MEMORANDUM
Now pending are cross-motions for summary judgment in this action alleging breach of a real property lease contract. The defendant claims that it properly disaffirmed the lease under the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (“FIRREA”), Pub.L. No. 101-73, 103 Stat. 183 (codified in scattered sections of Titles 12 and 18 U.S.C.). No hearing is deemed necessary. See Local Rule 105.6. For the reasons that follow, the defendant’s motion will be granted, in part, on the issue of disaffirmance of the lease, and the plaintiffs motion will be granted on the issue of pre-disaffirmance rent due.
BACKGROUND
The plaintiff is New Hampshire Associates Limited Partnership (“New Hampshire”), a Maryland Limited Partnership with its principal place of business in Montgomery County, Maryland. By a writing dated March 27, 1987, New Hampshire leased office space in Silver Spring, Maryland to the Potomac Savings Bank, F.S.B. (“Bank”) for a term of fifteen years, which was to expire on June 30, 2002. The rent consisted of a base monthly rent of $29,647.13 (subject to annual increases) plus additional pass-throughs for common area maintenance and real estate taxes. The Bank operated an administrative office on the premises, and subleased part of the office space to sub-tenants.
The Bank was later declared insolvent, and through a chain of events (the precise detail of which is neither disputed nor pertinent to the issues raised in this case) the defendant Resolution Trust Corporation (“RTC”), a corporate instrumentality of the United States, was appointed receiver of the Bank effective
Ninety days after its appointment as receiver, the RTC attempted to disaffirm the lease by letter dated. May 26, 1994. The letter was addressed, however, not to New Hampshire, but to its general partner, Marvin R. Lang. It stated that the RTC, as receiver for the Bank, had the power under 12 U.S.C. § 1821(e) to disaffirm any contract entered into by the Bank prior to the RTC’s appointment. It then purported to disaffirm the lease:
The [Bank’s] records indicate that the [Bank] was a party to that [sic] certain lease dated March 27, 1987, and any subsequent amendments, if any, between you and the [Bank] The purpose of this letter is to notify you that the Receiver has elected to disaffirm this lease to the full extent, if any, that the represented and enforceable obligation of the [Bank] effective as of July 81, 1994 [sic]. You are entitled to contractual rent through the effective date. You do not have a claim for damages under any acceleration or penalty clause. Further, the Receiver is entitled to any collateral pledged to secure the [Bank’s] remaining obligations.
All creditors having claims against the [Bank] must present their claims, substantiated by legal proof, to the Receiver by August 24, 1994 (90 days from May 26, 1994 )•
On August 23, 1994, New Hampshire submitted a claim to the RTC for $1,948,442.48 in “[l]ost rent and operating expense payments ... due to breach/alleged disaffirmance of the Lease.” (Pl.’s CompL, Ex. C.) Attached was a statement that New Hampshire was never officially notified' that the lease was being disaffirmed, and thus the RTC had failed to comply with the repudiation requirements of 12 U.S.C. § 1821(e). The RTC disallowed the claim in full and New Hampshire timely filed this suit.
ANALYSIS
1. Standard for Summary Judgment
Rule 56(c) of the Federal Rules of Civil Procedure provides that summary judgment
shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.
The Supreme Court has clarified that this does not mean any factual dispute will defeat the motion:
By its very terms, this standard provides that the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact.
Anderson v. Liberty Lobby, Inc.,
“The party opposing a properly supported motion for summary judgment may not rest upon mere allegations or denials of [its] pleading, but must set forth specific facts showing that there is a genuine issue for trial.”
Rivanna Trawlers Unlimited v. Thompson Trawlers, Inc.,
2. “Reasonable Period ”
FIRREA was enacted in 1989 to address the dire financial circumstances of the numerous failed, federally insured, savings and loans throughout the country at that time. It “ ‘constitute^] emergency legislation' to stop the financial hemorrhaging” of government coffers brought on by the savings and loan crisis.
Resolution Trust Corp. v. Diamond,
While federally insured- banks and savings and loan associations are not subject to bankruptcy law, 11 U.S.C. § 109(b)(2), the receivership provisions of 12 U.S.C.A. § 1821 (c)-(r) create a more or less parallel regime for those institutions.
Unisys Finance Corp. v. Resolution Trust Corp.,
Congress established the RTC to act as conservator or receiver for failed thrift institutions, 12 U.S.C. § 1441a(b), requiring it to conduct its operations “in a manner which [ ] maximizes the net present value, return from the sale or other disposition of’ thrift assets. 12 U.S.C. § 1441a(b)(3)(C)(i). Accordingly, Congress granted to the RTC the authority to disaffirm or repudiate any lease that the bank may have made before receivership if the RTC were to determine, in its discretion, both that the lease was “burdensome” and that disaffirmance would “promote the orderly administration of the institution’s affairs.” 12 U.S.C. § 1821(e)(l)(B-C). 2
Although reasonableness is to be determined on the facts of each case,
see Union Bank v. Federal Savings and Loan Ins. Corp.,
The RTC did not initially repudiate the lease when it became receiver, even though the institution to which it had sold the assets of the Bank had waived its option to assume the lease, “so that the Administrative functions and responsibilities relative to the operation of Potomac Federal could continue in an uninterrupted and efficient manner.” (Def.’s Mem. Opp. Summ. J. and Reply, Leg. Div. Interoff. Mem., Ex. 2, at 3.) A ninety-day period for winding up the business of the failed Bank seems reasonable enough on its face, and New Hampshire neither argues to the contrary nor claims bad faith on the part of the RTC or prejudice to itself. Notably, it has not presented evidence that it was harmed in any way by the ninety-day delay, and does not protest the further two month
3. Existence of Subleases
New Hampshire argues that under the FIRREA the RTC had no power to repudiate the lease because it had subleased part of the property to sub-tenants. It bases its argument on 12 U.S.C. § 1821(e)(5)(A), which provides that:
If the conservator or receiver repudiates an unexpired written lease of real property of the insured depository institution under which the institution is the lessor and the lessee is not, as of the date of such repudiation, in default, the lessee under such lease may either—
(i) treat the lease as terminated by such repudiation; or
(ii) remain in possession of the leasehold interest for the balance of the term of the lease unless the lessee defaults under the terms of the lease after the date of such repudiation.
