Inn At Saratoga Associates v. FDIC

Citation856 F. Supp. 111
Decision Date27 June 1994
Docket NumberNo. 91-CV-145 (LPG).,91-CV-145 (LPG).
PartiesThe INN AT SARATOGA ASSOCIATES, a New York limited partnership, Myra Rynderman, as administratrix of the estate of Monia S. Rynderman, William F. Chandler, Steven N. Fischer, Roy Fischer, John S. Gijanto, Lawrence A. Kotlow, Richard G. Kotlow and John E. Wolfgang, individually, Plaintiffs, v. FEDERAL DEPOSIT INSURANCE CORPORATION, as receiver of Bank of New England, N.A., Defendant.
CourtU.S. District Court — Northern District of New York

Phillip G. Steck, Cooper, Erving, Savage, Nolan & Heller, Albany, NY, for plaintiffs.

Christopher Massaroni, DeGraff, Foy, Holt-Harris & Mealey, Albany, NY, for defendant.

OPINION & ORDER

GAGLIARDI, Senior District Judge.

Plaintiffs commenced this action against Berkshire Bank & Trust Company ("Bank") in August 1986 in New York State Supreme Court, Albany County, raising several contract and tort claims. All of Plaintiffs' claims stem from an alleged contract between Plaintiffs and the Bank for a $1.3 million mortgage loan. In a letter dated June 2, 1994, the FDIC requested judgment in its favor, claiming protection against Plaintiffs' action under section 1823(e) of Title 12, United States Code, 12 U.S.C. § 1823(e) (as amended Aug. 9, 1989) (1823(e)"); the Court construes this letter as a motion for summary judgment pursuant to Rule 56 of the Federal Rules of Civil Procedure, Fed. R.Civ.P. 56 (1994) ("Rule 56").

In support of its motion, the FDIC relies on the contents of the parties' Joint Stipulation of Facts and its Trial Brief. Plaintiffs filed an opposition memorandum, to which the FDIC in turn filed a response. On June 10, 1994, the Court held a pre-trial conference during which both parties agreed that the case is ripe for summary judgment consideration. The Court set a deadline of June 17, 1994 for any final submissions. On June 17, 1994, Plaintiffs filed the affidavits of Mr. Lawrence F. Anito, Jr. ("Anito") and Plaintiff Richard G. Kotlow. For the reasons stated below, the FDIC's motion for summary judgment as to all of Plaintiffs' claims is granted.

I. BACKGROUND

The factual basis for Plaintiffs' complaint is as follows, with all the pertinent events occurring in 1985 unless otherwise indicated. On January 15 Plaintiff Monia S. Rynderman ("Rynderman") met with William H. Porter, Jr. ("Porter"), a Vice President and Regional Loan Officer of the Bank, seeking a $617,500 loan to be made to Plaintiff The Inn at Saratoga Associates ("Saratoga Associates"), a limited partnership, for the purchase and renovation of the Coachman Inn. On January 24 the Bank issued a commitment letter ("January 24 Commitment") for the above amount; Plaintiffs did not execute this letter. Per Rynderman's request, on April 9 the Bank issued a second commitment letter ("April 9 Commitment") for the amount of $875,000; this letter was similarly unexecuted by Plaintiffs.

Loan officers from the Bank met with Plaintiffs during April and May to discuss increasing the loan amount to over $1 million. On June 24 Plaintiff Rynderman entered into a contract to purchase the Coachman Inn on behalf of Saratoga Associates. On June 26 the Bank's Officer Loan Committee ("OLC") voted to table the proposed loan to Plaintiffs, memorialized in the Loan Approval Record ("LAR").

On July 3 Plaintiffs Kotlow, Fischer, Chandler, Gijanto and Wolfgang agreed to provide $200,000 in personal guarantees to induce the Bank to expand the proposed loan amount to $1.3 million. On that same day, the OLC approved the $1.3 million loan subject to certain conditions, memorialized in the Officer Loan Committee Minutes ("OLCM"). On July 15 Porter wrote a letter to Plaintiff Kotlow ("Porter letter") concerning the $1.3 million loan, which states in relevant part:

Our Loan Committee, subsequent to a formal review of the 3/31/85 financial statements on the Lookout Inn (another inn owned by Plaintiffs), have ratified the $1.3 million loan. I assumed sic that the financial statements on the Lookout Inn will give us the comfort that we seek in those statements and I look forward to ironing out all the final details relative to this mortgage loan at the earliest possible convenience.

With regard to the $1.3 million loan, the Bank did not issue a formal commitment letter similar to the January 24 and April 9 Commitments.

On August 21 Anito forwarded proposed closing documents to the Bank on behalf of Plaintiffs, referring to the total loan amount as $1.3 million. On August 26 the Bank's attorneys reviewed an internally-produced draft commitment letter for the $1.3 million loan; this draft was never finalized and thus no commitment letter was ever sent to Plaintiffs.

