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BLAIS CONSTRUCTION CO. v. HANOVER SQUARE ASSOCIATES-I

March 27, 1990

BLAIS CONSTRUCTION CO., INC., PLAINTIFF,
v.
HANOVER SQUARE ASSOCIATES-I, LIMITED PARTNERSHIP AND MATTHEW ANTELL, INDIVIDUALLY AND AS A GENERAL PARTNER OF THE LIMITED PARTNERSHIP, DEFENDANTS. HANOVER SQUARE ASSOCIATES-I, LIMITED PARTNERSHIP AND MATTHEW ANTELL, INDIVIDUALLY AND AS A GENERAL PARTNER OF THE LIMITED PARTNERSHIP, THIRD-PARTY PLAINTIFFS, V. YANKEE BANK FOR FINANCE & SAVINGS, FSB AND THE FEDERAL DEPOSIT INSURANCE CORPORATION AS RECEIVER OF YANKEE BANK FOR FINANCE AND SAVINGS, FSB, THIRD-PARTY DEFENDANTS.



The opinion of the court was delivered by: McCURN, Chief Judge.

  MEMORANDUM-DECISION AND ORDER

I. Introduction

This suit is one of a number of construction contract and foreclosure actions arising out of the failure of efforts to renovate two large historical buildings located in the downtown business district of Syracuse, New York. These structures are generally known as the Larned building and the SA & K building. Different limited partnerships with similar names acted as the owners/developers of the two buildings. Hanover Square Associates-I, Limited Partnership ("HSA-I"), was the owner/developer of the Larned building. Hanover Square Associates-II, Limited Partnership ("HSA-II"), owned and developed the SA & K Building. Matthew Antell served as general partner of both HSA-I and HSA-II. Both renovation projects were financed by the same bank, Yankee Bank for Finance & Savings, FSB ("Yankee Bank"). Yankee Bank, as mortgagee, brought suit against both HSA-I and HSA-II, as mortgagors, for defaulting on payments due under separate construction loan agreements. While the foreclosure actions were proceeding, the Federal Home Loan Bank Board found Yankee Bank to be insolvent and appointed the Federal Deposit Insurance Corporation ("FDIC") as its receiver. In all this litigation the FDIC has been effectively substituted as the representative of Yankee Bank.

A third group of participants in these proceedings are contractors and subcontractors who claim that they were not compensated for labor and materials provided toward the Larned and SA & K projects. These businesses have placed mechanic's liens on the two buildings, pursuant to N Y Lien Law § 13, in an attempt to obtain payment. Plaintiff Yankee Bank/FDIC joined the mechanic's lienors as defendants in the foreclosure actions.

After Yankee Bank was placed into receivership, the FDIC successfully removed both foreclosure actions to this court pursuant to 12 U.S.C. § 1819. See Yankee Bank v. Hanover Square-One, 693 F. Supp. 1400 (N.D.N.Y. 1988). The two foreclosure actions have proceeded separately; litigation concerning the SA & K building (which has been designated civil action 88-CV-224) is near completion — the premises having been sold at a foreclosure sale. On the other hand, the foreclosure action with respect to the Larned building (civil action 88-CV-223) has been delayed — perhaps due to a fire which severely damaged that structure.

The motions addressed in this memorandum-decision and order pertain to a third lawsuit, one based on the alleged breach of a construction contract, that is factually related to the two foreclosure actions. The plaintiff in this suit is Blais Construction Company ("Blais"). Blais entered into a contract with HSA-I to be the general contractor for the renovation of the Larned building in July of 1986 and has brought suit against HSA-I and Matthew Antell for allegedly breaching that contract (the "main action"). Over two years after the contract action was initiated, defendants HSA-I and Antell brought a third-party action against the FDIC in its role as receiver for Yankee Bank. The third-party complaint, which will be described in more detail below, generally asserts that HSA-I's breach, if any, was caused by Yankee Bank's failure to abide by the terms of a construction loan agreement. The FDIC subsequently removed the contract action from state court pursuant to 12 U.S.C. § 1819 and has now moved to dismiss HSA-I/Antell's third-party complaint. Should the third-party complaint be dismissed plaintiff Blais requests that the action be remanded to state court for want of federal subject matter jurisdiction.

