Court blocks seizure of assets by Md. National Status quo remains on DeChiaro trust

January 16, 1992|By Timothy J. Mullaney

The Sun Thursday incorrectly named attorney Benjamin Rosenberg's clients in a suit alleging that Maryland National Bank mismanaged a trust set up for Ralph DeChiaro's daughters and their heirs. Mr. Rosenberg represents two of Mr. DeChiaro's three daughters. The grandchildren and great-grandchildren are represented by other attorneys.

The Sun regrets the errors.

A Baltimore County Circuit Court judge has barred Maryland National Bank from seizing the assets of a trust set up by Towson developer Ralph DeChiaro for his three daughters.

Judge John F. Fader II, in comments made from the bench, said the bank might have bungled its position as the trust's manager by allowing the trust's assets to be used to guarantee loans to Mr. DeChiaro's son-in-law, Lawrence Rachuba.

FOR THE RECORD - CORRECTION

The order is the latest twist in a web of litigation that began in 1990, when Mr. Rachuba, also a developer, filed for personal and corporate bankruptcy protection.

Baltimore County Circuit Court Judge John F. Fader II, in an order signed Tuesday, said the move was designed to "maintain the status quo" until a trial was scheduled, possibly in August or September.

"It just appears to me that what Maryland National Bank did . . . is certainly . . . an absolute, unbelievable, egregious breach of trust," Judge Fader said in court last week, according to a transcript of the session.

Daniel Finney, a Maryland National spokesman, declined to comment on the ruling, as did the bank's attorney, Jeffrey D. Herschman of the law firm Piper & Marbury.

Two of Mr. DeChiaro's daughters, Roberta Hucek and Carol Scheffenacker, claim in the suit that led to the ruling that the bank breached its duty to manage the trust in the best interest of the beneficiaries, Mr. DeChiaro's three daughters and their heirs, said Benjamin Rosenberg, attorney for Ms. Hucek and Ms. Scheffenacker.

The third daughter, Diane Rachuba, who is married to Mr. Rachuba, is not a plaintiff in the suit. Mr. Rosenberg said he is also representing Mr. DeChiaro's grandchildren and great-grandchildren in the case.

The bank breached its fiduciary duty by pledging trust assets as collateral for Mr. Rachuba's loans beginning in 1984, Mr. Rosenberg alleged. Later, after Mr. Rachuba became trustee of the trust, the bank allowed him to pledge trust assets as collateral for other loans, the suit filed by Ms. Scheffenacker and Ms. Hucek claims. Maryland National was aware of Mr. Rachuba's alleged conflict of interest, their suit claims.

"The trustee has discretion [to manage the trust's assets], but he's got to use it in the best interests of the beneficiaries, not a third party," Mr. Rosenberg said. He said that all the trust got in exchange for giving loan guarantees that now leave the trust on the hook for about $26 million was "minimal" interests in Rachuba ventures that "were underwater from the start."

The trust was set up in 1963 and its sole asset was a real estate partnership formed by Mr. DeChiaro. The partnership, called DeChiaro LP, owned most of the income-producing properties Mr. DeChiaro had developed at that time, including a one-half interest in Towson Plaza (now Towson Town Center) and more than 1,000 apartments, Mr. Rosenberg said.

By 1984, Mr. Rachuba served as general partner of DeChiaro LP while Maryland National managed the trust.

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