CROWN BANK v. FEDERAL DEPOSIT INSURANCE CORPORATION et al
Filing
49
OPINION. Signed by Judge Claire C. Cecchi on 6/19/2017. (JB, )
NOT FOR PUBLICATION
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
Civil Action No.: 2:15-cv-3629-CCC-MF
CROWN BANK,
Plaintiff,
OPINION
V.
E’JSURANCE
DEPOSIT
FEDERAL
CORPORATION, in its capacity as
RECEIVER of FIRST BANKAMERICANO,
and FEDERAL DEPOSIT INSURANCE
CORPORATION in its corporate capacity,
Defendants.
CECCHI, District Judge.
I.
INTRODUCTION
This matter comes before the Court on the motion of Defendant Federal Deposit Insurance
Corporation (“FDIC”) in its capacity as receiver (“FDIC-Receiver”) for summary judgment
pursuant to Federal Rule of Civil Procedure 56. ECF No. 37. Plaintiff Crown Bank (“Plaintiff’
or “Crown Bank”) opposes the motion. ECF No. 41. Also before the Court is Plaintiffs crossmotion for discovery. Id. No oral argument was heard. $ee Fed. R. Civ. P. 78. For the reasons
set forth below, fDIC-Receiver’s motion for summary judgment is denied and Plaintiffs crossmotion for discovery is granted.
II.
BACKGROUND
This action is an accounting dispute arising out of Plaintiffs acquisition of the assets and
liabilities of a failed bank, first BankAmericano (the “Failed Bank”) from the FDIC in its capacity
as receiver of the Failed Bank. On July 31, 2009, Plaintiff, the FDIC in its corporate capacity
(“fDIC-Corporate”) and FDIC-Receiver entered into a Purchase and Assumption Agreement (the
“P&A Agreement”) with Crown Bank. See Defendant FDIC-Receiver’s Local Civil Rule 5 6.1(a)
Statement of Material Facts Not in Dispute (“DSMF”), ECF No. 37-2
¶ 7; Plaintiff Crown Bank’s
Local Civil Rule 56.1(a) Responsive (“PRSMF”) and Supplemental Statement of Material Facts
(“PSSMF”), ECF No. 41-1
¶
7. Through the P&A Agreement, Plaintiff acquired from FDIC
Receiver certain assets and liabilities of the Failed Bank. See P&A Agreement, ECF No. 41-4.
The P&A Agreement provides, inter atia, that Crown Bank had an exclusive option to accept an
assignment of any or all leases for the Failed Bank’s premises. P&A
§
4.6(b). If Crown Bank
decided not to accept the assignment, it was required to provide notice to FDIC-Receiver of its
decision within 180 days after the closing. Id.
§ 4.6(g)(ii).
If Crown Bank failed to provide notice,
FDIC-Receiver contends Crown Bank would be deemed to have assumed all leases, obligations,
and liabilities for the Failed Bank’s premises, including the obligation to reimburse FDIC-Receiver
for the security deposits and to purchase all of the furniture, fixtures, and equipment (“FF&E”)
owned by the Failed Bank and located thereon. Id.
§ 4.6(f), (g)(ii).
Crown Bank failed to provide
notice of its intention to vacate the Failed Bank’s premises in Roselle, West New York, and Union
City, thereby, FDIC-Receiver argues, Crown Bank invoked its obligation to assume the leases for
these premises, to reimburse FDIC-Receiver for the security deposits, and to purchase all FF&E
owned by Failed Bank at such premises. See DSMF
¶J 23-24, 43; PR$MF ¶J 23-24, 43.
To date, Crown Bank has not paid the amount demanded by FDIC-Receiver for the rent
for the Failed Bank’s Harrison, New Jersey premises, certain security deposits, and FF&E. Id.
¶ 41, 45.
Pursuant to the P&A Agreement, the purchase price for the ff&E is Fair Market Value
(“FMV”), and Crown Bank agreed to pay market rental value for the leased premises. See P&A
§
4.6(e)(i); Schedule 3.2. Pursuant to the terms of the P&A Agreement, the Parties agreed to the
2
appointment of Cost Recovery Solutions, LLC to determine the market value of these, and other,
items. DSMF
¶J
19; PRSMF
¶
19. On October 26, 2009, POP Valuation Inc., on behalf of the
FDIC, sent a letter to Robert Rahner at Cost Recovery Solutions, LLC to engage their services for
the Appraisal. See ECF No. 19-3. The letter stated: “PGP on behalf of the FDIC is your client
and unless authorized, you may not disclose any confidential data, including the value conclusion,
to anyone other than the undersigned.
