CROSSLAND BY FDIC v. A. Suna & Co., Inc., 92 CV 3919.
| Citation | 935 F. Supp. 184 |
| Decision Date | 13 June 1996 |
| Docket Number | No. 92 CV 3919.,92 CV 3919. |
| Parties | CROSSLAND FEDERAL SAVINGS BANK, By the FEDERAL DEPOSIT INSURANCE CORPORATION, as Conservator, Plaintiff, v. A. SUNA & COMPANY, INC., Alan Suna, and the Estate of Harry Suna, By its executrix Bernice Suna, Defendants. |
| Court | U.S. District Court — Eastern District of New York |
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Herrick, Feinstein, LLP (Darlene Fairman, of counsel), New York City, for plaintiff.
Ballon Stoll Bader & Nadler, P.C. (Marshall B. Bellovin, of counsel), New York City, for defendants.
In a carefully reasoned Report and Recommendation dated September 29, 1995 Magistrate Judge Robert M. Levy recommended that the court (1) grant the motion of plaintiff CrossLand Federal Savings Bank (CrossLand) to amend the complaint to reflect that it is no longer under the conservatorship of the Federal Deposit Insurance Corporation, and (2) grant CrossLand's motion for summary judgment against defendants Alan Suna and the Estate of Harry Suna.
The court has reviewed the Report and Recommendation and defendants' objections to it, agrees with the reasoning of the Magistrate Judge, and approves the Report and Recommendation.
Accordingly, the court grants CrossLand's motions to amend the complaint and for summary judgment against Alan Suna and the Estate of Harry Suna, and refers the matter to Magistrate Judge Levy to determine (1) the amount owed by Alan Suna and the Estate of Harry Suna under the Guarantee and (2) the amount of attorneys fees and costs incurred by CrossLand for which these defendants are liable.
So ordered.
REPORT AND RECOMMENDATION
Plaintiff CrossLand Federal Savings Bank moves for summary judgment and to amend the complaint to reflect the fact that it is no longer under the conservatorship of the Federal Deposit Insurance Corporation ("FDIC"). By order dated December 14, 1992, the Honorable Eugene H. Nickerson, United States District Judge, referred this case to then Magistrate Judge Zachary Carter to report and recommend on all dispositive motions. On January 28, 1993, this case was reassigned to then Magistrate Judge Allyne R. Ross, and upon her appointment as district judge the case was reassigned to Magistrate Judge John L. Caden. Finally, on March 24, 1995, the above-captioned matter was referred to the undersigned. For the reasons set forth below, the undersigned respectfully recommends that plaintiff's motion for summary judgment be granted and that damages be awarded in the amount of three million dollars, plus interest, attorneys' fees and costs.
There are no disputes with regard to the material facts of this case. On May 26, 1988, CrossLand Savings, F.S.B. ("Old CrossLand") loaned A. Suna & Co. ("Suna Co.") three million dollars. The loan was evidenced by a promissory note (the "Original Note") and agreement for the extension of a revolving line of credit (the "Original Agreement"). As part of the Original Agreement, Harry and Alan Suna, both officers of Suna Co., executed and delivered an unconditional guaranty of the payment of Suna Co.'s obligations (the "Guaranty"). Old CrossLand and Suna Co. then modified the Original Agreement on March 14, 1990, creating an "Amended Agreement." Harry and Alan Suna executed a new promissory note (the "Replacement Note") at that time. The Replacement Note became due on August 31, 1991, and has not yet been repaid.
On January 23, 1992, the Director of the Office of Thrift Supervision (the "OTS") closed Old CrossLand and appointed the FDIC as its receiver. A new bank, CrossLand Federal Savings Bank ("New CrossLand") was formed on the same date and the FDIC was appointed as its conservator. New CrossLand subsequently purchased the assets of Old CrossLand, including the assets that form the basis of this action.
On March 18, 1992, after Harry Suna, Chairman of Suna Co., indicated a desire to discuss a possible workout or restructuring of the loan, the executive board of New CrossLand met to discuss the Suna Co. credit agreement. The board authorized Tom Murphy, then the Vice-President designated to handle the Suna Co. loan, to restructure the credit agreement into a term loan. However, authorization for Mr. Murphy to offer this modification to Suna Co. was conditional upon two changes from the terms originally suggested by Mr. Murphy. The term of the loan was to be limited to one year instead of two, and the $30,000 fee suggested by Mr. Murphy was to be applied to the principal rather than being paid as a fee. On March 24, 1992, Mr. Murphy sent a fax to Harry Suna. The fax, which included a handwritten note on the cover sheet and was signed "Tom," listed some of the conditions for restructuring the Suna Co. loan; it also included an amortization schedule for the proposed term loan.
