- 14 -
of that loan, and Mr. Palermo's pledge of certificates of deposit
in the amount of $230,000. Northern Trust decided to structure
the loan from it to Second Street as a purchase by it from
NationsBank/Amresco of the 1989 note.
On October 18, 1994, Northern Trust acquired the 1989 note
from NationsBank/Amresco for $595,252.65, which amount was the
sum of (1) the outstanding principal balance of $590,850 and
(2) the accrued, unpaid interest of $4,402.65, which were due
under that note. On the same date, a replacement promissory note
(replacement note) in the amount of $590,850 payable to Northern
Trust was executed on behalf of Second Street by Mr. Palermo as a
general partner and by Mr. Palermo as president of George Palermo
Architects, Inc., the other general partner of Second Street.
The replacement note replaced the 1989 note of Second Street to
the Bank. The first page of the replacement note stated that it
had an effective date of April 12, 1993, and an execution date of
October 18, 1994. All of the other documents relating to the
replacement note issued by Second Street to Northern Trust
contained the date of October 18, 1994, or a later date, and none
of them contained the date of April 12, 1993.
At a time not disclosed by the record, an account of a type
not disclosed by the record (account) was established for pe-
titioners' daughter Holly McDaniel to be used for her college
education. The sources of the funds in that account were Mr.
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