914 F. Supp. 2d 480
S.D.N.Y.2012Background
- Carver Federal Savings Bank made a $6,080,000 loan to Shaker Gardens, Inc. and Mariner’s Bank purchased a 50% interest via a participation agreement.
- Shaker defaulted on the loan in 2008; Carver foreclosed in December 2010.
- Mariner’s Bank transferred its participation interest to Purchase Partners, LLC; Judge Holwell substituted Purchase Partners as plaintiff.
- Carver asserted counterclaims for breach of the participation agreement, defective notice, and transfer issues, while Purchase Partners asserted contract and misrepresentation-related claims.
- Both sides moved for summary judgment; Purchase Partners sought leave to amend to add negligent misrepresentation claims, which the court later denied except as to certain limited amendments.
- New York law governs the dispute; the court granted in part Carver’s summary-judgment motion and in part Purchase Partners’ motions, with several claims dismissed or left for trial.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Carver breached by treating advances as a negative escrow | PP asserts advances must be added to principal and consent obtained. | Carver argues 3.8(a) allows commercially reasonable advances without consent; no damages shown. | Ambiguity; summary judgment denied on this issue. |
| Whether Carver needed written consent before filing civil action against Shaker | PP says consent required under 3.5 and non-consent breached. | Carver acted in consultation per 3.6; no breach; consent not required in this context. | Carver not liable; 3.6 governs; summary judgment against PP on this point. |
| Whether Carver issued defective notice of default | Notice was defective and estops Carver; collateral estoppel or Rooker-Feldman apply. | Notice issue distinct from foreclosure; no estoppel; reasonable diligence inquiry for jury. | Not entitled to summary judgment; issues of fact for trial remain. |
| Whether Carver breached by failing to detect initial payment defaults | Carver failed to detect and address early defaults; breaches the standard of care. | Carver had unilateral waiver/extension power; issues of fact remain about timing and damages. | Questions of fact preclude summary judgment; both sides’ positions survive. |
| Whether Buyer's gross negligence claim is duplicative of contract | PP says Carver’s mismanagement constitutes tort duty. | No independent duty; contract duties govern; banking relationship not a special duty. | Gross negligence claim dismissed as duplicative; summary judgment for Carver on Count Four. |
Key Cases Cited
- Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (1986) (requires genuine disputes of material fact to survive summary judgment)
- Postlewaite v. McGraw-Hill, Inc., 411 F.3d 63 (2d Cir. 2005) (ambiguities in contract interpretation preclude summary judgment)
- Banque Arabe et Internationale d’Investissement v. Md. Nat’l Bank, 57 F.3d 146 (2d Cir. 1995) (banking relationships generally do not create fiduciary duties absent special circumstances)
- Sommer v. Fed. Signal Corp., 583 N.E.2d 1369 (Court of Appeals of New York, 1992) (duality of contract and tort claims; consider independent duties and damages)
- Parklane Hosiery Co. v. Shore, 439 U.S. 322 (1979) (court in equitable estoppel considerations for collateral estoppel under certain circumstances)