Before any settlement discussions took place, and later while such discussions were ongoing, New CrossLand sent a series of letters (the "pre-negotiation letters") to Suna Co. These letters specified that although New CrossLand wished to negotiate with Suna Co., it had not yet agreed to modify the existing loan. The letters also stressed that all settlement discussions would be without prejudice and that changes to the existing agreement were to become effective only when "definitive documentation" had been signed. Although New CrossLand requested that he do so, Harry Suna did not sign and return the first pre-negotiation letter, dated April 20, 1992.
Harry Suna died on May 6, 1992. New CrossLand then engaged in workout discussions with Stuart Suna, Harry Suna's successor as Chairman of Suna Co., and sent a second pre-negotiation letter to Stuart Suna, dated June 11, 1992. That letter also went unexecuted. Following further workout discussions between Mr. Murphy and Stuart Suna, Mr. Murphy sent Stuart Suna a one-page letter summarizing the agreed-upon points in their negotiations and proposing additional terms requested by New CrossLand's loan committee. That letter, dated June 15, 1992, was never signed by either of the parties. However, Stuart Suna executed a third pre-negotiation letter, dated July 22, 1992, which contained language substantially similar to that of the earlier pre-negotiation letters. Specifically, the July 22, 1992 pre-negotiation letter stated:
New CrossLand has not offered, and is not at this meeting offering, either orally or in writing to waive or forbear from exercising any rights or remedies it may have against the Borrower; and ... New CrossLand has not, and is not at this meeting offering to make any new loans or grant or extend any financial accommodations to the Borrower.
New CrossLand demanded payment on the Replacement Note by letters dated July 7, 1992 and July 23, 1992. When payment was not received, New CrossLand initiated this action on August 17, 1992. On May 21, 1993, an involuntary petition for bankruptcy was filed against Suna Co.; the petition was converted to a Chapter 11 bankruptcy petition on July 19, 1993. As a result of Suna Co.'s bankruptcy, New CrossLand is pursuing only its claims against Alan Suna and the Estate of Harry Suna, the guarantors of the loan agreement.
On August 19, 1993, the FDIC ended its conservatorship of New CrossLand, which thereupon became a privately-owned, federally chartered stock bank. New CrossLand subsequently reorganized. In March 1994, Brooklyn Bancorp ("Bancorp") was formed as a holding company for New CrossLand, which became a wholly owned subsidiary of Bancorp. All shares of New CrossLand stock were exchanged for Bancorp stock; New CrossLand then merged with CrossLand Interim Federal Savings Bank, a Bancorp subsidiary. New CrossLand emerged as the surviving bank and a wholly-owned subsidiary of Bancorp.
New CrossLand filed the present motion for summary judgment before then Magistrate Ross on September 14, 1994. On October 21, 1994, the summary judgment motion was stayed on consent of both parties, and New CrossLand withdrew the motion on December 19, 1994. The motion was reinstated on March 31, 1995, and oral argument was held before the undersigned on June 6, 1995.
As an initial matter, New CrossLand seeks leave to amend the caption of its complaint to reflect the fact that it is no longer under the conservatorship of the FDIC. Materials submitted by both parties, including the shareholder's report and the affidavits submitted by New CrossLand, demonstrate that on August 19, 1993, New CrossLand became a privately owned stock bank that is no longer under the conservatorship of the FDIC.
Rule 15(a) of the Federal Rules of Civil Procedure states that leave to amend a pleading "shall be freely given when justice so requires." It is an abuse of discretion for the court to deny a motion for leave to amend a pleading in the absence of undue delay, bad faith or improper motive, unless the amendment would be futile or meritless. Cortec Indus. v. Sum Holding L.P., 949 F.2d 42, 49 (2d Cir.1991). See also Foman v. Davis, 371 U.S. 178, 182, 83 S.Ct. 227, 230, 9 L.Ed.2d 222 (1962). The party opposing the motion for leave to amend has the burden of demonstrating that the amendment would be prejudicial, contrary to justice or futile. Tucker Leasing Capital Corp. v. Marin Medical Mgt., Inc., 833 F.Supp. 948, 960 (E.D.N.Y.1993).
The Sunas advance two arguments in opposition to plaintiff's motion to amend. First, they contend that New CrossLand's motion must be denied because plaintiff has failed to comply with FED.R.CIV.P. 25(c), which provides:
in any case of transfer of interest, the action may be continued by or against the original party, unless the court upon motion directs the person to whom the interest is transferred to be substituted in the action or joined with the original party.
The Sunas argue that the merger of New CrossLand and Crossland Interim Savings Bank to form a new bank...
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