II. Legal Background

The FDIC, as a third-party defendant, moves for dismissal of the third-party complaint on the basis that the requirements of Rule 14(a) of the Federal Rules of Civil Procedure ("Third Party Practice") have not been met. Rule 14(a) states in applicable part:

  At any time after commencement of the action a
  defendant party, as a third-party plaintiff, may cause
  a summons and complaint to be served upon a person not
  a party to the action who is or may be liable to the
  third-party plaintiff for all or part of the
  plaintiff's claim against the third-party plaintiff.
  . . . Any party may move to strike the third-party
  claim, or for its severance or separate trial.

According to the FDIC, the claims asserted in the third-party complaint are not sufficiently derivative or dependent upon the adjudication of the claims in the main action, and therefore, the FDIC is not a person "who is or may be liable to the third-party plaintiff for all or part of the plaintiff's claim against the third-party plaintiff." Fed.R.Civ.P. 14 (a).

Third-party practice, also known as impleader, is generally permitted when the third party's liability is"dependent upon the outcome of the main claim" or when the third party is"potentially secondarily liable" to the defendant. Kenneth Leventhal & Co. v. Joyner Wholesale Co., 736 F.2d 29, 31 (2nd Cir. 1984). In all cases, however,"[t]he decision whether to permit a defendant to implead a third-party defendant rests in the trial court's discretion." Id. The general purpose of Rule 14(a) is to serve judicial economy, discourage inconsistent results, and limit the prejudice incurred by a defendant by removal of the time lag between a judgment against the defendant and a judgment over against a third-party defendant. Dery v. Wyer, 265 F.2d 804, 806-07 (2nd Cir. 1959). The liability of the third party defendant "must not arise out of a separate and independent claim," Farmers Prod. Credit Ass'n of Onconta v. Whiteman, 100 F.R.D. 310, 312 (N.D.N.Y. 1983), and "the mere fact that the alleged third-party claim arises from the same transaction or set of facts as the original claim is not enough." 6 Wright & Miller, Federal Practice and Procedure, § 1446 at 257 (1971). A frequently cited summary of the considerations involved when determining whether Rule 14 (a) impleader is proper is found in United States v. Joe Grasso & Son, Inc., 380 F.2d 749 (5th Cir. 1967), where the court stated:

  [W]hen the defendant's right against the third party
  is merely an outgrowth of the same core of facts which
  determines the plaintiff's claim, impleader is
  properly used "to reduce litigation by having one
  lawsuit do the work of two." . . . But we are also
  cognizant of the obverse rule . . . that an entirely
  separate and independent claim cannot be maintained
  against a third party under Rule 14, even though it
  does arise out of the same general set of facts as the
  main claim. . . . The question whether a defendant's
  demand presents an appropriate occasion for the use of
  impleader or else constitutes a separate claim has
  been resolved consistently by permitting impleader
  only in cases where the third party's liability was in
  some way derivative of the outcome of the main claim.
  In most such cases it has been held that for impleader
  to be available the third party defendant must be
  "liable secondarily to the original defendant in the
  event that the latter is held liable to the
  plaintiff." . . . Stating the same principle in
  different words, other authorities declare that the
  third party must necessarily be liable over to the
  defendant for all or part of the plaintiff's recovery
  . . . or that the defendant must attempt to pass on to
  the third party all or part of the liability asserted
  against the defendant. . . . Whichever expression is
  preferred, it is clear that impleader under Rule 14
  requires that the liability of the third party be
  dependent upon the outcome of the main claim.
  Id. at 751-52; see also Index Fund, Inc. v. Hagopian, 417 F. Supp. 738, 743-44 (S.D.N Y 1976) (overview of Rule 14(a) cited with approval by the Second Circuit in ...

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