Tuxedo Beach Club Corp. v. City Federal Sav. Bank

• Decision Date: 31 October 1990
• Docket Number: Civ. A. No. 89-5225 (MHC).
• Parties: TUXEDO BEACH CLUB CORPORATION and Edmund C. Wideman, III, Plaintiffs, v. CITY FEDERAL SAVINGS BANK, in receivership, Resolution Trust Corporation as Receiver, Defendant. CITY SAVINGS BANK, F.S.B., in conservatorship, Resolution Trust Corporation, Conservator, Plaintiffs-Interveners, v. TUXEDO BEACH CLUB CORPORATION and Edmund C. Wideman, III; Central Glass, Co., Inc., Crossroads Construction Company, Allmilmo Corporation, General Masonry Building and Construction Co., Inc., Alco Incorporated, B & B Custom Drywall Co., Inc., De Falco and Bisconti, Inc., J. Wittman & Sons, Inc. a/k/a Wittman & Sons, Inc., Labor Mechanical Contractors, Hilti, Inc., Defendants.
• Court: U.S. District Court — District of New Jersey

749 F. Supp. 635

TUXEDO BEACH CLUB CORPORATION and Edmund C. Wideman, III, Plaintiffs, v. CITY FEDERAL SAVINGS BANK, in receivership, Resolution Trust Corporation as Receiver, Defendant.

CITY SAVINGS BANK, F.S.B., in conservatorship, Resolution Trust Corporation, Conservator, Plaintiffs-Interveners, v. TUXEDO BEACH CLUB CORPORATION and Edmund C. Wideman, III; Central Glass, Co., Inc., Crossroads Construction Company, Allmilmo Corporation, General Masonry Building and Construction Co., Inc., Alco Incorporated, B & B Custom Drywall Co., Inc., De Falco and Bisconti, Inc., J. Wittman & Sons, Inc. a/k/a Wittman & Sons, Inc., Labor Mechanical Contractors, Hilti, Inc., Defendants.

Civ. A. No. 89-5225 (MHC).

United States District Court, D. New Jersey.

October 31, 1990.

COPYRIGHT MATERIAL OMITTED

Horn, Kaplan, Goldberg, Gorny & Daniels, P.C. by Mark Soifer, Atlantic City, N.J., for plaintiffs.

Cassidy, Foss & Filippo by Roger J. Foss, and Kathleen A. Sheedy, Red Bank, N.J., for defendant Resolution Trust Corp.

OPINION

COHEN, Senior District Judge:

This breach of contract and tort action is presently before the Court on plaintiffs' Motion for Partial Summary Judgment and defendant's Motion to Dismiss.

I. FACTUAL HISTORY

A. The Parties

Plaintiffs, Tuxedo Beach Club Corporation ("Tuxedo Beach"), and its president, Edmund C. Wideman, III ("Wideman") (collectively "Plaintiffs") initiated a lender liability action against defendant, City Federal Savings Bank ("City Federal"), alleging that City Federal fraudulently breached its promise to fully fund the acquisition, construction and completion of a sixty-eight unit residential condominium building located in Brigantine, New Jersey, known as Las Brisas Condominiums (the Project).

Defendant, City Federal, is a financial institution subject to the Financial Institutions Reform, Recovery and Enforcement Act of 1989. P.L. No. 101-73, 1989 U.S. Code Cong. & Admin.News (103 Stat.) 183 (FIRREA). Pursuant to this act the Office of Thrift Supervision of the Federal Deposit Insurance Corporation (FDIC) appointed the Resolution Trust Corporation (RTC) to be the receiver for defendant on or about December 7, 1989 after the bank ran into financial difficulties. The RTC as receiver organized City Savings Bank, F.S.B. ("City Savings") to take over certain assets and liabilities of City Federal, pursuant to section 211(d)(2)(F)(i) of the Federal Deposit Insurance Act, as incorporated by Section 21A(b)(4) of the Federal Home Loan Bank Act, as amended.¹ Thereafter, RTC, as receiver for City Federal, entered into a purchase and assumption agreement with City Savings whereby City Savings acquired substantially all the assets and assumed certain liabilities of the failed City Federal.² On June 6, 1990, the parties consented to allow City Savings, in conservatorship, RTC as conservator, to intervene as the assignee of the mortgage which is the subject of the instant lawsuit, and to file claims against plaintiffs for foreclosure and for sums allegedly due on various notes between plaintiffs and the original defendant, City Federal.

B. The Dispute

Plaintiffs allege that the defendant, City Federal, had agreed to fund their land acquisition, development, and construction costs of the aforesaid Brigantine, New Jersey project. City Federal provided a loan to fund the first portion of the project and agreed to provide further monies in the future. Plaintiffs maintain that they began construction in reliance upon defendant's promises, and that defendant did not provide further loans, in violation of their agreement. Plaintiffs assert that the half-built project is vulnerable to weather and other elements which can cause it to deteriorate. At the present, plaintiffs claim that there is no funding available to either complete the project or protect it from the elements, and that the project will suffer irreparable harm from unnecessary delay.