.
.
.“
Id. Crown alleges that along with this letter, FDIC
Receiver exercised control over the Appraisal process, including questioning the Appraiser’s
conclusions, conducting improper ex parte discussions, and causing the appraiser to issue a
“revised” appraisal more than doubling its initial valuation.’ See PSSMF ¶ 11. Crown takes issue
with these contacts, alleging that “[t]hese discussions and agreements were not in keeping with the
neutral and independent valuation of the assets contemplated by the” P&A Agreement. Id.
¶
1$.
Based upon the Appraisal. Crown Bank was to pay $195,770 for the purchase of the fF&E,
which, to date, Crown Bank has not paid. DSMF
¶J 25-26;
PRSMF
¶J 25-26.
Additionally, it is
undisputed that Crown Bank removed some FF&E before vacating the Failed Bank’s premises in
Elizabeth, New Jersey. Id.
28. The Parties do not agree on which items were taken, nor the
purchase price of this FF&E due to the Appraisal dispute. Id.
¶ 29.
Due to the Appraisal, Crown
Bank also disputes the amount owed for unpaid rent for the Failed Bank’s premises in Harrison,
New Jersey. Id.
¶ 39.
Lastly, in regards to the Appraisal, Crown Bank disputes its obligation to
pay half of the Appraisal fee as required by the P&A Agreement, Art. 1., which FDIC-Receiver
alleges amounts to $4,325.00. See DSMF
¶ 34; PRSMF ¶ 34.
The first valuation used the method of “value-in-exchange” which “implies the value at which
assets would sell on a piecemeal basis,” and the second valuation used the method of “value-in
use” which “is the value in assets used in an operating business and reflects the extent to which
the underlying assets contribute to the profitability of the business enterprise.” See ECF Nos. 415,41-6.
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The Parties further dispute the following three loans: 544-546 LLC, Mika Property, and
C.O. Jones Operations. See Id.
¶J
50-68. The 544-546 LLC and Mika Property loans were
acquired by Crown Bank pursuant to the P&A Agreement. Id.
“Any loan purchased by the Assuming Bank
.
.
.
¶ 54.
The P&A Agreement states:
which the Failed Bank charged off2 during the
period from June 10, 2009 to Bank Closing [July 31, 2009] shall be deemed not to be charged off
for the purposes of the pro forma statement,” which was to reflect any adjustments to the initial
assessment of the Failed Bank’s assets and liabilities. P&A
§
8.1. The Parties dispute when the
charge offs occurred. Crown alleges that the information provided for its due diligence indicated
these loans had been charged off prior to June 10, 2009, and therefore, the charge offs were FDIC
Receiver’s responsibility. See ECF No. 41 at 23. FDIC-Receiver alleges that because the Failed
Bank charged off the disputed loans between June 10, 2009 and July 31, 2009, they were deemed
not to be charged off for the purposes of the pro forma statement, and were Crown Bank’s
responsibility. See DSMF
¶ 54.
The total value of these charge offs is approximately $390,000.
See PSSMF ¶ 27-29; Defendant FDIC as Receiver’s Response Pursuant to Local Civil Rule 56.1(a)
to Crown Bank’s Supplemental Statement of Material F acts, ECF No. 45-1
¶ 27-29.
As to the C.O. Jones Operations loan, the Parties dispute whether the loan was among those
included in the “virtual data room,” which was made available to all potential bidders regarding
information on the loans held by the Failed Bank. See DSMF
¶J 57-58, 64; PRSMF ¶ 57-58, 64.
Due to this issue, the Parties dispute whether Crown Bank is liable for the C.O. Jones Operations
2
“A charge-off is defined as ‘[treating] (an account receivable) as a loss or expense because
payment is unlikely; to treat as a bad debt.” Conquest v. WCMMorlg. Corp., No. 16-03604, 2017
U.S. Dist. LEXIS 47463, at *14 (E.D. Pa. Mar. 29, 2017) (quoting Charge-Off Black’s Law
Dictionary (10th ed. 2010)).
