Federal Deposit Ins. Corp. v. Julius Richman, Inc., 198

• Decision Date: 03 December 1981
• Docket Number: No. 198,D,198
• Citation: 666 F.2d 780
• Parties: FEDERAL DEPOSIT INSURANCE CORPORATION, Plaintiff-Appellee, v. JULIUS RICHMAN, INC., and Lenore Richman, individually and as Executrix of the Estate of Julius Richman, Defendants-Appellants. ocket 81-7125.
• Court: U.S. Court of Appeals — Second Circuit

Page 780

666 F.2d 780

FEDERAL DEPOSIT INSURANCE CORPORATION, Plaintiff-Appellee, v. JULIUS RICHMAN, INC., and Lenore Richman, individually and as Executrix of the Estate of Julius Richman Defendants-Appellants.

No. 198, Docket 81-7125.

United States Court of Appeals Second Circuit.

Argued Nov. 19, 1981.

Decided Dec. 3, 1981.

Ira L. Hyams, P. C., Jericho, N. Y., for plaintiff-appellee.

Jeffrey Levitt, Massapequa, N. Y. (Russ, Weyl & Levitt, Massapequa, N. Y., of counsel), for defendants-appellants.

Before LUMBARD, MANSFIELD and NEWMAN, Circuit Judges.

PER CURIAM:

Defendant Lenore Richman appeals from a judgment of the Eastern District of New York, Platt, J., in favor of plaintiff Federal Deposit Insurance Corporation (FDIC) in its suit on her guarantee of loans made to Julius Richman, Inc., a corporation maintained and operated by her husband, Julius Richman. Lenore Richman argues that money was advanced not to the corporation but to her husband, and that her guarantee is therefore unenforceable under New York's General Obligations Law. We affirm the judgment of the district court.

Julius Richman was a real estate broker, operating through his corporation Julius Richman, Inc. Prior to 1973, Julius Richman borrowed money from Franklin National Bank to finance his real estate speculation. In 1973, market interest rates rose above the maximum permitted by New York State's usury laws, GOL § 5-501, on loans made to individuals. Corporations, however, may not assert a usury defense. GOL § 5-521. For this reason, Franklin National pursuant to an agreement with Julius Richman transferred $152,000 in debt from his personal account to his corporate account on July 6, 1973. On July 13, 1973, Julius and Lenore Richman jointly guaranteed the liabilities of the corporation. The guarantee was in writing and states that it was made "in consideration of advances, loans, extensions of credit, renewals ... heretofore made to or for account of Julius Richman, Inc. ... and/or now or hereafter to be made for the account of ... Borrower...." Franklin National subsequently extended additional credit to the corporation. Much, if not all, of the money loaned to the corporation was funnelled through the corporation to Julius Richman's personal accounts. The corporation restated its indebtedness to the bank on October 2, 1974, in a note for $291,000. Julius Richman signed the note. Thomas Eschmann, assistant vice president of the bank, was in charge of Richman's personal and corporate accounts and wrote in "Jules Richman, Inc." as the name of the maker.

Franklin National was declared insolvent by the Comptroller of the Currency on October 8, 1974. The FDIC was appointed receiver and sued on the guarantee. Julius Richman died on October 14, 1976. Lenore Richman is being sued individually and as executrix of his estate.

Prior to trial Judge Platt granted partial summary judgment to the FDIC, dismissing Lenore Richman's affirmative defenses of usury, lack of consideration, and violation of the statute of frauds. With respect to the defenses of usury and lack of consideration, he held that these defenses, since they rest on the theory that the corporate loan documents were created improperly to disguise what in reality were personal loans, were unavailable under...