Federal Deposit Ins. Corp. v. Kuang Hsung Chuang

• Decision Date: 09 May 1988
• Docket Number: No. 85 CIV. 7468 (SWK).,85 CIV. 7468 (SWK).
• Citation: 690 F. Supp. 192
• Parties: FEDERAL DEPOSIT INSURANCE CORPORATION, as Receiver of Golden Pacific National Bank, Plaintiff, v. KUANG HSUNG CHUANG, et al., Defendants.
• Court: U.S. District Court — Southern District of New York

690 F. Supp. 192

FEDERAL DEPOSIT INSURANCE CORPORATION, as Receiver of Golden Pacific National Bank, Plaintiff, v. KUANG HSUNG CHUANG, et al., Defendants.

No. 85 CIV. 7468 (SWK).

United States District Court, S.D. New York.

May 9, 1988.

Kaye, Scholer, Fierman, Hays & Handler, New York City by Barry Wilmer, for plaintiff.

Damadeo & Demartin, Hicksville, N.Y., for defendants 67 Hudson Street Corp. and T & C Realty Co.

Donald R. Schechter, P.C., Forest Hills, N.Y., for defendants Nepz Progress Plastics, Inc., T & C Realty Co., Prospect Polymer, Inc., Chiu Sui Teng, and Ya Jung Teng, as administratrix of the decedent's estate of Chiu Sui Teng.

MEMORANDUM OPINION AND ORDER

KRAM, District Judge.

The Federal Deposit Insurance Corporation ("FDIC") brings this action as receiver of the Golden Pacific National Bank ("Bank") in an attempt to recover assets from a variety of corporations and individuals who allegedly owe funds to the Bank either as borrowers or guarantors. Plaintiff has invoked this Court's jurisdiction pursuant to 12 U.S.C. § 1819 and 28 U.S.C. § 1345, and jurisdiction is not contested.

The FDIC has brought motions for summary judgment against a number of defendants in a piecemeal fashion. At the present time, the Court is considering plaintiff's motion against Nepz Progress Plastics, Inc. ("Nepz"), Chui Sui Teng ("Teng"), and Ya Jung Teng ("Ms. Teng"), the administratrix of Teng's estate, as well as plaintiff's motion against T & C Realty Company ("T & C"), Prospect Polymer, Inc. ("Prospect"), 67 Hudson Street Corp. ("67 Hudson St."), Teng and Ms. Teng, again as administratrix. Plaintiff has also moved for entry of final judgment pursuant to Fed.R.Civ.Pro. 54(b).

BACKGROUND

The facts of this case revolve around the failure of a Chinatown bank, the Golden Pacific National Bank, and the FDIC's efforts at recovering the Bank's assets pursuant to its statutory duties, see 12 U.S.C. §§ 1811, 1821(d). The FDIC was appointed receiver of the Bank on June 21, 1985 by the Comptroller of the Currency of the United States after the Bank was ordered closed.

The Alleged Nepz Obligations

The FDIC has commenced this action against Nepz to secure payment of a draft ("Nepz Draft") made payable to the Bank in the amount of $821,641.47. The FDIC states that the Nepz draft is payable on demand, that demand has been made and that no payment has been received. Defendants do not dispute that this draft exists and that the specified amount is presently owing to the Bank. Affidavit of Ya Jung Teng ("Teng Aff."), at ¶¶ 3, 4.

The FDIC also seeks judgment against Teng and his estate on a Subordination Agreement and Guaranty ("Teng Guaranty Agreement") which he executed to guarantee payment of the Nepz Draft. The Teng Guaranty Agreement states that Teng unconditionally guaranteed the payment of all debts of Nepz to the Bank which existed at the time of execution or arising thereafter. Affidavit of Simon Levy, September 30, 1987 ("Levy Aff. I"), at ¶ 7 and Exhibit B. Teng has failed to pay any of Nepz's obligations under the Guaranty Agreement. Defendants do not dispute these facts, but argue that the Guaranty is invalid (1) because Teng did not understand its terms and (2) because at the time of execution Kuang Hsung Chuang ("Chuang") acted as Teng's lawyer, as partner in the underlying business transaction, and as president of the Bank. Teng Aff., at ¶¶ 6, 10, 11.

Teng served as president of both Nepz and Prospect. Prospect and 67 Hudson St.—a corporation founded by Chuang— formed the partnership known as T & C Realty in 1980. Teng Aff., at ¶ 5; Supplemental Affidavit of Ya Jung Teng ("Teng Supp."), at p. 2. Through a series of transactions, T & C gained ownership of the property at 67 Hudson Street, which was to be converted into condominiums and sold.¹ According to Ms. Teng, the proceeds of these sales were to be used to repay the various obligations owing to the Bank. Ms. Teng also argues that her husband did not understand that he was signing a guaranty for all of Nepz's present and future debts, but only thought he was signing a guarantee for $147,000 in relation to the purchase of real property at 67 Hudson Street in New York. Defendants' Memorandum of Law at p. 6. Defendants also claim that Chuang led Teng to believe that all loans could be repaid through the sale of condominiums alone. Teng Aff. at ¶ 9. Ms. Teng claims that while her husband spoke English fluently, he had some difficulty understanding complicated written English. Id. at ¶ 12. Ms. Teng states that Chuang and her husband were longtime friends, and as businessmen in the Chinese community, were accustomed to conducting their business orally. She states that Teng trusted Chuang and relied on his friendship and reputation in the community. Id. at ¶ 8.

