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Valley of Lakes RICO Class Action against PNCBANK, et al.
ripped edge: federal court


	  IN THE UNITED STATES DISTRICT COURT
        FOR THE MIDDLE DISTRICT OF PENNSYLVANIA



LEON R. DONGELEWICZ, et al., 	: 	3:CV-95-0457 

		Plaintiffs	: 	Judge McCLURE 

	vs.			: 
					
FIRST EASTERN BANK, et al., 	: 	

		Defendants	: 
			M E M O R A N D U M
			September 23, 1997
BACKGROUND: 

	Plaintiffs in this class action suit are the lot owners
in a 3856-acre recreational housing development called the Valley
of Lakes (the community or VOL) which is located in Schuylkill
and Luzerne Counties near Hazleton, Pennsylvania. Plaintiffs
allege numerous improprieties on the part of individuals and
entities associated with or having an ownership interest in the
community over the years.
	Claims are asserted: 1) under the Racketeer Influenced

and Corrupt Organizations Act (RICO), 18 U.S.C. §§ 1961-1968,

against all defendants (Count I);1 2) under the Land Sales Act,

15 U.S.C. § 1701, against defendants C.B.G., Ltd., Frank M.

Cedrone and others (Count II); 3) under section 1983, 42 U.S.C.

§ 1983 (Count III) against C.B.G., Cedrone and others; 4) under

the New Jersey Real Estate Sales Full Disclosure Act, N.J.S.A. §

45:15-16.47, (Count IV), against defendants C.B.G., Cedrone and


others; and 5) under New Jersey state law for fraud and deceit
against defendants C.B.G., Cedrone, Valley Utilities, Co., Inc.
(Valley Utilities) and the Oneida Water Co. (Oneida), (Count V).
	Plaintiffs allege a long history of mismanagement,
broken promises and outright fraud on the part of those in
management and ownership positions at Valley of Lakes over the
years. Valley of Lakes has changed hands several times since the
subdivision plan was first filed in 1971 by High Vista, Inc.
(High Vista), a Pennsylvania corporation. (Plaintiffs'
complaint, exhibits 1-1 to 1-4). Jack Halperin and Philip Cohen
purchased High Vista in 1974 and marketed lots under the name
"Valley of Lakes." (Plaintiffs' complaint, ¶ 41 and exhibit 2-1
to 2-29)
	On August 4, 1980, Halperin was indicted on federal
charges of mail fraud, 18 U.S.C. § 1341, and of violating the
Interstate Land Sales Full Disclosure Act, (federal Land Sales
Act) 15 U.S.C. §§ 1701-1720. The charges arose out of Halperin's
activities in connection with Valley of Lakes. He was charged
with, inter alia, charging maintenance fees for services not
rendered and with failing to follow through on representations
that a lake, roads, a sewer system and other amenities would be
built at Valley of Lakes. (Plaintiffs' complaint, ¶¶ 42, 43, 68
and exhibits 3-1 to 3-24). Following Halperin's indictment, the
mortgage on the property was foreclosed. Meridian Bank
(Meridian) purchased the land at a Sheriff's Sale.
				2

	In September, 1986, CBG, a New Jersey-based

partnership, purchased land in the development. The original

general partners of CBG were defendant Cedrone and a Sicilian

construction company, SILEC SPA of Torino, Italy. (Plaintiffs'

complaint, 46). Plaintiffs allege that although CBG

subsequently held itself out as the successor to High Vista, it

was not High Vista's successor, and that it was in fact only

another purchaser of land in the development, no more entitled to

assume a position of management or control over the subdivision

than any other property owner. (Plaintiffs' complaint, 47)

Plaintiffs allege, inter alia, that:

1) representations that an 80-acre lake, "Lake Algonquin", and an

Arnold Palmer-designed and managed golf course, and other

business amenities including restaurants and shops, would be

built on the premises were never fulfilled; 2) representations

that road systems and water and sewer systems would be built and

adequately maintained for lot owners were never carried out; 3)

defendants incurred substantial advertising and promotional costs

in their efforts to promote the sale of lots to other purchasers,

which they then passed on to pre-existing property owners, citing

as proof of the same filings with the Department of Housing and

Urban Development (HUD) which state that "approximately 35%" of

closing costs represented promotional costs; and 4) defendants,

acting illegally and without proper authority, imposed covenants

and restrictions on Valley of Lakes property owners which unduly,

				3

illegally, and unconstitutionally interfere with their right of

ownership.

