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BANK OF NEW YORK v. SASSON

March 5, 1992

THE BANK OF NEW YORK, Plaintiff, against ENRIKO SASSON, Defendant. THE BANK OF NEW YORK, Plaintiff, -against- ENRIKO SASSON and MICHAEL E. THOMAS, Defendants.


The opinion of the court was delivered by: MICHAEL B. MUKASEY

 MICHAEL B. MUKASEY, U.S.D.J.

 These actions were brought by plaintiff, Bank of New York ("BNY"), to enforce the terms of a personal loan to Enriko Sasson, 90 Civ. 4860 ("Personal Loan Action"), and to enforce the terms of a guaranty executed by defendants Sasson and Michael E. Thomas, whereby they agreed to ensure the payment of all principal and interest on plaintiff's loan to the Techtron Centre Limited Partnership, 90 Civ. 4861 ("Techtron Action"). By Opinion and Order dated September 23, 1991, plaintiff's motions for summary judgment were granted. Bank of New York v. Sasson, 1991 U.S. Dist. LEXIS 13174 (S.D.N.Y.1991). At that time, judgment was not entered because of defendants' pending motions for leave to add counterclaims. Bank of New York, slip op. at 15-17. Those motions are now fully submitted. Plaintiff also has moved for entry of judgment on its claims for repayment pursuant to Fed. R. Civ. P. 54(b). *fn1" For the reasons set forth below, defendants' motions are denied. Because this disposes of the case, plaintiff's motions need not be addressed.

 I.

 For current purposes, familiarity with the September 23 Opinion and Order is assumed. To the extent the facts are summarized below, the summary is drawn from defendants' proposed counterclaims and from Sasson's affidavit attached to those counterclaims. In aid of a fair evaluation of the proposed counterclaims, the statements in the attached affidavit are assumed to have been incorporated therein. Cf. Kramer v. Time Warner, Inc., 937 F.2d 767, 773 (2nd Cir. 1991); Fed. R. Civ. P. 10(c).

 On April 29, 1985, plaintiff's predecessors agreed to lend to Techtron Centre Limited Partnership up to $ 3.8 million. The original maturity date of the Note was August 27, 1986. Following negotiations, on March 28, 1988, the debtor executed a Restated Note that extended the maturity date to September 27, 1989. (Restated Note p. 1; Sasson Aff. para. 46) The Restated Note provides that its terms "may not be modified or terminated orally," and that it "shall be construed and enforced in accordance with the laws of the State of Michigan." (Restated Note p. 2) At the closing on the first Note, defendants executed a full and unconditional guaranty of Techtron's obligations ("Guaranty"). Like the Restated Note, the Guaranty provides that it cannot be modified orally and that it is governed by Michigan law. (Guaranty paras. 6, 8)

 As the September 27, 1989 maturity date approached, Sasson and officers of BNY discussed the possibility that BNY would re-underwrite the loan and further extend the maturity date. Defendants maintain that an oral agreement was reached to extend the maturity date to March 27, 1991. (Sasson Aff. para. 50)

 Defendants have moved for leave to add counterclaims, denominated "counts," in both actions. In the Techtron Action, defendants would allege that BNY: breached its oral agreement to extend and re-underwrite the Techtron loan (Count I); breached an implied covenant of good faith and fair dealing in the administration of the Techtron loan (Count II); and induced the detrimental reliance of Sasson, Thomas and Techtron, who did not seek alternative financing due to promises made by BNY to extend the loan (Count III). Similarly, in the Personal Loan Action defendant Sasson would allege that BNY: breached its agreement to extend the line of credit (Count I); breached an implied covenant of good faith and fair dealing in its administration of the line of credit (Count II); and induced the detrimental reliance of Sasson, who did not seek alternative financing due to BNY's promise to extend the loan (Count III).

 II.

 Fed. R. Civ. P. 13(f) states: "When a pleader fails to set up a counterclaim through oversight, inadvertence, or excusable neglect, or when justice requires, the pleader may by leave of court set up the counterclaim by amendment." Courts must read Fed. R. Civ. P. 13(f) together with Fed. R. Civ. P. 15(a), which provides that leave to amend a pleading "shall be freely given when justice so requires." Banco Para El Comercio Exterior De Cuba v. First Nat'l City Bank, 744 F.2d 237, 243 (2d Cir. 1981). As the Supreme Court has explained: "In the absence of any apparent or declared reason -- such as undue delay, bad faith or dilatory motive on the part of the movant, repeated failure to cure deficiencies by amendments previously allowed, undue prejudice to the opposing party by virtue of allowance of the amendment, futility of amendment, etc. -- the leave to amend should, as the rules require, be 'freely given.'" Foman v. Davis, 371 U.S. 178, 182, 9 L. Ed. 2d 222, 83 S. Ct. 227 (1962).

 However, leave to replead should be denied if the proposed counterclaims are meritless and therefore amendment would prove futile. Albany Ins. Co. v. Esses, 831 F.2d 41, 45 (2d Cir. 1987), overruled on other grounds, United States v. Indelicato, 865 F.2d 1370 (2nd Cir. 1989). If the claims would be subject to dismissal under Fed. R. Civ. P. 12(b)(6), the court should refuse to grant leave to amend rather than assent and then await a motion to dismiss. Northwestern National, 717 F. Supp. at 153; 3 Moore's Federal Practice para. 15.08[4] (1991). Accordingly, the proposed counterclaims should be construed in the light most favorable to the party moving to amend, see Scheuer v. Rhodes, 416 U.S. 232, 236, 40 L. Ed. 2d 90, 94 S. Ct. 1683 (1974), and leave to amend should be denied if it appears that the movant can prove no set of facts in support of the proposed claims that would entitle him to relief. See Dahlberg v. Becker, 748 F.2d 85, 88 (2d Cir. 1984), cert. denied, 470 U.S. 1084, 85 L. Ed. 2d 144, 105 S. Ct. 1845 (1985).

 A. The Contract Claims

 In the Personal Loan Action, Sasson alleges that "prior to May 30, 1990, counter-defendant orally agreed to extend the maturity date of the line of credit Note" to May 30, 1991. (Pers. Cl. para. 34; Sasson Aff. paras. 16, 32, 34) *fn2" Sasson claims that as a result of BNY's breach of ...


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