complaint alleged that on October 9,

1974, Fetner borrowed the sum of $117,500 from it,

secured by a mortgage of some twenty-five acres of

improved land located in Nockamixon Township, Bucks

County. The Complaint alleged that Fetner defaulted

on the mortgage by failing to pay some $8,106.36 in

monthly installments due from July 1, 1976 to Feb-

ruary 1, 1977 and by failing to pay real estate taxes in

the amount of $1,659.16. The Complaint recited that

as a result of these defaults, the Bank was exercising its

right to acceleration under the terms of the mortgage.

Judgment was demanded for unmatured principal,

monthly installments due, interest, real estate taxes and

attorney’s commission, totalling $137,195.45.

Fetner filed Preliminary Objections to the Bank’s

Complaint which were dismissed after briefs were sub-

mitted. He then filed a 169-paragraph document which

included his Answer, New Matter and numerous Counter-

claims. The Counterclaims consisted of eleven counts

and sought aggregate damages, compensatory and puni-

tive, in excess of $5,000,000.

The Bank’s claim that appellant was in default in

his mortgage payments was established by undisputed

evidence. In appellant’s Answer, he claimed to have

made a $2,000 payment for which he was not given

credit, but he offered no proof in support of this

averment. In any event, this would not have cured the

default which has continued since July 1, 1976.

, Pn ne ema ees aE ED '

3a

Appellant has averred that the provision for a 10%

counsel fee in the mortgage bond is unconscionable. The

test of such a fee must be its reasonableness, determined

by the circumstances of each case. As this court said in

Foulke v. Hatfield Fair Grounds Bazaar, Inc., 196 Pa.

Superior Ct. 155, 160, 173 A.2d 703 (1969):

The mortgagee, having loaned a fixed sum of money

should recover both principal and interest without

diminution for expenses which he may be forced to

pay.

Certainly the circumstances of this case, involving pre-

liminary objections, briefs, depositions, a trial and this

appeal, each involving many of the issues tendered by

the appellant in his Counterclaims make a fee of 10% of

the mortgage quite reasonable, and probably not fully

compensatory for the Bank’s legal expenses. There was

no other challenge to the amount of the judgment on

foreclosure.

There remain for consideration the many issues raised

in appellant’s Counterclaims. Counterclaims are limited

by Rule 1148 of the Pa. R.C.P. to those ‘‘which arise

from the same transaction or occurrence or series of

transactions or occurrences from which the plaintiff’s

cause of action arose’. The Counterclaim must have

been a part of or incident to the creation of the mortgage

itself, and this is to be read narrowly. Mellon Bank N.A.

v. Joseph, _ Pa. Superior Ct. . sa

(June 27, 1979).

So tested, those which met the requirement of the

rule amounted to averments that the Bank was guilty of

fraud in the inducement of the mortgage. Averments in

support of this claim of fraud were: (1) that Penn DOT

had obtained an easement over a portion of the mort-

gaged property which was not disclosed to the appellant

4a

at or before the time of closing; (2) that appellant had

been promised 80% mortgage financing which he did

not receive; and (3) that appellant had been promised

“lenient” treatment if he fell behind in his payments,

but foreclosure followed a second default.

The background from which these allegations emerge

is the negotiation between the appellant and Russell

Albright, the local manager of the New Britain Branch

of the Southeast Association, an organization which

procured loan applications for submission to the Bank.

Appellant testified that he told Albright that he had

located a “‘gentleman’s country estate and horse farm”

on which he planned to sign an agreement to purchase in

June, 1974. The purchase price was to be $180,000 and

appellant requested 80% financing. Albright is said to

have replied that he would recommend such a loan and

that his recommendations had not been turned down by

the Bank as yet. He did not say that he had authority

to approve the loan.

At or about the same time, appellant, who is a lawyer,

authorized a title search and in due course a preliminary

title report was delivered to Albright which did not show

the easement to Penn DOT. It was created at a later

date and place on record on October 1, 1974.

The closing took place on October 9, 1974 at which

time the appellant executed the bond and mortgage in

favor of the Bank as security for a loan of $117,000,

the maximum the Bank would lend. He signed the

documents and received the proceeds at that time.