	Defendant C.B.G., Inc. (C.B.G.), the most recent

developer of the property, is currently in Chapter 11 bankruptcy,

In re: C.B.G. Limited, Bankruptcy No. 5-92-000525, as are

defendants Valley Utilities, In re Valley Utilities Co., Chapter 11,

No. 5-92-99617 (Bankr. M.D.Pa.), and the Oneida Water Co.

(Oneida), In re The Oneida Water Co., Chapter 11, No. 5-92-00619

(Bankr. M.D. Pa.).

	Plaintiffs move pursuant to Federal Rule of Civil

Procedure 55 for an order entering a default in their favor

against defendants Frank M. Cedrone, C.B.G. Ltd., Oneida Water

Co., and Valley Utilities Co., Inc. (hereafter collectively the

Cedrone defendants).2 For the reasons which follow, we will

grant the motion as to defendant Frank M. Cedrone, but deny the

motion as to the three named corporate defendants.

DISCUSSION

	A default judgment pursuant to Rule 55(b) may be

obtained when a "party against whom a judgment for affirmative

relief is sought has failed to plead or otherwise defend as

provided by these rules...." Fed.R.Civ.P. 55(a). "However, the

disposition of such a motion lies within the Court's discretion,

				4

and a dismissal of the case without a decision on the merits is a

'harsh remedy to be utilized only in extreme situations.'"

Fakhoury Enterprises, Inc. v. J.T. Distributors, 1995 WL 424990

at * 1 (S.D.N.Y. July 19, 1995), citing Jackson v. City of New

York, 22 F.3d 71, 75 (2d Cir. 1994) (citation omitted).

	"The Third Circuit does not favor judgment by default."

Trio Dying & Finishing Company v. Mimarc Industries, 1995 WL

612914 at * 1 (E.D.Pa. Oct. 12, 1995), citing Tozer v. Charles A.

Krause Milling Co., 189 F.2d 242, 245 (3d Cir. 1951) (citations

omitted). "Judgment by default is an extreme sanction, Hoxworth

v. Blinder, Robinson & Co., Inc., 980 F.2d 912, 919 (3d Cir.

1992), and whenever practicable, a decision on the merits should

be rendered." Id., citing Tozer, 189 F.2d at 245.

	Whether entry of judgment by default is warranted is

left to the discretion of the trial court. Poulis v. State Farm

and Casualty Co., 747 F.2d 863, 868 (3d Cir.1984).

That discretion, however, is not limitless. The court
must be satisfied that the non-moving party has
received notice of the motion and that the judgment and
remedies applied for are justified by the pleadings and
other information of record.

citing D.B. v. Howard Bloom, D.D.S., Madison Dental Centre, 1995

WL 490481 *3 (D.N.J.) (citing 10 C. Wright, A. Miller & M. Kane,

Federal Practice and Procedure, §§ 2681, 2688)(2d ed. 1983).

	Entry of default judgment is appropriate if the

adversarial "process has been halted because of an essentially

unresponsive party.'" Nationsbank of Florida v. Banco Exterior

				5

de Espana, 867 F.Supp 167, 175 (S.D.N.Y. 1994) (quoting Meehan v.

Snow, 652 F.2d 274, 277 (2d Cir. 1981).

	The requirements of Rule 55 having been met, entry of

default judgment would appear to be clearly warranted on the face

of the record. Despite the passage of more than two years since

proper service of the summons and complaint on them, the Cedrone

defendants have not filed an answer or otherwise responded to the

complaint or undertaken any effort to defend this action.

The certificate of service attached to plaintiffs'

motion for default states that a copy of the motion was served on

Frank M. Cedrone at 128 Monmouth Green, Marlton, New Jersey

08053. None of the Cedrone defendants has responded to the

motion for default.

Motion for default against Frank Cedrone

	We address separately the motion for default against

Cedrone and the motions for default against the corporate

defendants because their circumstances differ. As we noted

above, all three corporate defendants are currently in Chapter 11

bankruptcy. On the other hand, nothing brought to the court's

attention suggests that Cedrone has sought the protection of the

bankruptcy code. The complicating factors which arise in

connection with the pending bankruptcies therefore do not affect

disposition of plaintiff's motion for default against Cedrone.