Because, New Hampshire argues, at the time of the RTC’s attempted repudiation the sub-lessees were neither in default nor had they consented to termination of their leases, the RTC could not dispossess the sublessees and return possession of the leased premises to New Hampshire.
New Hampshire’s argument rests upon the unsupported premise that to repudiate a lease under FIRREA the RTC must return full possession of the leased premises to the lessor. But this premise conflicts with the statute it is supposedly based upon, which on its face serves merely to grant rights to a sublessee who, having had nothing at all to do with the Bank’s insolvency, might otherwise be dispossessed and left with only a claim against an insolvent landlord.
Cf. Resolution Trust Corp. v. Diamond,
4. Notice
New Hampshire argues that the RTC’s notice of disaffirmance of the lease addressed to its general partner, Mr. Lang, was legally insufficient to constitute notice to
Perhaps realizing that it cannot claim not to have received actual notice of RTC’s disaffirmance, New Hampshire instead argues— by some apparently technical yet self-evident proposition, as it cites to no authority in its brief — that notice to its general partner “did not have the effect of disaffirming the ... lease ... between New Hampshire and the Bank.” (Pl.’s Compl. at 3.) Under the Maryland Uniform Partnership Act,
4
however, “[njotice to any partner of any matter relating to partnership affairs, and the knowledge of the partner acting in the particular matter ... operate as notice to or knowledge of the partnership” (except in the case of the partner’s fraud on the partnership). Md.Code Ann., Corps. & Ass’ns § 9-304 (Michie 1993 & Supp.1996);
see also id.
§ 9-102 (a person has “knowledge” not only when he or she has actual knowledge, but when he or she “has knowledge of such facts as in the circumstances shows bad faith”; and a person has “notice” when the person claiming the benefit of such notice mails “a written statement of the fact to such person or to a proper person at his [or her] place of business or residence”);
id.
§ 9-301 (partner is agent of partnership). These sections apply as well to limited partnerships.
See id.
§ 10-108 (providing that provisions of Title 9 shall apply to limited partnerships unless inconsistent with or modified by provisions in Title 10);
Mount Vernon Fire Ins. Co. v. East Side Renaissance Assoc.,
Thus RTC’s notice to Mr. Lang constituted notice to New Hampshire.
5. Pre-Disaffirmance Rent
Finally, New Hampshire argues that it is entitled to summary judgment on the issue of back rent. While FIRREA cuts off a lessor’s right to damages arising from disaffirmance of a lease, a lessor is nevertheless entitled to the “contractual rent” accruing before the effective date of the disaffirmance. 12 U.S.C. § 1821(e)(4)(B)(i). A lessor may not, however, recover “damages under any acceleration clause or other penalty provision in the lease.” 12 U.S.C. § 1821(e)(4)(B)(ii).
New Hampshire submitted evidence showing that it was owed $31,838.53 in back rent, but $10,515.23 of that figure is for late fees, which the lease designates in paragraph 2.8 as a “Late Payment Penalty.” (Pl.’s Mem. Opp. and Supp. Summ. J., Ex. 10, Ex. 1). New Hampshire does not argue that the late fees are not in fact a penalty despite their being so labeled, so the court will treat
A separate order follows.
Notes
. The RTC’s powers as receiver of a failed insured depository institution were generally coextensive with those of the FDIC when acting in the same capacity. 12 U.S.C. § 1441a(b)(l)(B), (b)(4)(A), (b)(5).
. Although New Hampshire originally claimed that the RTC never in fact made these determinations — the RTC having failed repeatedly in discovery to produce any evidence on the matter— the RTC eventually managed to produce with its reply brief two interoffice memoranda showing that it did in fact determine that maintaining the lease would be burdensome. (The delay seems
. While it seems equally true (except in a highly unusual case) that a lessor would have had no role in the Bank's insolvency, Congress specifically cut off certain of its rights, as discussed previously. It chose to treat sublessees somewhat differently, although in keeping with the policy of minimizing the cost to the government as insurer of failed institutions, a sublessee who chooses to remain in possession has only a limited damages claim against the RTC for its failure subsequent to repudiation to perform its obligations under the sublease. See 12 U.S.C. § 1821(e)(5)(B).
. Maryland recently replaced its Uniform Partnership Act with the Revised Uniform Partnership Act, which will become applicable to all Maryland partnerships on 1 January, 2003, with three exceptions not relevant here. 1997 Md. Laws Ch. 654 (H.B.251) (effective date provisions to be codified as Md.Code Ann., Corps. & Ass'ns § 9-1204).
. New Hampshire's victory may not be purely pyrrhic, though, for the RTC never cross-claimed for recovery of the balance of its security deposit, choosing instead merely to oppose New Hampshire's motion to collect back rent on the ground that New Hampshire owed the RTC more than the RTC owed New Hampshire. Whether the RTC may at a later date claim the balance is not before the court, but the doctrines of res judicata and compulsory counterclaims may or may not prove relevant to that point. See Fed.R.Civ.P. 13(a).