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CENTRAL BUFFALO PROJECT CORP. v. FDIC

July 8, 1997

CENTRAL BUFFALO PROJECT CORPORATION, Plaintiff, -vs- FEDERAL DEPOSIT INSURANCE CORPORATION, as Receiver of Empire of America Federal Savings Bank; FEDERAL DEPOSIT INSURANCE CORPORATION, as Receiver of Empire Federal Savings Bank of America; and FEDERAL DEPOSIT INSURANCE CORPORATION, as Manager for the FSLIC Resolution Fund, Defendants.


The opinion of the court was delivered by: CURTIN

 CURTIN, DISTRICT JUDGE

 BACKGROUND

 In this case, brought under the Federal Deposit Insurance Act, 12 U.S.C. § 1821(e), the parties have each filed in limine motions. Specifically, plaintiff, Central Buffalo Project Corporation ("Central Buffalo"), is seeking a determination precluding defendants from asserting as a defense that plaintiff must establish that it was prejudiced by defendants' delay in repudiating the subject leases before it may recover damages in this action (Item 59). If the court decides to allow the defendants to assert this defense or at least to raise the issue of prejudice at trial, plaintiff seeks permission to present evidence, including expert testimony, that it was prejudiced by defendants' delay. Defendants seek a determination that plaintiff is barred from claiming damages after October 31, 1995, the date plaintiff sold the building in which the subject property is located (Item 67).

 The parties have submitted several briefs and affidavits in support of and in opposition to the pending motions in limine, and they appeared for oral argument on these motions on July 1, 1997. This case was bifurcated, with the liability bench trial scheduled to commence on July 14, 1997.

 FACTS

 Plaintiff is a Delaware Corporation that owned and operated the Main Place Tower, an office building located in downtown Buffalo, during the time period relevant to this claim, up until October 31, 1995. Plaintiff leased office space to Empire Federal Savings Bank of America ("Old Empire"), formerly known as Empire of America FSA, Erie County Savings Bank, and Erie Savings Bank, for many years, starting in November 1966. Between November 1966 and March 1985, plaintiff and Old Empire executed and entered into five separate leases (the "subject leases"), constituting the entire leasehold space rented by Old Empire and comprising approximately 217,356 square feet of space. By their terms, two of the subject leases expired on December 31, 1994, and the remaining three were to expire on June 30, 2019.

 On January 24, 1990, the Office of Thrift Supervision ("OTS") appointed the Resolution Trust Corporation ("RTC") conservator of Old Empire. On February 27, 1990, the OTS appointed the RTC as receiver for Old Empire, organized Empire of America Federal Savings Bank ("New Empire"), and appointed the RTC conservator of New Empire. On February 28, 1990, the RTC, as receiver for Old Empire, entered into a purchase and assumption agreement with New Empire transferring the right, title, and interest in and to substantially all of Old Empire's assets to New Empire. On March 23, 1990, the RTC assigned the five subject leases from Old Empire to New Empire and notified plaintiff that the assignment of the leases had been accepted. On September 28, 1990, the OTS appointed the RTC receiver of New Empire. As a result of its appointments by the OTS, RTC, by operation of law, succeeded to all rights, title, powers, and privileges of both Old Empire and New Empire, and of any stockholder, member, account holder, depositor, officer, or director of either institution with respect to the institutions' assize, including the subject leases.

 Also on September 28, 1990, the RTC entered into a purchase and assumption agreement with Key Interim Savings Bank FSB of Buffalo ("Key Bank") which contained a 90-day option giving Key Bank 90 days from the date of association closing, September 28, 1990, to accept assignment of the subject leases. This period ran through December 28, 1990. On December 17, 1990, M & T Bank, pursuant to a sub-agreement with Key Bank, notified plaintiff and the RTC that it was not accepting assignment of the subject leases. On December 20, 1990, Key Bank notified plaintiff and the RTC that it was not accepting assignment of the subject leases from the RTC. On March 28, 1991, six months after its appointment as receiver and over three months after its receiving notice from Key Bank and M & T Bank that they would not accept assignment of the leases, the RTC notified plaintiff that it was repudiating the subject leases, pursuant to the RTC's statutory grant of authority under 42 U.S.C. § 1821(e), effective June 1, 1991. *fn1"

 Plaintiff first filed an administrative claim with the RTC challenging its repudiation of the subject leases. The RTC denied plaintiff's administrative claim. Plaintiff then filed the present action on December 18, 1991, naming Old Empire, New Empire, and the RTC as defendants. Although plaintiff originally set forth several separate causes of action seeking various forms of relief, plaintiff's remaining claim is that the RTC's attempted repudiation of the subject leases was ineffective because it was not completed within a "reasonable period" of time after the appointment of the RTC as conservator or receiver for both Old Empire and New Empire, as required by statute. *fn2" Plaintiff is seeking damages of $ 39,655,436.00, which include all rents and related expenses payable pursuant to the terms of the leases, plus attorneys' fees, costs, and interest.

 The RTC was dissolved on December 31, 1995, in accordance with the provisions of the Resolution Trust Corporation Act, 12 U.S.C. §§ 1331a(m)(1)-(2). At that time, the assets and liabilities of the RTC, in its corporate capacity, were transferred to the Federal Deposit Insurance Corporation ("FDIC"), which serves as manager of the FSLIC Resolution Fund. 12 U.S.C. § 1821a(a)(1). Pursuant to 12 U.S.C. § 1441a(m)(1), the FDIC succeeded the RTC as receiver of both Old Empire and New Empire, and thereby succeeded the RTC in this action (See Item 48). On June 21, 1996, the court amended the caption of the case to reflect this statutory succession and the substitution of defendants (Item 50).

 After conducting some discovery, the parties filed cross-motions for summary judgment (Items 30 and 33). Each side argued that it was entitled to judgment as a matter of law on the question of whether the RTC's repudiation was both lawful and timely under 12 U.S.C. § 1821(e). In his report and recommendation denying both motions for summary judgment on this cause of action, which was adopted by this court on April 11, 1996 (see Item 49), Magistrate Judge Maxwell found that "a question of fact exists as to whether the delay in repudiation of the leases by the RTC was reasonable, considering the particular facts of this action" (Item 40, pp. 8-9). Following this decision, the parties attempted to negotiate a settlement. Once it became evident that the parties could not agree to a negotiated resolution of this case, the court set a date for the liability phase of this non-jury trial.

 DISCUSSION

 I. Plaintiff's Motion Regarding Proof of ...


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