Plaintiffs allege that Ron Gigantino, an agent of City Federal, assured Wideman that City Federal would fully fund the Project through its completion. Based upon these assurances, the plaintiffs rejected an offer to sell the land which would have resulted in an immediate $2 million profit. Moreover, City Federal convinced Wideman to accept the initial $11,775,000.00 loan despite the parties' knowledge that that amount would be insufficient to fully fund the Project. Plaintiffs state that City Federal informed them that reapplying for a larger loan would have involved submitting the new loan's application to its Executive Committee, which employed stricter and more rigid approval procedures than its Officer's Loan Committee, the committee to which the initial loan application had been sent. Therefore, an additional loan would be made, for approximately $2,000,000.00, on the condition that City Federal approve the Project's final plans and that the bank's in-house appraisers value the Project at a sufficient figure to support the additional loan; both conditions were ultimately met.

The initial loan agreement required plaintiffs to produce 25 non-refundable contracts from unit purchasers before City Federal would release more than the first one million dollars. However, when the plaintiffs were unable to meet this requirement, it was waived by City Federal.

In May or June of 1988, Wideman sought the additional loan pursuant to the parties' previous agreement. Plaintiffs maintain that they made several attempts to obtain the loan, but that the only response they received from City Federal was a commitment for one million dollars conditioned on plaintiffs producing 35 non-refundable contracts on the Las Brisas units. Plaintiffs assert that City Federal knew both that the amount was inadequate, and that the condition was impossible.

II. PROCEDURAL HISTORY

Plaintiffs initially filed their complaint on December 4, 1989 in the Superior Court of New Jersey. A few days thereafter, RTC was appointed receiver and removed the case to this Court on December 15, 1989.³ The complaint asserts ten counts, charging defendant with breach of fiduciary duty, constructive fraud, breach of duty to act fairly and in good faith, negligent misrepresentation, prima facie tort, tortious interference with prospective economic advantage, intentional misrepresentation, breach of contract, promissory estoppel, breach of covenant to act fairly and in good faith and consumer fraud.

On February 16, 1990, plaintiffs filed a motion for partial summary judgment. The RTC responded to this motion by moving for a 90 day stay of proceedings pursuant to 12 U.S.C. section 1821(d)(12), as amended by FIRREA, which was denied by this Court in an Opinion and Order filed February 9, 1990. See 729 F.Supp. 1508 (D.N.J.1990). Thereafter, RTC moved for a 180 day stay pursuant to 12 U.S.C. sections 1821(d)(5), (6), & (7), as amended by FIRREA. This motion was granted in an Opinion and Order filed March 14, 1990. See 737 F.Supp. 18 (D.N.J.1990). The 180 day period was applied retroactively, however, from December 7, 1989, which was the date the RTC was appointed receiver for City Federal.

On March 30, 1990, this Court certified its March 14, 1990 Order (granting the 180 day stay) for appeal, however, the Third Circuit denied plaintiffs' request for relief. The 180 day period expired on June 5, 1990. During the interim, on August 23, 1990, the RTC filed an Amended Answer on behalf of City Federal, and an intervener complaint against Tuxedo Beach and its creditors for foreclosure on the mortgage. On June 26, 1990, in response to plaintiffs' pending Motion for Partial Summary Judgment, the RTC filed the instant Motion to Dismiss. Finally, on October 18, 1990, plaintiffs answered the RTC's intervener complaint and filed a counterclaim against the RTC as receiver for City Federal which is similar to plaintiffs' original complaint, but bases the claims on an alleged partnership which was formed between the parties. Presently before the Court is plaintiffs' Motion for Partial Summary Judgment and defendant's Motion to Dismiss.

III. DISCUSSION

A. Characterization of Defendant's Motion

The parties initially dispute whether the defendant's Motion to Dismiss should be treated as a motion to dismiss, pursuant to Fed.R.Civ.P. 12(b)(6), for failure to state a claim, or rather as a motion for summary judgment pursuant to Fed.R.Civ.P. 56. Plaintiffs maintain that the motion should be treated as one for summary judgment since defendant refers to matters outside the pleadings in its appendix. Rule 12(b) provides that, "if, on a motion asserting the defense numbered (6) to dismiss for failure of the pleading to state a claim upon which relief can be granted, matters outside the pleading are presented to and not excluded by the Court, the Motion shall be treated as one for summary judgment and disposed of as provided in Rule 56, and all parties shall be given reasonable opportunity to present all material made pertinent to such a motion by Rule 56." Defendant replies that the documents included in Defendant's Motion to Dismiss are documents referred to in Plaintiffs' own complaint. That the extraneous documents were originally submitted by plaintiffs rather than defendant is, however, irrelevant to our determination as to how to treat the motion. As stated by Wright and Miller:

The court has complete discretion to determine whether or not to accept any material beyond the pleadings that is offered in conjunction with a Rule 12(b)(6) motion. This discretion generally will be exercised on the basis of a determination of whether or not the proffered material, and the resulting conversion from the Rule 12(b)(6) to the Rule 56 procedure, is likely to facilitate the disposition of the action.

5A C. Wright & A. Miller, Federal Practice and Procedure, § 1366, at 491-93 (2d ed. 1990). Thus, we treat defendant's motion as one for summary judgment.

B. The Summary Judgment Standard

The standard for granting summary...