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HAWKE ASSOC. v. CITY FEDERAL SAV. BANK

May 22, 1991

IN THE MATTER OF HAWKE ASSOCIATES, A NEW JERSEY PARTNERSHIP, PLAINTIFF,
v.
CITY FEDERAL SAVINGS BANK; THE RESOLUTION TRUST CORPORATION; AND CITY SAVINGS BANK, DEFENDANTS.



The opinion of the court was delivered by: Bissell, District Judge.

OPINION

This matter arises before the Court on the basis of the defendants' two motions. The first is to substitute one failed bank for the presently listed failed banks as defendant, as well as the Resolution Trust Corporation as the receiver for each of them. The second motion is to dismiss the three-count complaint for failure to state a claim upon which relief may be granted under Fed.R.Civ.P. 12(b)(6).

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).

II. DISCUSSION

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." (Rule 12(b)).

Defendants' motion to substitute named defendants will ...


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