Lobby, Inc., 477 U.S. at 247-48.
B. Third Party Beneficiary Breach of Contract Claim
This claim alleges that JNB improperly administered Jock's loans. Although plaintiffs' argument is not totally clear on this claim, the court will perform as full an evaluation of the arguments as is possible. The first issue is the $ 150,000.00 grid note issued on June 15, 1989. Taking plaintiffs' allegations as true, JNB never notified plaintiffs that the $ 100,000.00 note was paid by renewal and that their CD was collateral on the $ 150,000.00 renewal note. As plaintiffs state, "nor did [plaintiffs] consent expressly or by operation of law to a reissue of their original limited guaranty under the facts and circumstances which prevailed where the JNB had misrepresented the status of Jock's project." (Pls.' Mem. Law at 7 (emphasis added).) Thus, this claim is based upon an unwritten condition to the guaranty: that the guaranty could only be reissued if JNB told the truth about Jock's financial condition. Likewise, as discussed above, the invalidity of the hypothecation agreements is based upon fraudulent inducement, which is an agreement subject to § 1823. Because the claim is based upon a condition which falls within the ambit of § 1823(e) but fails to meet the requirements of that section, the claim fails as a matter of law. See Giammettei, 34 F.3d at 58-59; Bernstein, 944 F.2d at 108; Simms, 816 F. Supp. at 824; Krauss, 769 F. Supp. at 524; see also Yankee Bank for Finance & Savings, No. 88- CV-224, 1989 U.S. Dist. LEXIS 9159, at *37 (claim against FDIC based on oral commitment fails).
The second issue is the proper application of HUD distributions to the $ 150,000.00 grid note. Plaintiffs allege that JNB improperly allocated HUD distributions to the various outstanding grid notes. If the plaintiffs' argument is that the HUD distributions should have been applied to the $ 150,000.00 grid note prior to application to any of the other notes, then that argument would be based upon some unwritten agreement to do so. Use of such agreement against FDIC would be precluded by § 1823(e). See Mainland Sav. Ass'n v. Riverfront Assocs., Ltd., 872 F.2d 955, 956 (10th Cir.) (defense of breach of implied covenant of contractual fair dealing barred by § 1823(e) due to failure to meet that section's writing requirement), cert. denied, 493 U.S. 890 (1989); FDIC v. Roldan Fonseca, 795 F.2d 1102, 1107-1110 (1st Cir. 1986) (claim of improper disbursement of loan proceeds barred by § 1823(e) where the proper disbursement agreement was oral); Yankee Bank for Finance & Savings, 1989 U.S. Dist. LEXIS 9159, at *24. Moreover, such a claim could not be proven without relying on documents outside JNB's records, which is precluded by § 1823(e). See Clay v. FDIC 934 F.2d 69, 73 (5th Cir. 1991) (claim barred where unable to prove it on the face of bank's documents).
Finally, plaintiffs question the truthfulness, accuracy, and authenticity of JNB's loan ledgers. Plaintiffs point to defendant Fred Dupee's letter dated August 24, 1990 advising plaintiffs that between $ 80,000.00 and $ 112,000.00 remained outstanding, while the loan ledger shows $ 103,242.38 outstanding on the same date. (See Dep. Ex. 16, 25.) Dupee explained in his deposition, however, that he was referring to the amount outstanding on the HUD contract. Without any evidence from plaintiffs except the disparity of numbers, and given that the August 24 letter was, to say the least, unclear, plaintiffs have failed to raise a genuine issue of fact regarding the accuracy of the ledgers.
As to authenticity, Dupee, who at the time was regional vice-president of JNB, testified that these were JNB's loan ledger records of the grid notes at issue here. Furthermore, in keeping with the purpose of § 1823, FDIC is entitled to rely upon the accuracy of JNB's records in their entirety. Side agreements and documents outside the bank's records cannot be used against the FDIC to dispute those records. See Clay, 934 F.2d at 73; Yankee Bank for Finance & Savings, 1989 U.S. Dist. LEXIS 9159, at *24.
C. Violation of New York Deceptive Acts and Practices Law Claim
Plaintiffs base this claim upon JNB's misleading statements or assurances as to the financial soundness of Jock's construction project, alleging a violation of New York General Business Law § 349. The New York law forbids "deceptive acts or practices in the conduct of any business, trade or commerce or in the furnishing of any service in this state . . . ." N.Y. Gen. Bus. Law § 349(a) (McKinney 1988). However, this consumer-protection law is not applicable to commercial loan transactions. Yankee Bank for Savings & Finance, 1989 U.S. Dist. LEXIS 9159, at *41-42; Quail Ridge Assocs. v. Chemical Bank, 162 A.D.2d 917, 920, 558 N.Y.S.2d 655 (3d Dep't), appeal dismissed without op., 76 N.Y.2d 936 (1990).
Here all parties involved, including the plaintiffs, were knowledgeable and experienced. The transactions were commercial loans to finance a construction project, not "ordinary or recurring consumer transactions." See id. at *41. Therefore, FDIC's motion for summary judgment on this claim must be granted. Id. at *42.
D. Insured Deposit Alternative Claim
Plaintiffs claim that their CD was not liquidated, and if it was liquidated it was improper, and therefore the CD was an insured deposit which should be paid by FDIC. FDIC insures deposits of up to $ 100,000.000, paying depositors for insured amounts at the time of bank closure. 12 U.S.C. §§ 1817(i), 1821(a), (f). According to the JNB records, upon which FDIC is entitled to rely, see § 1823(e), the Goodhue/Shaw CD was liquidated on March 29, 1991, prior to JNB's closure on February 26, 1993. Therefore, there was no deposit at the time of the bank's closure for FDIC to insure. Further, the claim that the CD was improperly liquidated must fail because it is barred by § 1823(e). See discussion and cases cited in Section B, supra.
Accordingly, it is hereby ORDERED that
1. Defendant FDIC's motion for summary judgment is GRANTED, and
2. the complaint as against defendant is DISMISSED.
IT IS SO ORDERED.
David N. Hurd
U.S. Magistrate Judge
Dated: June 22, 1995
Utica, New York.