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loan. fDIC-Receiver states that the value of the C.O. Jones Operations loan is $l,617,713,75.
DSMFJ67.
Plaintiff initiated the instant action against the FDIC in its corporate capacity (“FDIC
Corporate”) and FDIC-Receiver on May 29, 2015. ECF No. 1. Plaintiff filed an Amended
Complaint on June 27, 2016. ECF No. 2$. Plaintiff alleges the following claims: breach of
contract against fDIC-Receiver and fDIC-Corporate (Counts I and II); breach of the covenant of
good faith and fair dealing against FDIC-Receiver (Count III); and declaratory judgment against
FDIC-Corporate (Count TV).3 On July 25, 2016, FDIC-Receiver filed an answer to the Amended
Complaint and Counterclaims against Plaintiff. ECF No. 31. FDIC-Receiver alleges fourteen
Counterclaims against Crown Bank, including: breach of contract, unjust enrichment, conversion,
and breach of implied covenant of good faith and fair dealing. See Id. On November 1, 2016,
FDIC-Receiver filed a motion for summary judgment as to all Counterclaims and for Count I in
the Amended Complaint. ECF No. 37. On November 5,2016, Plaintiff filed an opposition to the
summary judgment motion and a cross-motion for discovery. ECF No. 41.
III.
LEGAL STANDARD
Summary judgment is appropriate if the “depositions, documents, electronically stored
information, affidavits or declarations, stipulations.. admissions, interrogatory answers, or other
.
materials” demonstrate that there is no genuine issue as to any material fact, and, construing all
facts and inferences in a light most favorable to the non-moving party, “the moving party is entitled
to a judgment as a matter of law.” fed. R. Civ. P. 56(c); see Celotex Corp. v. Catrett, 477 U.s.
317 (1986); ?ollockv. Am. Tel. & Tel. LongLines, 794 F.2d 860, $64 (3d Cir. 1986).
FDIC-Corporate filed a motion to dismiss on July 25, 2016 seeking to dismiss Counts II and
IV. ECF No. 32. On March 16, 2017, the Court denied the motion. ECF No. 47.
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The moving party has the initial burden of proving the absence of a genuine issue of
material fact. See Celotex, 477 U.S. at 323. Once the moving party meets this burden, the nonmoving party has the burden of identifying specific facts to show that, to the contrary, there exists
a genuine issue of material fact for trial. See Matsushita Elec. Indus. Co. v. Zenith Radio Corp.,
475 U.S. 574, 586-87 (1986). The non-moving party must “go beyond the pleadings and by [its]
own affidavits, or by the ‘depositions, answers to interrogatories, and admissions on file,’
designate ‘specific facts showing that there is a genuine issue for trial.” Celotex, 477 U.S. at 324;
see also Lujan v. Nat’l Wildlife Fed’n, 497 U.S. $71, 888 (1990) (“The object of [Rule 56(e)] is
not to replace conclusory allegations of the complaint
. . .
with conclusory allegations of an
affidavit.”); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249 (1986); Big Apple BMW, Inc. v.
BMW ofN. Am., Inc., 974 F.2d 1358, 1363 (3d Cir. 1992) (“To raise a genuine issue of material
fact,” the opponent must “exceed the ‘mere scintilla’ threshold
“).
A fact is “material” if a
dispute “might affect the outcome of the suit under governing law,” and a “genuine” issue exists
as to that fact “if the evidence is such that a reasonable jury could return a verdict for the
nonmoving party.” Anderson, 477 U.S. at 24$. The Court’s role is to determine whether there is
a genuine issue for trial, not to weigh the evidence and decide the truth of the matter. Id. at 249.
IV.
DISCUSSION
FDIC-Receiver moves for summary judgment as to all Counterclaims and for Count I in
the Amended Complaint. See ECF No. 37. fDIC-Receiver’s Counterclaims can be divided into
three disputed categories for claims relating to: the Appraisal, the loan charge offs, and additional
amounts. For the reasons set forth below, fDIC-Receiver’s motion for summary judgment is
denied, and Crown Bank’s cross-motion for discovery is granted.
