Opinion ID: 1142705
Heading Depth: 3
Heading Rank: 1

Heading: Lowery, Kantor and Riggan Transactions

Text: Before USB ever appeared, Lowery, Kantor and Riggan (LK & R) banked with the Branch, and Gray had been the principal officer with whom they dealt. Lowery and a partner owned the Belvedere Apartments in Memphis, Tennessee. Lowery, Kantor and Riggan were also involved in a substantial condominium development in Memphis known as Wagner Place. In November of 1983, Gray issued BOM's letter of credit for the benefit of LK & R in the sum of $400,000.00, understanding that LK & R would deliver the letter to First South Savings and Loan Association of Pine Bluff, Arkansas, (First South) as part security for financing outstanding loans regarding the Belvedere Apartment Building. The letter obligated BOM to pay First South upon the latter's written representation the $3,200,000.00 purchase money loan First South held on Belvedere was in default. In the late Spring of 1984, First South called the Belvedere letter of credit. BOM undoubtedly was obligated, and Gray honored the letter of credit on June 5, 1984, wiring First South $400,000.00 of BOM funds. Lowery and Riggan assured Gray the $400,000.00 would be repaid shortly  a matter of weeks but certainly before the pending sale to USB  either from the half million dollar surplus on the Wagner Place construction loan or from the anticipated sale of the Belvedere. June 26, 1984, arrived, and the debtors had produced no funds. On that date, Gray had Lowery, Kantor and Riggan formalize the debt by giving BOM their ninety day note in the principal sum of $400,000.00, payable on September 4, 1984, with interest at fourteen percent per annum. Sometime near the end of June, Gray told Woodrow W. Martin, Jr., chairman of the Board of the Bank of Mantee, about the Lowery/Kantor/Riggan matter and said the funds would be shortly repaid or, if necessary, once USB took over, he would make Lowery, Kantor and Riggan a new loan, so they could repay BOM. There is no evidence that Martin [1] told anyone about the conversation with Gray, including Jerry Ishee, BOM's president. Three weeks after USB had acquired the Branch and Gray had become USB's Branch president, on July 23, to be exact, Gray wired $407,210.96 from USB to BOM, the $7,210.96 representing interest from June 5, the day BOM paid First South, until July 23, 1984. The record is silent whether Lowery, Kantor or Riggan requested the wire, or a USB loan to repay BOM. It appears Gray moved the loan to USB on his own initiative. He sought no approval from higher authority within USB for these credit extensions that so obviously exceeded his authority. Of the $407,211.96, BOM credited $400,000.00 to its commercial loans general ledger account and $7,210.96 to its interest general ledger account. LK & R's June 26 note to BOM had been paid in full. On July 27, four days after wiring BOM the money, Gray had Lowery, Kantor and Riggan each give USB his note for $150,000.00, for an aggregate of $450,000.00. Each cross-guaranteed the notes of the others. These notes were backdated to July 23 and were otherwise unsecured. The $42,789.04 difference ($450,000.00  $407,210.96 = $42,789.04) was deposited in Riggan's checking account. [2] Each man considered the notes valid at that time and expected to pay them. USB subsequently renewed each of the three notes at least twice. USB ultimately recovered some money, but applied this to other obligations of these borrowers. The respective LK & R notes have been charged off in full. Through October 17, 1988, LK & R's unpaid balance was $607,539.03, principal and interest.