Maryland National Bank has sued the chairman of Pittsburgh-based Equimark Corp. and his wife for $9.5 million for allegedly defaulting on a 1988 loan.
The suit, filed in U.S. District Court in Baltimore, names Alan S. Fellheimer of Equimark, the holding company for Equibank, and Judith E. Fellheimer, a former vice chairman at Equibank, as co-defendants.
Equibank announced Friday that Alan Fellheimer has been replaced as chairman. His departure was attributed to a drastic drop in the price of Equimark stock and the company's loss of $50 million.
The Fellheimers could not be reached for comment on the suit.
David Clarke Jr., a Baltimore lawyer who represents Maryland National, acknowledged yesterday that the Fellheimers have been making payments on the loan, but he said the value of their collateral -- shares of Equimark stock -- has been subject to "a drastic diminution," so the bank sued to protect its investment.
Fellheimer, who announced two months ago that he plans to resign soon as Equimark's chairman and chief executive, obtained the Maryland National loan through a Pennsylvania partnership in which he and his wife own about half interest.
The Fellheimers posted more than 196,000 shares of Equimark preferred and common stock as collateral for the loan.
At one point during the loan period, the common stock traded at more than $20 a share. The company recently announced a loss of $50 million, however, and the stock is trading below $3 a share.
The lawsuit says that the Fellheimers are technically in default under terms of the note and a "loan and security agreement" as the result of "a material adverse change in their financial condition, the value of the collateral . . . and the prospect for full and punctual" loan payments.
The Fellheimers obtained the original $11.7 million loan from Equitable Bank, which merged with Maryland National earlier this year.
Clarke said Maryland National filed the lawsuit because the bank "wanted to do the reasonable thing" to protect the investment.
Asked what would happen if Equimark stock rises in value, Clarke said, "If there is a change in the collateral, the bank will re-evaluate its position" in the suit.