The opinion of the court was delivered by: Sweet, District Judge.
Defendant Federal Deposit Insurance Corporation ("FDIC") and
intervenor Joint Venture Asset Acquisition ("JVAA") have each
moved for summary judgment dismissing the claims of plaintiff
Melvyn Krauss ("Krauss") and upholding their claims against
Krauss. JVAA has also moved in the alternative for permission
to amend its claims against Krauss and to assert a cross-claim
for indemnity against FDIC. For the reasons set forth below,
both summary judgment motions are granted.
Krauss, a New York resident who holds a Ph.D. in economics,
is a Senior Economics Fellow at New York University and
Stanford University. In March 1987, Krauss borrowed $63,000
from First City National Bank and Trust Company ("FCNB") in
exchange for a promissory note ("the Note"). The loan has never
FDIC is a United States Government corporation which is the
receiver of FCNB. JVAA is a New York joint venture which
acquired Krauss's Note from FCNB prior to the FDIC's takeover
of the bank.
Krauss initial filed a complaint against FCNB, asserting
federal securities violations and common law fraud claims in
connection with the loan and his concurrent investment of the
proceeds, on August 4, 1987, and the case was assigned to the
Honorable Shirley Wohl Kram. FCNB answered and asserted a
counterclaim for recovery under the Note. In December, 1987,
Krauss sought to amend his complaint to request a trial by
jury. This motion was summarily denied by Judge Kram because
Krauss had not followed the proper pre-motion procedure.
In July 1988, FCNB moved for summary judgment on its
counterclaim. By memorandum opinion of October 18, 1989, the
motion was denied, Judge Kram having concluded that while FCNB
had made out a prima facie case for recovery on the Note there
was a genuine factual dispute regarding the relationship
between FCNB and Ronald Williams ("Williams"), the sponsor of
the program in which Krauss had invested the loan proceeds.
While it is indisputable that Krauss signed a
promissory note and that [FCNB] has established a
prima facie case, summary judgment is inappropriate
because Krauss has alleged a sufficiently close
relationship between [FCNB] and [Williams] for a
jury reasonably to infer that Krauss was knowingly
defrauded by [FCNB.]
Krauss v. First City National Bank and Trust Co., 87 Civ. 5585
(SWK) slip op. at 11, 1989 WL 125783 (S.D.N.Y. Oct. 18, 1989)
("the 1989 Opinion").
In December 1989, FCNB endorsed the Note and transferred it
to JVAA. Shortly thereafter, FDIC became the receiver of FCNB
and was substituted as the defendant in this action. JVAA moved
to intervene in the case, and Judge Kram granted the motion in
August 1990. JVAA then filed a complaint for recovery on the
Note against Krauss, and Krauss answered and asserted as
counterclaims substantially the claims which he had made
originally against FCNB.
On October 29, 1990, the case was transferred to the
Honorable John S. Martin, and when he recused himself it was
transferred to this Court. The present motions were filed in
February 1991, and were argued and fully submitted on March 8.
The facts relating to FCNB's loan to Krauss and the making of
the Note are set forth in detail in the 1989 Opinion,
familiarity with which is assumed. To summarize, Krauss became
interested in investing in oil drilling in late 1986, and after
receiving advise from his accountant and reviewing various
promotional materials he decided to invest in an oil drilling
partnership promoted by Williams and identified as the Forum
Consolidated Drilling — Taylor Program ("Forum"). The
investment was made by means of a loan from FCNB with the
proceeds of the loan to be paid to Forum. On March 20, 1987
Krauss executed the Note in exchange for the $63,000 loan. In
with loan, Krauss also signed a Borrower's Letter ...