F.D.I.C. v. Giammettei

Citation34 F.3d 51
Decision Date24 August 1994
Docket NumberD,No. 1622,1622
PartiesFEDERAL DEPOSIT INSURANCE CORPORATION, as Receiver of Citytrust, Plaintiff-Appellee, v. Joseph L. GIAMMETTEI; Dennis A. Moore; Russell A. Carlson; Edward L. Varapapa; Patricia J. Sorrentino; Carlo Centore; Rocco W. Iezzi; Patrick E. Patterson; James R. Fitzpatrick; Walter W. Miner and John Iafolla, Defendants-Appellants. ocket 93-6235.
CourtUnited States Courts of Appeals. United States Court of Appeals (2nd Circuit)

Raymond A. Garcia, New Haven, CT (Garcia, Seeley & Associates, of counsel), for defendants-appellants.

Richard E. Castiglioni, Stamford, CT (Diserio, Martin, O'Connor & Castiglioni, of counsel), for plaintiff-appellee.

Before: OAKES, KEARSE and MAHONEY, Circuit Judges.

OAKES, Senior Circuit Judge:

Eleven individual defendants, each a limited partner in the Northeastern Heritage Limited Partnership ("NHLP"), appeal from judgments of the District of Connecticut, Ellen Bree Burns, Judge, granting the motion of the plaintiff, the Federal Deposit Insurance Corporation ("FDIC"), for summary judgment and awarding damages in favor of the FDIC against each of the eleven individual defendants. We affirm.

I. Background
A. The Underlying Transaction

This litigation arose out of a real estate venture promoted by two individuals, Arnold Peck and Michael Belfonti. Peck and Belfonti formed NHLP and established themselves as general partners. NHLP was to purchase a 164-unit apartment complex in Vernon, Connecticut and convert the apartments into condominiums.

Peck and Belfonti promoted the partnership to prospective limited partners through a Private Placement Memorandum ("PPM") dated July 22, 1987. The PPM offered qualifying investors the opportunity to purchase "units" in NHLP. The purchase price of a unit was $50,000, payable with $1,100 in cash and a promissory note for the balance. 1 As Magistrate Judge F. Owen Eagan found,

[t]he notes were to be paid off in six annual installments of varying amounts, and the timing of the payments was to coincide with annual disbursements from the partnership to the limited partners, or with tax benefits which the limited partners were to receive.

Recommended Ruling on Plaintiff's Motions for Summary Judgment at 4-5, FDIC v. Giammettei, No. 5:91-CV-00490 (EBB) (D.Conn. July 22, 1992) ("Recommended Ruling"). The PPM further provided that Citytrust was to hold the notes, together with the down payments, in escrow pending approval of the limited partners. Upon approval of the limited partners, the notes were to be assigned to a financial institution to secure additional financing for NHLP.

Each of the eleven defendants purchased an interest in NHLP, 2 effectively becoming limited partners in NHLP. Peck and Belfonti assigned the notes to Citytrust as collateral for a $3,325,000 loan.

Despite the assurances in the PPM, no disbursements were ever made from NHLP to the limited partners. The limited partners made no payments on any of the notes, defaulting under the terms of the notes assigned to Citytrust. This litigation ensued.

B. Procedural History

Citytrust commenced collection actions against each of the eleven defendants in Connecticut Superior Court in 1990. On December 20, 1990, the defendants filed identical answers, each raising eight affirmative defenses to liability for repayment of the debts evidenced by their promissory notes.

On August 9, 1991, the Commissioner of Banking of the State of Connecticut declared Citytrust insolvent and brought a petition in Superior Court for an order appointing the FDIC Receiver of Citytrust. 3 The FDIC accepted its appointment and, by operation of law, succeeded to all rights, titles, powers and privileges of Citytrust to Citytrust's assets, including its rights to collect on the promissory notes. 12 U.S.C. Sec. 1821(d)(2)(A)(i) (1988 & Supp. IV 1992). Pursuant to 12 U.S.C. Sec. 1819(b)(2)(A) and (B) (1988 & Supp. IV 1992), the FDIC moved on September 5, 1991, to remove each of the eleven collection actions to the United States District Court for the District of Connecticut. Also on that date, the FDIC moved for the substitution of the FDIC for Citytrust as plaintiff. The district court referred the case to Magistrate Judge F. Owen Eagan on September 30, 1991. Magistrate Eagan consolidated the eleven actions on June 2, 1992.

On July 22, 1992, Magistrate Eagan signed a Recommended Ruling on the FDIC's motion for Summary Judgment. On February 11, 1993--over an objection by the defendants and after appearances by counsel for the defendants and the FDIC regarding the recommended ruling--Judge Burns by endorsement approved the recommended ruling. The order granted summary judgment to the FDIC on each of the defendants' affirmative defenses and held that each of the defendants was liable to the FDIC for the debt evidenced by his or her promissory note. The order did not calculate damages, however. Final judgment was entered against all but one of the defendants on August 11, 1993, and against the remaining defendant two days later. This judgment resolved the precise amounts to be paid by each defendant to the FDIC. The defendants filed a timely joint notice of appeal on August 19, 1993.