A final title report was on hand at the time of the closing

which showed the Penn DOT easement. This would

appear to have been available to all parties at the closing,

including the appellant, but it does not appear that he

eum

ies —

5a

read it. There is no evidence that he did not understand

the terms o: the bond and mortgage.

In November, 1974, appellant lost his job and fell

behind in his mortgage payments. The Bank threatened

foreclosure but did not do so, and by March 1976

appellant became current in his payments. However, he

did not pay the 1975-1976 school taxes on the property,

and the Bank did so pursuant to authority vested in it

under the terms of the mortgage. Appellant again fell

behind in his monthly payments on July 1, 1976, and

has made no payments since that date, although he has

continued to occupy the property.

Attached to the appellant’s Counterclaims were copies

of Complaints filed against the sellers of the property,

the estate of his real estate broker, two title insurance

companies and Penn DOT, averring misrepresentations

and fraud in the sale of the property, most of which are

repeated in his Counterclaim against the Bank.

We deal first with the appellant’s claim that the Bank

fraudulently withheld from him knowledge of the fact

that Penn DOT had obtained an easement over a portion

of the property nine days before the closing. At the time

appellant talked to Albright, the preliminary title report,

which was then available, did not include the easement

because it had then not been created. Appellant does

not claim that the Bank or Albright reported to him that

no easement existed; he simply contends that the Bank

had a duty to tell him that the title report showed an

easement in Penn DOT.

There is no basis for appellant’s conclusion that the

Bank or its mortgage procuring agent had any duty to

search out defects in the title and disclose them to the

appellant. Ordinarily, the relationship between the

borrower and lender does not create a confidential

6a

relationship, Grace et ux v. Moll, 285 Pa. $53, 355, 132

A. 171 (1926), and none was shown to exist in this case.

An action based upon concealment will not lie, even

as between a vendor and vendee, unless there is estab-

lished an affirmative duty to disclose the existence of a

title defect. American Metal Fabricators Company uv.

wae 227 Pa. Superior Ct., 284, 289, 323 A.2d 891

1974).

Ordinarily, there is no duty on the part of a lender

to inspect the mortgaged property to determine that

the borrower is obtaining that which he may have been

promised by the vendor or that which he believes he is

obtaining. Unless some further obligation is assumed,

the lender’s inspection of the premises to be mortgaged

is made only to ascertain whether the property has

sufficient value to secure the loan and is made by the

lender for its benefit only.

Appellant did not contract with the Bank to review

the title; he did not advise the Bank that he intended

to rely on its inspection of the property; and no duty

existed in law for the Bank to learn of or disclose any

matter which appellant might deem a defect. If appellant

was defrauded by the Penn DOT easement of which he

avers he was unaware, the deception was not perpetrated

by the Bank and appellant’s remedy must be sought

elsewhere.

It is equally clear that appellant was not defrauded

by the representation of the Bank’s agent that it would

recommend 80% financing. Albright’s assurance that he

would recommend a mortgage in that amount and that

his recommendations had never been turned down were

no more than the opinion of an agent admittedly acting

outside his authority. His power, at best, was only

7a

sufficient to allow him to recommend a loan to the Bank.

See 12 U.S.C.A., § 2033(11). The Bank had the absolute

right to refuse the mortgage terms requested by the

appellant and recommended by its agent. Todd v. Skelly,

384 Pa. 423, 428, 120 A.2d 906 (1956). Appellant

had a remedy for the denial of his original application

which he did not exercise. 12 U.S.C.A. § 2202. Finally,

appellant voluntarily accepted the lesser 60% financing

offered by the Bank, took its mortgage money and signed

the bond and mortgage. Certainly, these circumstances

do not establish fraud in the inducement of the mortgage.

The claim that appellant was promised “lenient”

treatment in the event of a default is based upon a

statement attributed to Albright in the preliminary

negotiations to the effect that the Bank had a reputation

for being lenient with its lenders. Even if Albright had

the authority to commit the Bank, which he did not, this

hardly amounted to a commitment that the Bank would

not pursue its legal remedies if there was a default. In

point of fact, the Bank did not foreclose when appellant

went into default for the first time in 1975. It was not

until appellant again fell behind in July 1976 and made

no, payment from then until March 1977 that the Bank

foreclosed. There is no basis in fact or law for appel-

lant’s claim that he was entitled to leniency and did not

receive it.