	The motion for default against Cedrone is unopposed.

Plaintiffs' averments in the motion plainly support entry of

default, and no reason has been presented to the court why a

				6

default should not be entered against Cedrone. We will,

therefore, grant the motion for entry of default against Frank M.

Cedrone pursuant to Fed. R. Civ. P. 55(a).

Motion for default against C.B.G.
Ltd., Oneida and Valley Utilities

	Defendants, First Eastern Bank, N.A. and First Eastern

Corporation (hereafter collectively First Eastern), filed a

response to plaintiffs' motion for default to remind the court

that C.B.G., Oneida and Valley Utilities are currently in Chapter

11 bankruptcy proceedings, such that an entry of default or any

action taken against them to recover monies on a claim would,

presumably, be a violation of the automatic stay imposed under

bankruptcy law. 11 U.S.C. § 362(a)(1).3

	Plaintiffs argue in response that the automatic stay

does not apply, since all claims on which they seek default

against C.B.G., Oneida and Valley Utilities arose after

bankruptcy proceedings were initiated.

				7

	It is true, under Third Circuit precedent, that post-

petition claims are not barred by the automatic stay. That was

the Third Circuit's holding in the Matter of M. Frenville Co.,

Inc., 744 F.2d 332, 338 (3d Cir. 1984), cert. denied, 469 U.S.

1160 (1985), based on the fact that claims4 which arise post-

petition are not discharged in bankruptcy, so there is no logical

reason to subject them to the automatic stay.

	Although bankruptcy law controls whether claims qualify

to be asserted in the bankruptcy proceedings,5 in determining

whether the claims are pre-petition or post-petition for purposes

of deciding whether the automatic stay applies, the state or

federal law under which the claims arise governs. In the Matter

of Penn Central Transportation Company, 71 F.3d 1113 (3d Cir.

				8

1995) and Schweitzer v. Consolidated Rail Corp., 758 F.2d 936,

941 (3d Cir.), cert. denied, 474 U.S. 864 (1985).

	Here, claims are asserted against defendant C.B.G.

under RICO, the federal Land Sales Act, Section 1983 and under

New Jersey state law. We look, therefore, to those laws to

determine when plaintiffs' various causes of action accrued. If

the cause of action accrued on or before the filing of

the bankruptcy petition, the claims are pre-petition and are

therefore, governed by the automatic stay. If not, the claims

are post-petition, and the automatic stay does not apply.

	C.B.G., Oneida and Valley Utilities all filed petitions

for protection under Chapter 11 of the Bankruptcy Code in the

United States Bankruptcy Court for the Middle District of

Pennsylvania in March, 1992. (C.B.G. - No. 5-92-525, Oneida -

No. 5-92-619 and Valley Utilities - No. 5-92-617.)

Claims asserted under RICO

	Plaintiffs rely on the Third Circuit's decision in

Keystone Ins. Co. v. Houghton, 863 F.2d 1125 (3d Cir. 1988) as

authority for their position that the RICO claim arose post-

petition, since the date of the last predicate act is

controlling.

	However, Keystone was expressly overruled by the United

States Supreme Court earlier this year. In Klehr v. A.0. Smith

Corporation, 117 S.Ct. 1984 (1997), after noting a conflict among

the circuits on the question of when a civil cause of action

accrues under RICO, 18 U.S.C. § 1964, the Court singled out the

				9

Third Circuit's accrual rule, as stated in Keystone, for

disapproval. The Court stated:

	We shall first discuss the Third Circuit's accrual
rule--the "last predicate act" rule....Like the Eighth
Circuit, the Third Circuit believes that the
limitations period starts to run when a plaintiff knew
or should have known that the RICO claim (including a
"pattern of racketeering activity") existed, but the
Third Circuit has added an important exception, which
it states as follows:
"[If], as a part of the same pattern of
racketeering activity, there is further injury to
the plaintiff or further predicate acts
occur,...the accrual period shall run from the
time when the plaintiff knew or should have known
of the last injury or the last predicate act which
is part of the same pattern of racketeering
activity. The last predicate act need not have
resulted in injury to the plaintiff but must be
part of the same pattern." Keystone Ins. Co. v.
Houghton, 863 F.2d 1125, 1130 (C.A.3 1988).

. . . .