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A. Appraisal
The following claims arise from the Appraisal dispute: the FF&E for Roselle, West New
York, Union City, and Elizabeth Premises (Counts I-V); and the unpaid rent at the Failed Bank’s
Harrison premises (Counts Vill-IX). FDIC-Receiver argues it is entitled to summary judgment as
to issues regarding the Appraisal, as “the express terms of the P&A Agreement and the undisputed
facts demonstrate that Crown Bank assumed the leases for the Roselle, West New York, and Union
City Bank Premises and, therefore, is required to purchase the Furniture and Equipment at those
Bank Premises,” at the rate of the market value and FMV as determined by the Appraiser.
Memorandum of Law in Support of Defendant FDIC, as Receiver’s Motion (“FDIC-Receiver
Mem.”), ECF No. 37-4 at 28-29, 33. Crown Bank argues that fDIC-Receiver’s discussions with
the Appraiser were not disclosed, that the revisions were discussed and conducted without Crown
Bank’s knowledge or involvement, and that these discussions and agreements between fDIC
Receiver and the Appraiser “were not in keeping with the neutral and independent valuation of the
assets contemplated” by the P&A Agreement. PSSMF
¶
18.
The Court finds there is a genuine issue of material fact as to the extent and nature of FDIC
Receiver’s correspondence with the Appraiser and whether such correspondence constitutes a
breach of the P&A Agreement.
Accordingly, the Court denies FDIC-Receiver’s motion for
summary judgment as to Counterclaim Counts I-V and Counts Vill-IX and as to Crown Bank’s
affirmative claim of breach of contract, Count I of the Amended Complaint. The Court also grants
Crown Bank’s motion for discovery as to FDIC-Receiver’s interaction with the Appraiser and
involvement in the Appraisal process.
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B. Additional Amounts
fDIC-Receiver alleges it is entitled to summary judgment as to Counterclaim Counts VIVII for Crown Bank’s share of Appraisal fees, Counts X-XI for the security deposits for the
assumed leases and Counts XII-XIII for additional amounts due. FDIC-Receiver alleges that it
has satisfied its burden to show there is no genuine issue of material fact by providing: a Settlement
Transaction Report reflecting the amounts for the Appraisal fees and security deposits; and a chart
identified as Schedule A and Schedule B which list additional amounts due to fDIC-Receiver and
Crown Bank. See fDIC-Receiver Mem. at 16-19; 34-35; ECF No. 19-3; ECF No. 37-2. Crown
Bank argues that this evidence is not sufficient to satisfy fDIC-Receiver’s burden to show there is
no issue of fact, as there is “no information concerning (1) where the information in the summary
chart comes from; (2) what source documentation is used to create the chart; (3) who prepared the
summary chart; (4) any statement as to the accuracy of the summary chart; or (5) why the original
source documentation is not available.” Plaintiffs Brief in Opposition (“P1. Br.”), ECF No. 41 at
19-20. Crown Bank argues that because the evidence set forth by FDIC-Receiver would not be
admissible at trial, fDIC-Receiver may not use it to meet its burden. See Id. at 20.
The Court agrees with Crown Bank. The best evidence rule requires that “[am
original
writing, recording, or photograph is required in order to prove its content unless these rules or a
federal statute provides otherwise.” fed. R. Evid. 1002. Therefore, a second hand report or chart
produced by fDIC-Receiver would not be admissible at trial when the original writing would be
the best evidence for the amounts alleged by fDIC-Receiver. Accordingly, FDIC-Receiver’s
motion to summary judgment as to Counterclaim Counts VT-Vu, X-XI, and XII-XIII is denied.
The Court also grants Crown Bank’s motion for discovery as to the information relating to the
original writings regarding the appraisal fees, security deposits, and additional amounts.
$
C. Disputed Loans
fDIC-Receiver alleges it is entitled to summary judgment as to Crown Bank’s affirmative
claim of breach of contract (Count I) in the Amended Complaint regarding the three disputed loans.
FDIC-Receiver argues because it has attached a print out of the information available to Crown
Bank through the virtual data room, there is no genuine issue of material fact that the charge offs
as to the 544-546 LLC and Mika Property loans occurred after June 10, 2009, and that the C.O.
Jones Operations loan was present in the information provided in the virtual data room. See fDIC
Receiver Mem. at 36-37. Crown Bank has submitted a certification by Jacinto X. Rodrigues, the
Chairman and CEO of Crown Bank, which certifies that the due diligence information provided to
Crown Bank indicated that balances of the 544-546 LLC and Mika Property loans included the
charge offs and that the C.O. Jones Operations loan was not included in the information provided.