The Alleged T & C Obligations

The FDIC also seeks summary judgment against T & C, and its general partners Prospect and 67 Hudson St., under two promissory notes payable to the Bank in the amounts of $1,250,000 and $253,947.22, plus interest, late charges and attorneys fees. The FDIC again seeks judgment against Teng and his estate for these same amounts based on written guarantees. T & C executed a secured note ("Note") on August 18, 1982 for $1,250,000, through which T & C promised to repay the loan upon demand. Affidavit of Simon Levy, October 7, 1987 ("Levy Aff. II"), at ¶ 4 and Exhibit A. T & C, according to plaintiff, has failed to make any payments on the Note, despite demand for payment. On October 7, 1980, T & C executed another "Mortgage Note" in the amount of $350,000. Exh. B to Levy Aff. II. Plaintiff claims that $253,947.22 in principal is presently due and owing on this Mortgage Note. Id. at ¶¶ 6, 7.

Defendants do not dispute the existence of these financial obligations, though they dispute the actual amount owing. Defendants contend that both these notes have been satisfied by the sale of condominium units, though the Bank never provided defendants with a satisfaction. Teng Supp., at p. 7. Teng states that the $1.25 million Note was established as a fund against which T & C could pay construction costs. Id. at p. 5. The Bank advanced monies as needed, condominium units were constructed and as the units were sold in 1985 and thereafter, the Bank allegedly credited T & C's account with payments toward its total indebtedness. Id. at p. 6. Attached to Teng's Supplemental Affidavit are copies of T & C's checking account bank statements and copies of debtor memos which evidence "repayment" by T & C, though the memos do not specify what is being repaid. The debtor memos evidence repayment in the amount of approximately $2,000,000. Exhibit G1 to Teng Supp.²

Ms. Teng further states that T & C borrowed a total of $3,042,602.43, though she provides no evidence suggesting how she reached this figure. Teng Supp. at p. 6. Teng states that these bank statements and debit memos are the only documentation available to establish the repayment of the loans, since neither Chuang or the Bank provided any other documents. Teng Aff. at ¶ 6. Ms. Teng attributes this lack of documentation to the nature of business dealings in the Chinese community. Id. at ¶ 8.

Teng executed an "Unlimited Guaranty" through which he promised to pay T & C's obligations to the Bank when due. Levy Aff. II at ¶ 8 and Exh. C. Teng has not paid any of T & C's obligations to the Bank, despite demand. Again, defendants do not deny the existence of the guaranty, though they object to its enforceability for the general reasons stated above concerning Chuang's role in the transactions. Defendants also note that Chuang simultaneously acted as attorney for T & C, received broker's commissions for the sale of condominium units at 67 Hudson Street and served as president of the Bank, thereby rendering the transaction invalid. Teng Aff. at ¶ 6.

DISCUSSION

Standards for Summary Judgment

Summary judgment is appropriate where "the pleadings, depositions, answers to interrogatories and admissions on file, together with affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Rule 56(c). In testing whether the movant has met this burden, the Court must resolve all ambiguities against the movant. Lopez v. S.B. Thomas, Inc., 831 F.2d 1184, 1187 (2d Cir.1987) (citing United States v. Diebold, Inc., 369 U.S. 654, 655, 82 S.Ct. 993, 994, 8 L.Ed.2d 176 (1962)).

The moving party bears the initial burden of demonstrating the absence of a genuine issue of material fact. Adickes v. S.H. Kress and Co., 398 U.S. 144, 157, 90 S.Ct. 1598, 1608, 26 L.Ed.2d 142 (1970). The movant may discharge this burden by demonstrating to the Court that there is an absence of evidence to support the non-moving party's case on which that party would have the burden of proof at trial. Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 2553, 91 L.Ed.2d 265 (1986).³ The non-moving party then has the burden of coming forward with "specific facts showing that there is a genuine issue for trial." Rule 56(e). The non-movant must "do more than simply show that there is some metaphysical doubt as to the material facts." Matsushita Electric Industrial Co. v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S.Ct. 1348, 1356, 89 L.Ed.2d 538 (1986). Speculation, conclusory allegations and mere denials are not enough to raise genuine issues of fact. To avoid summary judgment, the non-moving party must establish the existence of enough evidence such that a jury could return a verdict in its favor. See Anderson v. Liberty Lobby, 477 U.S. 242, 247-51, 106 S.Ct. 2505, 2510-11, 91 L.Ed.2d 202 (1986) (interpreting the "genuineness" requirement).

The Nepz Draft

Summary judgment against Nepz is clearly indicated since defendants admit the existence and validity of the obligation. Nepz has made no payments of the Draft and has stated no defenses to the entry of judgment. In their memorandum...