	We conclude that the Third Circuit's rule is not a
proper interpretation of the law. We have two basic
reasons. First, as several other Circuits have pointed
out, the last predicate act rule creates a limitations
period that is longer than Congress could have
contemplated. Because a series of predicate acts
(including acts occurring at up to 10-year intervals) can
continue indefinitely, such an interpretation, in
principle, lengthens the limitations period dramatically.
It thereby conflicts with a basic objective--repose--that
underlies limitations periods. See Wilson v. Garcia, 471
U.S. 261, 271...(1985)...Indeed, the rule would permit
plaintiffs who know of the defendant's pattern of
activity simply to wait, "sleeping on their rights,"
ibid., as the pattern continues and treble damages
accumulate, perhaps bringing suit only long after
the "memories of witnesses have faded or evidence is lost."
...[Citation omitted.] We cannot find in civil RICO a
compensatory objective that would warrant so significant
an extension of the limitations period, and civil RICO's
further purpose--encouraging potential private plaintiffs
diligently to investigate...suggests the contrary.
				10

	We recognize that RICO's criminal statute of
limitations runs from the last, i.e., the most recent,
predicate act. But there are significant differences
between civil and criminal RICO actions, and this Court
has held that criminal RICO does not provide an apt
analogy....
	Second, the Third Circuit rule is inconsistent with
the ordinary Clayton Act rule, applicable in private
antitrust treble damage actions, under which "a cause of
action accrues and the statute begins to run when a
defendant commits an act that injures a plaintiff's
business." Zenith Radio Corp. v. Hazeltine Research,
Inc., 401 U.S. 321, 338...(1971). We do not say that a
pure injury accrual rule always applies without
modification in the civil RICO setting in the same way
that it applies in traditional antitrust cases. For
example, civil RICO requires not just a single act, but
rather a "pattern" of acts. Furthermore, there is some
debate as to whether the running of the limitations
period depends on the plaintiff's awareness of certain
elements of the cause of action. As we said earlier,
however, for purposes of evaluating the Third Circuit's
rule we can assume knowledgeable parties. Hence the
special problems associated with a discovery rule...are
not at issue.

Id., at 1988-89.

	...[T]hose courts that do not require "reasonable
diligence" have said that the "fraudulent concealment"
doctrine seeks to punish defendants for affirmative,
discrete acts of concealment; the behavior of plaintiffs
is consequently irrelevant....Whether or not that is so
in the legal contexts at issue in those cases (which were
not antitrust cases), it is not so in respect either to
antitrust or to civil RICO. Rather, in both of those
latter contexts private civil actions seek not only to
compensate victims but also to encourage those victims
themselves diligently to investigate and thereby to
uncover unlawful activity....That being so, we cannot say
that the "fraudulent concealment" is concerned only with
the behavior of defendants. For that reason, and in
light of the consensus of authority, we conclude that
"fraudulent concealment" in the context of civil RICO
embodies a "due diligence" requirement.

Id. at 1993 (Emphasis supplied.)

				11

	The Court rejected as well the contention that a single,

new predicate act committed with the four-year limitations period

would render timely claims for acts committed outside the

limitations period so long as they are alleged to be part of a

continuing pattern. The Court stated:

	...[S]ome Circuits have adopted a "separate accrual"
rule in civil RICO cases, under which the commission of
a separable, new predicate act within a 4-year
limitations period permits a plaintiff to recover for the
additional damages caused by that act. But, as in the
antitrust cases, the plaintiff cannot use an independent,
new predicate act as a bootstrap to recover for injuries
caused by other earlier predicate acts that took place
outside the limitations period.

Id. at 1990.

	The Supreme Court also considered whether "affirmative

continuing acts of fraud", coupled with active efforts of

concealment, equitably toll the statute of limitations, regardless

of whether the plaintiffs have exercised "reasonable diligence" to

discover and pursue their RICO claims. The Court held that:

..."[R]easonable diligence" does matter, and a plaintiff
who is not reasonably diligent may not assert "fraudulent
concealment."

Id. at 1993. See also: In re Merrill Lynch Limited Partnerships

Litigation, 1997 WL 529010 at * 21 (S.D.N.Y. Aug. 26, 1997)

(Interpreting and applying Klehr, the district court stated:

"[P]laintiffs must demonstrate reasonable diligence even if

defendants engaged in active concealment. The Supreme Court has

clarified recently that even when a plaintiff pleads active

concealment by the defendant, the plaintiff must still demonstrate

				12

that he exercised due diligence in trying to discover the fraud."

