Hagerstown mayor ordered to repay $80,000 debt

Bruchey co-signed for 2008 loan from Biltrite Homes Corp., owned by Vincent R. Groh

August 24, 2012|By C.J. LOVELACE |

A Washington County Circuit Court judge has signed an order that requires Hagerstown Mayor Robert E. Bruchey II to pay more than $80,000 owed to a local businessman, property owner and landlord.

The debt is from a 2008 loan on which Bruchey and the former owner of Hagerstown Motors defaulted.

In the order signed Aug. 14, Circuit Judge John H. McDowell ordered the mayor to pay $80,714.05 to Biltrite Homes Corp., a local real estate investment firm owned by Vincent R. Groh.

The amount Bruchey was ordered to pay includes $55,191.04 in principal on a $60,000 loan, $16,979.76 in interest accrued as of July 31, plus $8,278 in attorney’s fees.

Bruchey has 30 days from the day he was served notice of the judgment to appeal, according to court papers.

“It’s a private matter that revolves around the business, and has nothing to do with the City of Hagerstown,” Bruchey said when contacted by telephone Wednesday.

A copy of the promissory note contained in the civil case file bears the signatures of Bruchey and Michael Wayne Griffith, who owned the now-defunct Hagerstown Motors used car dealership at the intersection of Virginia Avenue and Halfway Boulevard in Halfway.

Both Bruchey and Groh said Groh expected no favors in return for the loan co-signed by the mayor.

“I got nothing,” Groh said. “Of course, he doesn’t have any authority anyway. He doesn’t even have a vote.”

Bruchey said that by co-signing the loan he was just “helping a friend keep his business open.” He said Griffith had attempted to secure a loan through a local bank before going to Groh, but the dealership had not been making enough money to qualify for a conventional business loan.

“It was purely the fact that I knew Vince, Mr. Groh, and I knew that Mike, Mr. Griffith, needed some help,” he said. “And I cordoned him in that direction. I figured that if Mr. Groh could help, he would. And he did.

“No good deed goes unpunished, I guess,” Bruchey said. “Let’s put it that way.”

Bruchey, who when Hagerstown Motors closed in late October 2009 described himself as the manager of the used-car dealership, said he personally knew Groh and was aware that Groh had given loans to other small businesses that were struggling.

Griffith asked Bruchey to set up a meeting with Groh to try to secure a loan that would help the dealership get back on its feet, Bruchey said.

Biltrite, which owned hundreds of acres of land that was sold for the Centre at Hagerstown shopping center on Garland Groh Boulevard as well as the approximately 400-home planned housing community behind it, has issued about “six or seven” mortgage loans in the past with mixed results, Groh said.

When the mayor approached Groh about acquiring the loan in 2008, Groh said, Bruchey mentioned that Biltrite was involved in the Centre at Hagerstown, and that Groh had made a large amount of money on the sale of land for the complex.

“He said, ‘Look at all the money you made on that. I’m entitled to some of that,’” Groh said. “And he didn’t do a thing about it. He didn’t put up a dime for that whole development.”

Bruchey called Groh’s comments about what the mayor said when he approached Groh for the loan “unbelievable.”

“I can’t fathom where that comes from,” he said.

Biltrite sold a large portion of the land later developed into the shopping center in 1999 for millions of dollars, according to documents obtained on the Maryland Department of Assessments and Taxation website.

The land on which the shopping center and housing development are located was annexed into the city in 1998, increasing the city’s assessable tax base by hundreds of millions, Groh said.

Bruchey served as mayor from 1997 to 2001. He lost mayoral bids in 2001 and 2005 before the council appointed him Feb. 28, 2006, to finish the remainder of the term of former Mayor Richard F. Trump, who resigned after serving less than a year. Bruchey was re-elected in 2009.

According to the mortgage installment note filed with other papers in the lawsuit, Bruchey and Griffith on Oct. 31, 2008, borrowed $60,000 from Biltrite with an annual interest rate of 10 percent. The loan was to be repaid in monthly installments of $1,274.82 on the first day of each month, beginning Dec. 1, 2008, court papers show. The loan was to be repaid in full by Nov. 1, 2013.

“It’s risky in a way (to make such a loan) ... but we just had some money available,” Groh said, noting that he only would have received one-tenth of 1 percent interest on the money had it been left sitting in the bank. “But then if they don’t pay, you’re not making any money, either.”

To receive the loan, Griffith had to put up as collateral a home he owned, Groh said.

“And the outcome was that Mr. Groh loaned us the money, legally, and would not loan us the money if it had not been that there was Mr. Griffith’s property on Avon Road as collateral,” Bruchey said. “So that’s how that happened.”

Groh said about four or five payments — a little less than $5,000 — were made on the principal amount of the loan, but after six months, the payments stopped.

Hagerstown Motors at 17703 Virginia Ave. closed Oct. 26, 2009, almost one year after the loan documents were signed.

Groh said the mortgage on the collateral property was taken when Griffith filed for bankruptcy, leaving Biltrite with no collateral for the unpaid loan.

“I didn’t get anything out of that because (the property) wasn’t (worth) enough to pay the first lien,” Groh said. “Bruchey said, ‘Well, I can’t give you anything on my house. I won’t do that.’ So they put it on this other guy’s house and I didn’t know how bad of shape they were in.”

Court records show Griffith had filed for bankruptcy twice, once in September 2010 and a second time, about nine months later, in 2011.

Griffith confirmed in a telephone interview Thursday that his property on Avon Road was seized in his bankruptcies.

When asked about Bruchey’s involvement in Hagerstown Motors, Griffith said the mayor wasn’t a legal partner, but became what he called a “silent partner” with his efforts in co-signing for the loan that was supposed to help save the business.

Bruchey later backed away from the situation because of his political career, according to Griffith, who said that the two had been friends for about 20 years but have since severed ties.

Bruchey said he has not been in contact with Griffith since he resigned from Hagerstown Motors, two days before the business closed.

“I didn’t see it getting better and I knew I needed to do something else because the business wasn’t being handled correctly,” he said, adding that he had not received a paycheck “for a while” in the time leading up to his resignation.

The mayor previously faced a court action related to finances. In 2008, Capital One Bank filed a lawsuit seeking payment from Bruchey of a past due balance of $672.72. Bruchey paid that amount before the matter proceeded.

A clause in the mortgage installment note signed by Bruchey and Griffith states that if the parties defaulted on the loan, Groh’s legal counsel would be authorized to seek a confessed judgment against Bruchey for the unpaid amount. Griffith is now removed from the issue since filing for bankruptcy.

Confession of judgment clauses are sometimes included in personal loan agreements, said Dennis Weaver, the Washington County Clerk of the Circuit Court.

“It pre-authorizes the lender to have a judgment against (a borrower) without a lot of court formality if there is a default on the loan,” Weaver said.

If Bruchey does not appeal within 30 days after the service of court papers, Biltrite could file for a writ of garnishment on wages and property, such as bank accounts, or a writ of collection for real estate, according to the Washington County Clerk of Courts Office.

Post-judgment interest will continue to accrue at the rate of 10 percent annually on the amount owed at the time of judgment until the debt is paid in full, according to Groh’s attorney, Edward L. Kuczynski.

Bruchey said he had just received the court order around 1 p.m. Wednesday. He declined further comment when asked if he planned to appeal or how he would proceed with repaying the debt.

“I’ll have a bit of direction of what my recourse is after I speak with my attorney,” he said.

Staff writer Don Aines contributed to this story.

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