Opinion ID: 1142705
Heading Depth: 3
Heading Rank: 3

Heading: Piecara Loans

Text: Frank Piecara was another established customer of the Branch. In 1984, Piecara was president of Mirage Construction, Inc., an Arizona corporation. He also was trustee for a trust created for his children, known as the Piecara Trust. Piecara apparently did business under various trade names. In May of 1984, Mirage entered into a subcontract with Rogers Construction Company for earthwork and roadwork at the Picacho Pumping Plant in Arizona. Beginning July 2, 1984, and within six weeks thereafter, Gray extended ten loans in the aggregate principal amount of $536,000.00 to the Piecara Trust, primarily for working capital for Mirage. In addition, Gray issued a $300,000.00 irrevocable letter of credit. BOM has no involvement here. The $300,000.00 letter of credit was issued to Rogers Construction, to secure Mirage's performance as Rogers' subcontractor. As security for the loans and the letter of credit credit, Gray took Mirage's accounts and contract rights, particularly all payments Piecara might earn via the subcontract. The value of the collateral turned on Mirage's satisfactory performance of his subcontract and, of course, on a solvent prime contractor. Gray neglected to perfect USB's security interest in the subcontract, nor did he notify the property owner or the prime contractor of USB's interest. Gray did not require the contractor or owner to remit subcontract payments directly to USB. As to the $300,000.00 letter of credit, Gray did call Edward P. Peacock, III, Senior Vice President in Clarksdale, and request authorization. The record is unclear how much information Gray gave Peacock about the proposal and how much Peacock requested. Gray and Peacock each had $150,000.00 authority to make secured loans, and the two combined their authority to issue the letter of credit. We do know that Piecara and his companies defaulted and USB took a substantial loss. USB managed to recover $631,160.50 owed by Piecara, but had charged off the principal sum of $582,808.67.