Id. at 21.

	"To prove reasonable diligence sufficient to permit a

finding of fraudulent concealment, a plaintiff must do more than

merely inquire as to the status of the...[matter]...or simply rely

on reassurances by the defendant....'Neither reassurances

accompanying the relevant notice nor the continued failure to

disclose the facts allegedly misrepresented in the first place,

relieves the plaintiff of his duty to undertake reasonable inquiry

or tolls the statute of limitations. Id., quoting In re

Integrated Resources Real Estate, 850 F.Supp. 1105, 1123 (S.D.N.Y.

1993).

	"Further, once a plaintiff becomes aware of direct

contradictions between the defendant's representations and other

materials available to the plaintiff, "'plaintiffs [are] thereby

left with reason to be suspicious of defendant, [and] it [is] no

longer reasonable for them to defer to [the defendant's]

representations.'" Id., quoting Addeo v. Braver, 956 F.Supp. 443,

451-52 (S.D.N.Y. 1997).

	Finally, the Supreme Court noted the existence of, but

declined to resolve, a conflict among the Circuits on the

application of discovery accrual rules to civil RICO claims,

stating:

	[Some] Circuits have applied "discovery" accrual
rules, which extend accrual periods for plaintiffs who
could not reasonably obtain certain key items of
information. The use of a discovery rule may reflect the
				13

fact that a high percentage of civil RICO cases,
unlike typical antitrust cases, involve fraud claims.

. . . .

	... [T]he major difference among the
Circuits--whether a discovery rule includes knowledge
about a "pattern"--is clearly not at issue here.

Id. at 1991-92. See also: Aramony v. United Way of America, 969

F.Supp. 226, 230 (S.D.N.Y. July 7, 1997) ("While holding that the

Third Circuit's 'last predicate act' rule of accrual is wrong, the

Supreme Court declined to resolve the more troublesome circuit split

on whether a plaintiff's lack of knowledge of his injury can

forestall accrual of the limitations period.")

	Plaintiffs' complaint is replete with references to

activities on the part of C.B.G. dating back to 1986. In their

403-paragraph complaint, plaintiffs allege, inter alia, that:6

	. . . .
		46. CBG purchased the land on or about September,
	1986...
		50. Commencing on or about September 30, 1986, and
	continuing through the present, Defendant Frank
	Cedrone...and other defendants, through a pattern of
	racketeering activity acquired control of the enterprise
	illegally operating and managing High Vista's
	subdivision,, named "Valley of Lakes", which had been
				14

	defunct for approximately seven (7) years...The
	defendants knowingly and willfully devised a scheme and
	artifice to defraud lot owners and prospective lot owners
	in the defunct subdivision through numerous false and
	fraudulent pretenses...among others:
	a. representing, in numerous mass mailings, that
	CBG had bought the "Valley of Lakes"...when in
	truth...CBG was only a "purchaser" of land...;
	b. representing in numerous mass mailings, that
	CBG had the right to collect the maintenance fees
	owed to Meridian Bank ...;
	. . . .
		51. In furtherance of their scheme ... the defendants
	implemented numerous extortion schemes, commencing on or
	about September 30, 1986 and continuing to the present,
	which are executed by obstructing, delaying and affecting
	commerce by stopping all vehicles at...entrances to the
	subdivision...
	. . . .
		54. A copy of a letter from CBG Ltd., signed by
	Frank M. Cedrone, as Managing General Partner...mailed to
	all owners of property in the "Valley of Lakes"
	subdivision, circa November 15, 1986 is annexed hereto
	and made a part of this complaint...
	. . . .
				15

	56. A copy of a letter on letterhead reading
"Valley of Lakes and Eagle Rock Resort," which was mailed
to all owners of property in the "Valley of Lakes"
subdivision, circa December, 1986 is annexed hereto...
	57. A copy of a letter dated January 22, 1987, from
Frank M. Cedrone...on letterhead reading "Valley of Lakes
a C.B.G. Limited Development," and mailed to all owners
of property in the "Valley of Lakes" subdivision
is annexed hereto...
	58. A copy of a letter on letterhead reading
"Valley of Lakes and Eagle Rock Resort,"...mailed to all
owners of property in the "Valley of Lakes" subdivision,
circa January, 1987...
. . . .
	63. A copy of CBG Ltd.Is "Rules and Regulations,"
adopted circa January 1987 is annexed hereto...

