I. FACTS AND BACKGROUND
A. The Parties
Plaintiff Hawke Associates is a New Jersey partnership with
offices located in Elizabeth, New Jersey. (Am. Compl., Intro.)
Plaintiff's complaint is against three defendants. The first
is City Federal Savings Bank ("City Federal"), the original
party to the lease forming the basis for the complaint.
However, on December 8, 1989, the Office of Thrift Supervision
("OTS") of the United States Department of the Treasury
declared City Federal insolvent and ordered it closed.
(Id., Ct. One, ¶ 3). On the same date, OTS appointed defendant
Resolution Trust Corporation ("RTC") as receiver of City
Federal. (Id.; McClelland Aff., Exh. A). RTC, as receiver sold
most of the City Federal assets to a newly formed bank, City
Savings Bank, F.S.B. ("City Savings Bank"). (Id., Ct. One, ¶
4). Both City Savings Bank and RTC as City Federal's receiver
are named as defendants.
Since the complaint herein was filed, City Savings Bank has
been declared insolvent by OTS, and RTC was appointed as
receiver. (Notice of Removal, Exh. A). RTC sold most of City
Savings Bank's assets to another, newly chartered bank, City
Savings, F.S.B. ("Savings, F.S.B."). RTC was appointed as
conservator to Savings, F.S.B.
Plaintiff filed this action in the New Jersey Superior
Court, and defendants removed to this Court on the basis of
28 U.S.C. § 1331 and the Financial Institutions Reform Recovery
and Enforcement Act of 1989 ("FIRREA"), Pub.L. 101-73, 103
Stat. 183. (See Notice of Removal, ¶ 9). Pursuant to
12 U.S.C. § 1441a(b)(4), RTC, as conservator and/or receiver for a failed
institution, has the same powers provided to the Federal
Deposit Insurance Corporation under 12 U.S.C. § 1821,*fn1
1822,*fn2 and 1823.*fn3
B. Allegations of the Complaint
On September 18, 1987, plaintiff Hawke entered into a lease
with City Federal for space in a building plaintiff owned in
Elizabeth, New Jersey. (Am.Compl., Ct. One, ¶ 1). The written
lease covers space in the basement, first floor and mezzanine
level of the building, and is for the period from May 24, 1988
through May 31, 1998. (Id., ¶ 1; Exh. A).
Paragraph 21(4) of the lease provides that the tenant is in
default of the lease "upon appointment of a trustee or a
receiver to take possession of substantially all of the
tenant's assets located at the premises or of tenant's
interest in the lease, where possession is not restored to the
tenant within sixty (60) days." (Id., Ct. One, ¶ 2). In such
event, the lease provides that the landlord may terminate the
right to possession and is entitled to recover damages,
including costs of renovation and reletting, and attorneys'
fees. (Id., Ct. One, ¶ 6). Accordingly, based on City Federal's
receivership, plaintiff claims that City Federal is in default,
that plaintiff is entitled to possession, and that it "has been
damaged by the Defendants' default and continued possession of
the premises, in that the value of the property has been
decreased due to the receivership of the Defendants and other
reasons." (Id., Ct. One, ¶ 8). This constitutes the First
Count of the complaint.
The Second and Third Counts of the complaint concern City
Federal's alleged leasing of the second through fifth floors
of plaintiff's building. Specifically, plaintiff claims in the
Second Count that City Federal represented that it would
continue to occupy this space, and that plaintiff relied
on this representation by providing more favorable terms in
the written lease described above. (Id., Ct. Two, ¶¶ 2-4).
However, City Federal has vacated this space, and plaintiff
claims it has been damaged as a result. (Id., Ct. Two, ¶ 5).
The Third Count asserts that City Federal's representations and
subsequent exit from the additional space constitutes fraud.
(Id., Ct. Three, ¶¶ 4-5).
Plaintiff's lease with City Federal was assigned to City
Savings Bank on August 9, 1990, and thereafter, on November 5,
1990, it was assigned to Savings, F.S.B. (See McClelland Aff.,
Exhs. D, G).