The remaining Counterclaims were either unsupported

by any proffer of evidence, or related to transactions or

occurrences which were not part of or incident to the

mortgage loan, and therefore properly excluded from

' consideration by reason of Rule 1148 of the Pa. R.C.P.

If any of them are actionable, it must be in an action

not tied to this foreclosure as a Counterclaim.

8a

Finally, appellant claims that he was denied the right

to make a final argument. The extent to which final

argument may be permitted in a civil case is addressed to

the discretion of the trial judge. Commonwealth, ex rel.

Frieldman v, Friedman, 223 Pa. Superior Ct. 66, 71, 297

A.2d 158 (1972). We said in Friedman (at p. 71), and

it is equally appropriate here:

“‘A matter such as the length of argument is, of

course, almost entirely within the discretion of

trial courts ....’ Here, an experienced trial judge,

thoroughly familiar with the law governing the case,

concluded that he had heard sufficient argument on

the facts during the course of the hearing and any

further argument would only be repetitious ... .

“¢ | . and we will not interfere with the discre-

tion of the Court in the matter ....’”

In the instant case, the trial court received and considered

extensive briefs at the time the Preliminary Objections

were ruled upon, and he permitted, indeed encouraged,

discussion of the issues by counsel as the trial progressed.

If, in his judgment, he had heard enough, we will not

interfere.

Affirmed.

9a

APPENDIX B

COMMONWEALTH COURT OF PENNSYLVANIA

June 6, 1979

L. JOAN VENEZIALE, et al.,

Appellants,

v.

CHARLES RAUDENBUSH, JR.

and

HARRY ZAMBELLI,

Appellees.

James M. McMaster, Thomas E. Timby & Associates,

Newtown, on briefs, for appellants.

Daniel Lawler, Feasterville, on briefs, for appellees.

Before BLATT, DiSALLE and MacPHAIL, JJ.

MacPHAIL, Judge.

On May 12, 1978, Appellants L. Joan Veneziale,

Walter Holzworth, Rosemarie Curran, and Michael J.

Laputka were enjoined by the Court of Common Pleas

of Bucks County from denying to Charles Raudenbush,

Jr. and Harry Zambelli, the duly elected township

supervisors of Lower Southampton Township, access to

the township building and the records, books and files

of the township. While Appellants have raised seven

issues for our determination, we need address only one.

10a

Pa. R.C.P. No. 1531 authorizes the issuance of a pre-

liminary injunction only after written notice and hearing

unless immediate and irreparable harm is shown in which

event a hearing must be held within five days of the

issuance of the injunction. In the instant case the court

issued the preliminary injunction after written notice

and hearing. However, Appellants claim that they were

denied their due process rights at the hearing because

they were not permitted to cross-examine witnesses nor

were they permitted to present testimony. Our reading

of the record. discloses that indeed the Chancellor did

interrupt and prohibit cross-examination by the Appel-

lants and did not permit Appellants to offer testimony

on their own behalf.

In his opinion in support of the preliminary injunction

the Chancellor characterized the Appellants’ contention

that they were denied their due process rights as “‘utterly

without merit.’”” We disagree. Whether or not Appellants’

position was “illegal, unjust and unconscionable,” as

the Chancellor found, the Appellants were nevertheless

entitled to a fair hearing which encompasses at the very

least the right to cross-examine witnesses and present

testimony. In Pubusky v. D.M.F., Inc., 428 Pa. 461,

463, 239 A.2d 335, 337 (1968), under nearly identical

facts, Justice (now Chief Justice) Eagen wrote:

“While the testimony at a hearing for a prelimi-

nary injunction which seeks only to preserve the

status of the parties until the issue is finally deter-

mined need not always be as extensive as that at

a final hearing, the litigants should not be deprived

of their right to fully cross-examine all adverse

witnesses, nor of the opportunity to present testi-

mony which is relevant to the question of whether

or not the injunction should issue.”

lla

Accordingly, the decree granting the preliminary

injunction in the instant case must be vacated.

ORDER

AND NOW, this 6th day of June, 1979, the decree

entered May 12, 1978 by the Court of Common Pleas

of Bucks County granting the preliminary injunction

requested by Charles Raudenbush, Jr. and Harry Zambelli

is vacated and the case remanded to the Court of

Common Pleas of Bucks County for further proceedings.