On August 30 Saratoga Associates received a $375,000 loan from the Bank for its purchase of Coachman Inn ("Coachman Inn loan"). None of the documents relating to this transaction referred to the $1.3 million proposed loan. Plaintiffs took possession no later than September and satisfied this debt obligation on December 23.

On September 10 officials from the Bank met with Plaintiffs to inform them that they had yet to provide the necessary documents for the $1.3 million loan. On September 26 the OLC again approved the $1.3 million loan subject to certain conditions. Between September and October, the Bank tried to find a participating lender, a condition that needed to be satisfied before the Bank proceeded with the loan. On October 3 the Bank rejected Plaintiff Kotlow's request for funds to pay construction expenses because a participating lender was yet to be found. On October 10 Rynderman demanded funds for construction expenses, which was again rejected. On October 23 Berkshire County Savings Bank agreed to participate in the loan but subject to its own distinct conditions. Finally, officials from the Bank agreed to proceed with financing the construction on November 6, but only upon different terms — as a short-term construction loan with Plaintiffs to seek permanent financing elsewhere.

Separately, on October 23, Plaintiffs managed to procure a loan for $1.3 million from Norstar Bank of Upstate New York ("Norstar"); this loan closed on December 16. On December 23 Plaintiffs managed to have the loan amount increased to $1.55 million through Fleet Bank, Norstar's merger partner.

On August 1, 1986, Plaintiffs commenced this litigation. Bank of New England ("BNE") subsequently acquired the Bank. On January 6, 1991, Defendant Federal Deposit Insurance Corporation ("FDIC") was appointed receiver of BNE, which ceased to exist as a legal entity. After exhausting their administrative remedies, Plaintiffs resumed this action against the FDIC on September 17, 1991.

II. STANDARD FOR RULE 56 RELIEF

Rule 56 states in relevant part:

(b) For Defending Party. A party against whom a claim ... is asserted ... may, at any time, move with or without supporting affidavits for a summary judgment in the party's favor as to all or any part thereof.
(c) Motion and Proceedings Thereon. ... The judgment sought shall be rendered forthwith if ... there is no genuine issue as to any material fact and the moving party is entitled to a judgment as a matter of law....

Fed.R.Civ.P. 56(b) & (c). Where there is no dispute as to the operative facts, if the movant demonstrates that it is entitled to judgment as a matter of law, the court should grant the summary judgment motion. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250, 106 S.Ct. 2505, 2511, 91 L.Ed.2d 202 (1986). Here, the parties filed a Joint Stipulation of Facts, which contains a full recitation of the facts necessary to determine the legal question involved — whether the FDIC is entitled to judgment as a matter of law pursuant to § 1823(e). If the FDIC meets its burden of demonstrating such entitlement, then the Court may grant the motion for summary judgment. See Id.

III. APPLICABILITY OF SECTION 1823(e)

The FDIC argues in its motion for summary judgment that it is entitled to the protection accorded it by § 1823(e). Plaintiffs disagree, contending that § 1823(e) does not apply to their contract claims because there is no agreement in an asset as required by that provision.

Section 1823(e) is applicable to Plaintiffs' contract claims. That provision states in relevant part:

No agreement which tends to diminish or defeat the interest of the FDIC in any asset acquired by it ... as receiver of any insured depository institution shall be valid against the FDIC....

12 U.S.C. § 1823(e). The parties agree that the applicability of § 1823(e) is governed by whether there was an "agreement ... in an asset" involved in this case.

The alleged promise to make a future loan involved in this case constitutes an agreement in an asset. An "agreement" as used in § 1823(e) should be interpreted broadly, Langley v. FDIC, 484 U.S. 86, 91, 108 S.Ct. 396, 401, 98 L.Ed.2d 340 (1987), and includes "promises to perform acts in the future," id. at 92, 108 S.Ct. at 401. An "asset" includes both bank loans and "promises to make future loans." In re NBW Commercial Paper Litig., 826 F.Supp. 1448, 1464 (D.D.C.1992). Thus, § 1823(e) reaches "unrecorded agreements to extend future loans," Bell & Murphy & Assoc. v. Interfirst Bank Gateway, 894 F.2d 750, 753 (5th Cir.), cert. denied, 498 U.S. 895, 111 S.Ct. 244, 112 L.Ed.2d 203 (1990), even if the FDIC cannot be said to have acquired a specific asset such as a documented, executed loan contract, Jackson v. FDIC, 981 F.2d 730, 734 (5th Cir.1992). That is, where the loan was never actually agreed upon, the loan negotiations suffice to bring the transaction within § 1823(e). Id. at 734-35.

Section 1823(e) does not protect the FDIC, however, where the "no asset" exception applies — that is, where the party adverse to the FDIC claims that the purported asset is invalid because of fraud in the factum and such fraud arises from acts independent of any understanding or side agreement between the parties. FDIC v. Zook Bros. Constr. Co., 973 F.2d 1448, 1452 (9th...

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