Defendants move to substitute Savings, F.S.B. and the RTC as
its receiver for the presently named defendants under Fed.
R.Civ.P. 25, asserting that they are the real parties in
interest. Defendants move to dismiss the First Count of the
complaint on the basis that the lease provision providing for
a default is unenforceable under FIR-REA. They move to dismiss
the Second and Third Counts on the basis that plaintiffs fail
to allege facts sufficient to satisfy the requirements of
12 U.S.C. § 1823(e).
As indicated above, defendants' second motion is a motion to
dismiss for failure to state a claim upon which relief can be
granted under Fed.R.Civ.P. 12(b)(6). However, both parties
have submitted substantial additional information. This Court,
in the interests of justice and efficiency, will consider this
information in its determination of the present motions.
Accordingly, defendants' motion "shall be treated as one for
summary judgment and disposed of as provided in Rule 56."
Defendants' motion to substitute named defendants will be
A. Defendants' Motion to Substitute Defendants
Defendants move under Fed.R.Civ.P. 25(c) for a substitution
of parties defendant. Specifically, they seek to substitute
Savings, F.S.B. and its receiver RTC for City Federal, City
Savings Bank and RTC as receiver for them.
Rule 25(c) provides:
In case of any transfer of interest, the action
may be continued by or against the original
party, unless the court upon motion directs the
person to whom the interest is transferred to be
substituted in the action or joined with the
original party. Service of the motion shall be
made as provided in subdivision (a) of this rule.
The decision of whether to enter an order substituting or
adding a new party under this rule is within the discretion of
the court. P.P. Inc. v. McGuire, 509 F. Supp. 1079, 1083 (D.N.J.
1981) (citations omitted).
In the present case, all parties agree*fn4 that Savings,
F.S.B. is the transferee of most of the assets of City Savings
Bank, who is the transferee of City Federal. The transferred
assets include plaintiff's lease, such that the real party in
interest with respect to the lease is Savings, F.S.B. With
respect to plaintiff's Second and Third Counts, Savings,
F.S.B. is the actual transferee in interest of any rights and
obligations of City Federal, so is properly in the action.
Accordingly, defendants' motion to substitute Savings, F.S.B.
for City Federal and City Savings Bank is granted. RTC remains
as a defendant as receiver for City Federal and City Savings
Bank, and conservator of Savings, F.S.B.
B. Defendants' Motion for Summary Judgment
1. Standards Governing Summary Judgment
Under Federal Rule of Civil Procedure 56(c), summary
judgment should be granted "if the pleadings, depositions,
answers to interrogatories, and admissions on file, together
with the affidavits, if any, show that there is no genuine
issue as to any material fact and that the moving party is
entitled to a judgment as a matter of law." See Chipollini v.
Spencer Gifts, Inc., 814 F.2d 893, 896 (3d Cir.) (en banc),
cert. dismissed, 483 U.S. 1052, 108 S.Ct. 26,
97 L.Ed.2d 815 (1987). In deciding a motion for summary
judgment, the facts must be viewed in the light most favorable
to the nonmoving party and any reasonable doubt as to the
existence of a genuine issue of fact is to be resolved against
the moving party. Continental Insurance Co. v. Bodie,
682 F.2d 436, 438 (3d Cir. 1982). The moving party has the burden of
establishing that there exists no genuine issue of material
fact. See Celotex Corp. v. Catrett, 477 U.S. 317, 106 S.Ct.
2548, 91 L.Ed.2d 265 (1986). The Supreme Court recently stated
that in applying the criteria for granting summary judgment,
the judge must ask himself not whether he thinks
the evidence unmistakably favors one side or the
other but whether a fair-minded jury could return
a verdict for the plaintiff on the evidence
presented. The mere existence of a scintilla of
evidence in support of the plaintiff's position
will be insufficient; there must be evidence on
which the jury could reasonably find for the
plaintiff. The judge's inquiry, therefore,
unavoidably asks whether reasonable jurors could
find by a preponderance of the evidence that the
plaintiff is entitled to a verdict. . . .
Anderson v. Liberty Lobby, Inc.,