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Hillside Metro Associates, LLC v. Jpmorgan Chase Bank

May 9, 2012

HILLSIDE METRO ASSOCIATES, LLC, PLAINTIFF,
v.
JPMORGAN CHASE BANK, NATIONAL ASSOCIATION, DEFENDANT.



The opinion of the court was delivered by: John Gleeson, United States District Judge:

MEMORANDUM AND ORDER

This is the second round of summary judgment motions in this case. In the first round, all motions were denied based on the insufficiency of the record. See Memorandum and Order, Hillside Metro Assocs., LLC v. JPMorgan Chase Bank, Nat'l Ass'n, No. 10-CV-1772 (JG) (SMG), 2011 WL 5008368 (E.D.N.Y. Oct. 20, 2011) (ECF No. 53) ("Hillside I"). The parties resumed discovery and here again cross-move for summary judgment based on a more developed factual record.

This opinion assumes familiarity with the facts and analysis laid out in Hillside I. In summary, this case involves a single claim for breach of contract by Hillside Metro Associates, LLC ("Hillside") against JPMorgan Chase Bank, National Association ("Chase"). Hillside's claim derives from a lease ("Hillside lease" or "lease") it originally entered into with Washington Mutual Bank ("WaMu"). After the lease was executed, WaMu was declared insolvent. The Federal Deposit Insurance Corporation ("FDIC") was appointed receiver for WaMu and assumed all assets and liabilities of the failed bank. The FDIC then entered into a contract with Chase that assigned in a wholesale fashion the bulk of WaMu's assets to Chase, with a few specified exceptions.

The key question addressed by these cross-motions for summary judgment is whether the Hillside lease was among those assets transferred to Chase by the FDIC. If so, Chase is liable to Hillside for its tenant obligations under the lease, including rent payments. If not, then both Chase and the FDIC lawfully repudiated the lease and Hillside has no remedy. The FDIC (which intervened in the case as the putative real party in interest) and Chase have jointly moved for summary judgment, asserting that, as a matter of law, Chase did not assume the lease; Hillside has cross-moved for summary judgment on the same issue, contending that the lease was assumed. For the reasons stated below, I conclude as a matter of law that Chase assumed the lease from the FDIC and accordingly grant Hillside's motion for summary judgment on the question of liability. The motion for summary judgment filed jointly by the FDIC and Chase is denied.

BACKGROUND

A. Facts

On or about May 15, 2008,*fn1 Hillside and WaMu entered into the Hillside lease for a piece of real property located at 216-20 Hillside Avenue in Queens, New York ("Hillside property" or "property"). The lease provided that Hillside would lease the property to WaMu for a period of ten years, with options for renewal and for early termination. Defs.' 56.1 Stmt. ¶ 9 (ECF No. 65); Lease §§ 1.01, 35.01, 38.01 (Smith Dec., Ex. A, ECF No. 69-5). At the time the lease was executed, a 4,300-square-foot building already existed on the property. Defs.' 56.1 Stmt. ¶ 17. The building had been used as a Blockbuster Video store. Pl.'s 56.1 Stmt. ¶ 17 (ECF No. 70). The lease authorized WaMu to make extensive renovations to the property to prepare it for use as a bank branch. Id.; Defs.' 56.1 Stmt. ¶ 17; Lease § 6.01. In particular, the lease permitted WaMu to construct one or more automated teller machines; to build a drive-through window; and to remove a portion of the rear of the building. Lease § 6.01(b)(i). Attached to the lease was a "Concept Plan" depicting a fully constructed, operational bank branch. Id. Ex. A.

On September 25, 2008, WaMu was declared insolvent and the FDIC was appointed to serve as WaMu's receiver. Accordingly, as of that date, all of WaMu's assets and liabilities, including the lease, were taken over by the FDIC. See 12 U.S.C. § 1821(c).

On the same day, the FDIC entered into a Purchase and Assumption Agreement ("PAA") with Chase. See PAA (Smith Dec., Ex. G, ECF No. 69-11; Vogel Dec., Ex. A, ECF No. 65-30). With certain specified exceptions, Section 3.1 of the PAA transferred to Chase "all right, title, and interest of the Receiver in and to all of the assets (real, personal and mixed, wherever located and however acquired)" of WaMu. Id. § 3.1.

Section 3.5 of the PAA specified the exceptions to the wholesale asset transfer of Section 3.1, providing that Chase "does not purchase, acquire or assume . . . under this Agreement the assets or Assets*fn2 listed on the attached Schedule 3.5." Id. § 3.5. Among those assets listed in Schedule 3.5 as specifically exempted from the automatic transfer were "leased Bank Premises." Id., sched. 3.5. The PAA defined "Bank Premises" as: the banking houses, drive-in banking facilities, and teller facilities (staffed or automated) together with appurtenant parking, storage and service facilities and structures connecting remote facilities to banking houses, and land on which the foregoing are located, that are owned or leased by the Failed Bank and are occupied by the Failed Bank as of Bank Closing.

Id., art. I.

Section 4.6 of the PAA gave Chase a 90-day option to accept or decline to accept assignment of "any or all leases for leased Bank Premises." Id. § 4.6(a).*fn3 Any lease that was not assumed by Chase within the 90 days would remain within the control of the FDIC as receiver.

Pursuant to 12 U.S.C. ยง 1821(e), the FDIC, within a reasonable period after its appointment as receiver for WaMu, could repudiate any lease to which WaMu was a party as long as it determined, within its discretion, that such lease was burdensome, and that its ...


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