See Certification of Jacinto X. Rodrigues, December 19, 2016, ECF No. 41-2
¶J 24-37.
The Court finds there is a genuine issue of material fact as to whether the charge offs in the
544-546 LLC and Mika Property loans were to take place prior to June 10, 2009, and whether the
C.O. Jones Operation loan was included in the due diligence provided to Crown Bank.
Accordingly, fDIC-Receiver’s motion for summary judgment as to Crown Bank’s affirmative
Count I of breach of contract is denied. The Court also grants Crown Bank’s motion for discovery
as to information relating to the 544-546 LLC and Mika Property charge offs and whether the C.O.
Jones Operations loan was available to Crown Bank through the due diligence information
provided.
D. Liability
fDIC-Receiver argues that “at a minimum” the Court “should grant summary judgment
on liability in favor of fDIC-Receiver on its Counterclaim[s].”
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fDIC-Receiver’s Reply
Memorandum of Law in Support, ECF No. 44 at 8. FDIC-Receiver alleges fourteen total counts
of the following claims against Crown Bank: breach of contract, unjust enrichment, conversion,
and breach of implied covenant of good faith and fair dealing. See ECF No. 31.
To state a claim for breach of contract, Plaintiff must allege four factors: “(1) a contract
between the parties; (2) a breach of that contract; (3) damages flowing from there; and (4) that the
party stating the claim performed its own contractual obligations.”4 Gordon v, United Continental
Holding, Inc., 73 F. Supp. 3d 472, 478 (D.N.J. 2014). Here, the Court finds a genuine issue of
material fact as to whether FDIC-Receiver performed its own contractual obligations in its
correspondence with the Appraiser and whether Crown Bank breached the contract, in that it may
not be obligated to pay the amounts demanded by FDIC-Receiver.
To state a claim for unjust enrichment, a plaintiff must show “defendant received a benefit
and that retention of that benefit without payment would be unjust.” Goldsmith v. Camden Cnty,
Surrogate ‘s Office, 408 N.J. Super. 376, 382 (N.J. App. Div. 2009) (internal quotation marks
omitted). Here, the Court finds a genuine issue of material fact as to whether Crown Bank’s
retention of the benefit received would be unjust.
To state a claim for conversion, a “[p]laintiff must prove that {d]efendants wrongfully and
willfully interfered with the dominion of [p]laintiff s property in a manner inconsistent with the
other person’s rights in that property.” McA dam v. Dean Witter Reynolds, Inc., $96 F.2d 750, 771
Section 13.4 of the P&A Agreement provides that the P&A “shall be governed by and construed
in accordance with the federal law of the United States of America, and in the absence of
controlling federal law, in accordance with the laws of the state in which the main office of the
failed bank is located.” ECF No. 28-I. As the failed bank was located in New Jersey, a breach of
contract claim is typically governed by state law, and neither party has advocated otherwise, the
Court will apply New Jersey contract law.
‘
(3d Cir. 1990). Here, the Court finds a genuine issue of material fact as to whether Crown Bank
wrongfully interfered with the property rights of FDIC-Receiver.
The covenant of good faith and fair dealing is implied in every contract in New Jersey and
requires that neither party to a contract “shall do anything [that] will have the effect of destroying
or injuring the right of the other party to receive the fruits of the contract.” Seidenberg v. Summit
Bank, 34$ N.J. Super. 243, 254 (N.J. App. Div. 2002). Proof of a party’s “bad motive” or
“intention” must support a claim of breach of contract grounded on an alleged breach of the implied
covenant of good faith and fair dealing. See Mendez v. Avis Budget Grp., Inc., No. l1—6537-JLL,
2012 WL 122470$, at *6 (D.N.J. Apr. 10, 2012) (citation omitted). Here, the Court finds a genuine
issue of material fact as to Crown Bank’s “bad motive” or “intention.”
Accordingly, FDIC-Receiver’s motion for summary judgment as to liability for its
Counterclaims is denied.
V.
CONCLUSION
For the reasons set forth above, fDIC-Receiver’s motion for summary judgment is denied
without prejudice and Crown Bank’s cross-motion for discovery is granted. An appropriate Order
accompanies this Opinion.
Date:June
1 9
,2017
CLAIRE C. CECCHI, U.S.D.J.
11
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