II. Jurisdiction

The district court had jurisdiction pursuant to 12 U.S.C. Sec. 1819(b)(2) and 28 U.S.C. Sec. 1331 (1988). This court has jurisdiction pursuant to 28 U.S.C. Sec. 1291 (1988).

III. Discussion
A. Review of an Award of Summary Judgment Striking an Affirmative Defense

We review an award of summary judgment de novo. Robinson v. Overseas Military Sales Corp., 21 F.3d 502, 507 (2d Cir.1994); Litton Indus. v. Lehman Bros. Kuhn Loeb Inc., 967 F.2d 742, 746 (2d Cir.1992). Thus, on appeal as well as in the district court, a movant for summary judgment "always bears" the burden of production or "the initial responsibility of informing the ... court of the basis for its motion, and identifying those portions of 'the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any,' which it believes demonstrate the absence of a genuine issue of material fact." Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 2553, 91 L.Ed.2d 265 (1986) (quoting Fed.R.Civ.P. 56(c)). Where a plaintiff uses a summary judgment motion, in part, to challenge the legal sufficiency of an affirmative defense--on which the defendant bears the burden of proof at trial--a plaintiff "may satisfy its Rule 56 burden by showing 'that there is an absence of evidence to support [an essential element of] the [non-moving party's] case.' " DiCola v. SwissRe Holding (North America), Inc., 996 F.2d 30 (2d Cir.1993) (quoting Celotex, 477 U.S. at 325, 106 S.Ct. at 2553-54) (brackets in original). While whatever evidence there is to support an essential element of an affirmative defense will be construed in a light most favorable to the non-moving defendant, there is "no express or implied requirement in Rule 56 that the moving party support its motion with affidavits or other similar materials negating the opponent's claim." Celotex, 477 U.S. at 323, 106 S.Ct. at 2553 (emphasis in original). After all, in cases where there is an absence of evidence to support an essential element of a defense, with respect to that defense "there can be 'no genuine issue as to any material fact' since a complete failure of proof concerning an essential element of the [defendant's affirmative defense] necessarily renders all other facts immaterial." Celotex, 477 U.S. at 323, 106 S.Ct. at 2552. In sum, we will affirm an award of summary judgment striking an affirmative defense if de novo review of the record in a light most favorable to the defendant reveals the absence of evidence supporting an essential element of the defense.

B. Legal Sufficiency of the Defendants' Affirmative Defenses

In D'Oench, Duhme & Co. v. FDIC, 315 U.S. 447, 62 S.Ct. 676, 86 L.Ed. 956 (1942), the Supreme Court established a doctrine that precludes persons who have lent themselves "to a scheme or arrangement whereby the banking authority on which the [FDIC] relied in insuring the bank was or was likely to be misled," id. at 460, 62 S.Ct. at 680-81, from raising a defense to a collection action brought by the FDIC as the receiver of the failed bank based on the misleading scheme or arrangement. Congress codified the D'Oench, Duhme doctrine in Sec. 2(e) of the Federal Deposit Insurance Act, codified at 12 U.S.C. Sec. 1823(e) (1988). In Langley v. FDIC, 484 U.S. 86, 108 S.Ct. 396, 98 L.Ed.2d 340 (1987), the Supreme Court considered the scope of the D'Oench, Duhme doctrine as codified at 12 U.S.C. Sec. 1823(e) and held that "[a] condition to payment of a note, including the truth of an express warranty, is part of the 'agreement' to which the writing, approval, and filing requirements of 12 U.S.C. Sec. 1823(e) attach." Id. at 96, 108 S.Ct. at 403; see also FDIC v. Bernstein, 944 F.2d 101, 108 (2d Cir.1991). In 1989, after the Supreme Court had decided Langley, Congress further enlarged the scope of the doctrine by amending Sec. 1823(e) to extend its protections to assets acquired by the FDIC through appointment as a receiver for an insolvent financial institution. Financial Institutions Reform, Recovery and Enforcement Act ("FIRREA"), Pub.L. No. 101-73 at Sec. 217(4), 103 Stat. 183, 256 (1989). As amended, 12 U.S.C. Sec. 1823(e) provides:

No agreement which tends to diminish or defeat the interest of the [FDIC] in any asset acquired by it under this section or section 1821 of this title, either as security for a loan or by purchase or as receiver of any insured depository institution, shall be valid against the [FDIC] unless such agreement--

(1) is in writing,

(2) was executed by the depository institution and any person claiming an adverse interest thereunder, including the obligor, contemporaneously with the acquisition of the asset by the depository institution,

(3) was approved by the board of directors of...

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