(Plaintiffs' complaint, ¶¶ 46 - 63)

	Plaintiffs allege that Cedrone and others wilfully

devised a scheme to use "the fraudulent covenants and restrictions

recorded by CBG" to continue a pattern of racketeering which

included the use of mass mailings announcing the formation of a

"property owners association" in which would vest authority to

control the community until Cedrone was in a position to resume

control. (Plaintiffs' complaint, ¶¶ 248-49) The mailings were,

plaintiffs' assert, part of a continuing scheme on the part of

defendants to exercise unauthorized control over the community and

				16

to extract money from property owners under false pretenses by,

among other things, imposing dues and fees. (Plaintiffs' complaint,

exhibits 211 and 212)

	Allegation after allegation indicates that all property

owners received mailings and notices from Cedrone and his

partnership, C.B.G. Ltd., as early as the fall of 1986, taking or

purporting to take the actions now claimed to be a violation of

federal law. Under even the most generous interpretation of the

discovery accrual rule,7 plaintiffs had information before them

which should have put them on notice that defendants were assuming

roles they had no legal right to assume. Almost six years elapsed

between the

public announcement of the September 1986 acquisition by C.B.G. and

Cedrone and their very public efforts to take control of the

subdivision and extract fees from property owners and the filing of

the petitions. Under any reasonable interpretation of the events,

as plaintiffs allege them to be, plaintiffs had actual notice of

events which should have, had they exercised the "reasonable

diligence" required of them, roused their suspicions and prompted

action.

	Their RICO claims therefore arose prior to the filing of

petitions in bankruptcy, and are governed by the automatic stay.

				17

Plaintiffs are entitled to proceed on such claims before this court

only if the receive relief from the automatic stay, obtainable only

from the bankruptcy court where the proceedings are pending.

	We will, therefore, deny the motion for default on the

RICO claims asserted in Count I.

	Claims asserted under the Land Sales Act
	Count II of plaintiffs' complaint alleges that defendants

C.B.G., Ltd., Frank M. Cedrone and others violated the Interstate

Land Sales Full Disclosure Act (the Act), 15 U.S.C. §§ 1701-1720.

The Act makes it a violation of federal law for, among other things,

"any developer or agent" to use the mails or any means of interstate

commerce to defraud or mislead the purchaser. 15 U.S.C.

§ 1703(a)(2).

	Established to redress violations which occur in

connection with the sale or lease of subdivision lots, the Act ties

the accrual date of a cause of action to the date of the agreement

of sale. Orsi v. Kirkwood, 999 F.2d 86, 89 (4th Cir. 1993) and

Yeomans v. Le Triomiphe Partnership, 884 F.2d 847 (5th Cir. 1989).

Causes of action, therefore, accrue on the date of the contract.

The fact that installments are due over a period of time does not

postpone the accrual date or extend the limitations period.

	Thus, it is clear that any cause of action plaintiffs have

under the Act arose on the date when they signed a sale contract

with C.B.G. or Cedrone. Only those plaintiffs who executed sale

contracts after the bankruptcy filing have post-petition claims.

				18

Nothing before us suggests that any of the plaintiffs did so, and

that would seem to be unlikely based on what the court has been told

of the events giving rise to this action. C.B.G. filed for

bankruptcy protection on March 30, 1992. What we have before us

suggests that the plaintiffs had by and large purchased their lots

before that time, making their claims pre-petition and therefore,

governed by the automatic stay. Because this is a class action, we

cannot say with absolute certainty that that is the case. Thus, to

the extent that any member of the class can establish that he or she

entered into a land sale contract with C.B.G. after the date of the

bankruptcy petition, we will entertain a motion for reconsideration

on this issue and will reconsider entry of default against C.B.G.

as to those plaintiffs only on Count II.

	Claims asserted under 42 U.S.C. S 1983
	Count III of plaintiffs' complaint asserts a section

1983, 42 U.S.C. § 1983, claim against C.B.G., Cedrone and other

defendants. Although federal courts apply the state personal

injury statute of limitations in section 1983 actions, Wilson v.

Garcia, 471 U.S. 261, 276-80 (1985), when the cause of action

accrues on a section 1983 claim is a question of federal law.

