Mercantile-Safe Deposit and Trust Co. has filed suit against Eli S. Jacobs, the principal owner of the Orioles, seeking repayment of a $21.3 million loan that the bank says is in default.
In court documents, Mercantile submitted copies of an agreement dated June 11 that called for Mr. Jacobs to make monthly interest payments and repay the debt in full by Sept. 30.
Although the loan is not directly connected with Mr. Jacobs' purchase of the Orioles, if he were to sell the team before that date, the agreement called for repayment at the time of the sale.
The bank said in documents filed in Baltimore City Circuit Court that Mr. Jacobs has failed to make the monthly interest payments on the $21.3 million loan and that interest had accrued $302,802 by the time of the filing.
That failure puts Mr. Jacobs in default, the bank said, and thus triggered its demand for full payment of the loan and accrued interest, or $21.6 million. In addition, the bank asked that a "writ of garnishment" be attached to "any and all monies" and other assests of Mr. Jacobs which are held by Morgan Guaranty Trust Company, Citibank N.A., Chemical Bank Corp. and any payments due Mr. Jacobs from The Orioles Inc.
Spokesmen for Mr. Jacobs and Mercantile declined to answer questions about the suit. But they did say that it was not directly related to the Orioles.
Mr. Jacobs did not return a phone call to his New York office yesterday, but his spokesman said the suit would have "no effect" on ownership of the Orioles. Mr. Jacobs has 30 days from the Aug. 14 filing date to respond to the suit. His lawyers are "studying" it, Mr. Jacobs' spokesman said last night.
James M. Smith, a lawyer for Mercantile in Baltimore, said, "This is a lawsuit that's between Mercantile and Mr. Jacobs," adding ++ that the action "does not involve the Orioles."
Orioles president and minority stockholder Larry Lucchino declined to comment on the lawsuit.
"The defendant, Eli S. Jacobs, has defaulted on his obligations owed to Mercantile," Scott H. Krieger, a Mercantile vice president, said in an affidavit filed with the court. "Mercantile has demanded payment. . . . Despite such demand, the defendant, Eli S. Jacobs, has refused and continues to refuse to pay."
Mercantile was one of the banks that had a role in Mr. Jacobs' purchase of the Orioles, which was completed in 1989. When the sale was announced, one of the first local businessmen to applaud the new owner was the bank's chairman, H. Furlong Baldwin. In a letter published in The Sun, Mr. Baldwin said of Mr. Jacobs, a New York investment banker with varied business holdings, "He is a gentleman. He is absolutely good for his word. And, he is a winner."
At Mr. Jacobs' invitation, Mr. Baldwin later sat on the Orioles board of directors, though he has since resigned from the largely honorary post. Mercantile still has a luxury box at the new Camden Yards Stadium, not far from the suite reserved for Mr. Jacobs.
A phone call to Mr. Baldwin's office yesterday was returned by John A. O'Connor Jr., Mercantile's corporate secretary, who referred all questions to Mr. Smith, the bank's attorney.
Lawyers for Mercantile filed the suit three days after warning Mr. Jacobs of possible legal action in a letter to the owner. In the letter, the bank demanded full repayment of the loan, including principal, accrued interest and late charges, amounting to $21,593,542.
If those payments weren't received by Aug. 13 at 3 p.m., the letter stated: "The bank, without further notice to you, will pursue all remedies available to it under applicable law."
Mr. Jacobs, 54, lives in New York and also has a home in Baltimore County. He has held interests in a wide range of companies that make everything from children's toys to computer software.
Mercantile's loan agreement with Mr. Jacobs resulted from a consolidation of debt in June. The nature of the debt was unclear.
The June agreement stipulated that should Mr. Jacobs default on the loan, the bank could file a judgment by confession against him. In accepting the terms, Mr. Jacobs agreed to waive "the benefit of any and every statute, ordinance, or rule of court which may be lawfully waived" in his defense. That could mean swifter handling of the case by the court because the owner's attorneys cannot use the full array of procedural rules.
Mr. Jacobs' legal and banking problems come at a time when the Orioles are projecting record profits. The team drew its 44th consecutive sellout to the new Camden Yards ballpark last night and is on a pace to draw roughly 3.56 million fans, easily a franchise record.
The Orioles do not disclose financial information, but an internal budgeting document prepared in October projected team net income to be $9.7 million.
But as the season has unfolded, even those numbers have appeared conservative.