Albright v. Oliver, 127 L.Ed.2d 114, 128 n. 6 (1994) (Ginsburg,

J. concurring). In general, section 1983 claims accrue when the

facts which support the claim are, or should be, apparent to a

person with a reasonably prudent regard for his rights and when

the identity of the person or persons responsible for the alleged

violation is known or reasonably should have been known to the

				19

plaintiff. McMillian v. Johnson, 1995 WL 21963 (M.D.Ala. Jan.

17, 1995), citing Mullinax v. McElhenney, 817 F.2d 711, 716 (11th

Cir. 1987).

	Plaintiffs' section 1983 claim is grounded on many of

the same factual allegations as their RICO claim, that is, the

alleged exercise of unauthorized and improper control and

authority of the subdivision and its inhabitants. As we have

already stated, plaintiffs allege repeatedly that defendants not

only carried out blatantly improper actions beginning in the Fall

of 1986, but made their actions and intentions known to all

property owners by means of repeated mailings sent to all

property owners. We need not decide the exact date of accrual,

because it is clear that under any scenario, plaintiffs should or

would have known had they exercised "reasonable diligence" that

their constitutional rights were infringed or at least in

jeopardy of being infringed.

Claims asserted under the New Jersey Real Estate Sales
Full Disclosure Act
	Patterned in a general sense after its federal

counterpart, the New Jersey Real Estate Sales Full Disclosure

Act, N.J.S.A. § 45:15-16.47, makes it illegal to knowingly

mislead purchasers of land. The Act provides that:

a. Any person who suffers any ascertainable loss of
moneys as a result of the failure of another to comply
fully with the provisions of this act may bring an
action or assert a counterclaim in any court of
competent jurisdiction. In any action filed under this
section in which a defendant is found to have knowingly
engaged in any false, deceptive, misleading promotional
or sales methods
or discriminatory advertising on the

				20

basis of race, sex, creed, color, marital status,
national origin or religion, concealed or fraudulently
diverted any funds or assets so as to defeat the rights
of subdivision purchasers, made an intentional
misrepresentation or concealed a material fact in an
application for registration, or disposed of any
subdivision or subdivided lands required to be
registered under section 7 of this act which are not so
registered, the court shall, in addition to any other
appropriate legal or equitable remedy, award double the
damages suffered, and court costs expended, including
reasonable attorney's fees.
In the case of an untruth,
omission, or misleading statement the developer
sustains the burden of proving that the purchaser knew
of the untruth, omission or misleading statement, or
that he did not rely on such information, or that the
developer did not know, and in the exercise of
reasonable care could not have known, of the untruth,
omission, or misleading statement.

b. The court may, in addition to the remedies provided
in this act, frame any other relief that may be
appropriate under the circumstances including, in the
court's discretion, restitution of all monies paid and,
where a subdivider has failed to provide to a purchaser
a copy of the current public offering statement
approved by the commission prior to execution of the
contract or agreement, rescission of the contract. If
the purchaser fails to establish a cause of action, and
the court further determines that the action was wholly
without merit, the court may award attorney's fees to
the developer or subdivider.

c. Every person who directly or indirectly controls a
subdivision or developer and violates the provisions of
subsection a. of this section, every general partner,
officer, or director of a developer, and every person
occupying a similar status or performing a similar
function, shall be jointly and severally liable with
and to the same extent as the developer. The person
otherwise liable pursuant to this subsection sustains
the burden of proof that he did not know, and in the
exercise of reasonable care could not have known, of
the existence of the facts by reason of which the
liability is alleged to exist. There is a right to
contribution among persons found liable.

d. Any stipulation or provision purporting to bind any
purchaser acquiring a parcel, lot, unit, or interest in
any development subject to the provisions of this act

				21

to a waiver of compliance with the provisions of this
act, shall be void.

e. Any party to an action asserting a claim,
counterclaim or defense based upon any violation of
this act shall mail a copy of the initial or responsive
pleading containing the claim, counterclaim or defense
to the commission within 10 days of the filing of the
pleading with court. Upon application to the court
where the matter is pending, the commission shall be
permitted to intervene or to appear in any status
appropriate to the matter.

	Although somewhat broader in scope, the New Jersey Act

focuses in part on the same conduct as its federal counterpart,

that is, by establishing a cause of action against real estate

developers who mislead or defraud purchasers. It is, therefore,

reasonable to assume that the New Jersey courts would apply the

same or similar accrual date rules. That is, that the cause of

action accrues on the date of the contract or the date when the

misrepresentation is made or, at the latest, when it should have

been discovered with the exercise of reasonable diligence.

	Plaintiffs' claims asserted under the New Jersey Act

are, therefore, plainly pre-petition, and therefore governed by

the automatic stay for the reasons we have already expressed. We

add, however, that the same condition stated above applies here,

and that to the extent any plaintiff can prove he or she entered

into a sales contract after the petition date, the stay does not

apply, and we will re-entertain a petition for default as to such

claims.

				22

	New Jersey common law claims
	Finally, we reach plaintiffs' claim against defendants

C.B.G., Valley Utilities and Oneida under New Jersey state law

for fraud and deceit. Again, applying the discovery rule for the

reasons we have already stated, it is clear that with the

exercise of reasonable diligence plaintiffs would have discovered

the alleged frauds perpetrated upon them well before the 1992

bankruptcy filing dates.

	We will, therefore, deny the motion for default as to

defendants C.B.G., Oneida and Valley Utilities on Count V.

				* * *

An order will be entered consistent with this

memorandum.



					/s/
					James F. McClure, Jr.
					United States District Judge



				23


	  IN THE UNITED STATES DISTRICT COURT
        FOR THE MIDDLE DISTRICT OF PENNSYLVANIA



LEON R. DONGELEWICZ, et al., 	: 	3:CV-95-0457 

		Plaintiffs	: 	Judge McCLURE 

	vs.			: 
					
FIRST EASTERN BANK, et al., 	: 	

		Defendants	: 
			  O R D E R  (#2)
			September 23, 1997
	For the reasons stated in the accompanying memorandum,

IT IS ORDERED THAT:

	1.	Plaintiffs' motion for entry of default (record

document no. 97) is granted as to defendant Frank M. Cedrone, and

otherwise denied.

	2.	Default is entered in favor of plaintiffs and

against defendant Frank M. Cedrone on all claims asserted against

him.


					/s/
					James F. McClure, Jr.
					United States District Judge





			

Footnotes

1Plaintiffs allege that defendants committed predicate acts of mail
and wire fraud under 18 U.S.C. § 1341 and 1343 and violated
federal securities laws.
Back
2Pending motions for reconsideration of the ruling granting class
certification and raising other issues will be addressed in a
separate order and memorandum.
Back
3Section 362(a)(1) of the Bankruptcy Code provides:
(a) Except as provided in subsection (b) of this section,
a petition filed under section 301, 302, or 303 of this
title ... operates as a stay, applicable to all entities,
of--
(1) the commencement or continuation, including the
issuance or employment of process, of a judicial,
administrative, or other proceeding against the
debtor that was or could have been commenced before
the commencement of the case under this title, or to
recover a claim against the debtor that arose before
the commencement of the case under this title.

11 U.S.C. § 362(a)(1).
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4	Under the Bankruptcy Code, a "claim" is defined as"
	(A) right to payment, whether or not such right is reduced
to judgment, liquidated, unliquidated, fixed, contingent,
matured, unmatured, disputed, undisputed, legal, equitable,
secured, or unsecured; or
	(B) right to an equitable remedy for breach of performance
	if such breach gives rise to a right to payment, whether
	or not such right to an equitable remedy is reduced to
	judgment, fixed, contingent, matured, unmatured, disputed,
	undisputed, secured, or unsecured.
11 U.S.C. § 101(4).
Back
5Under Bankruptcy law, the prerequisite to asserting a claim with
the Bankruptcy Court is a "right to payment." In re First
Energy Leasing Corp., 38 B.R. 577, 581 (Bankr.E.D.N.Y. 1984).
Although "claim" is defined by § 101(4), the Code does not define
when a right to payment arises. 744 F.2d at 337.
Back
6Because the allegations are that defendants participated in a
civil conspiracy, the conduct of all defendants is relevant for
purposes of determining the accrual date of a civil RICO cause of
action, although we have focused on those allegations mentioning
in particular conduct of C.B.G.
Back
7We will assume, without deciding, that were the issue before it,
the Third Circuit would follow the lead of other circuits and
endorse application of the discovery rule in the context of RICO
civil claims in the wake of the Supreme Court's reversal of
Keystone in Klehr.
Back
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