Ammerman v. Miller

• Decision Date: 26 October 1973
• Docket Number: No. 71-2048.,71-2048.
• Citation: 488 F.2d 1285
• Parties: H. Max AMMERMAN et al., Appellants, v. Lou MILLER.
• Court: U.S. Court of Appeals — District of Columbia Circuit

488 F.2d 1285 (1973)

H. Max AMMERMAN et al., Appellants, v. Lou MILLER.

No. 71-2048.

United States Court of Appeals, District of Columbia Circuit.

Argued April 5, 1973.

Decided October 26, 1973.

Rehearing Denied November 21, 1973.

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J. Alan Galbraith, Brattleboro, Vt., for appellants.

Bernard I. Nordlinger, Washington, D. C., for appellee.

Before McGOWAN and MacKINNON, Circuit Judges, and BURNITA SHELTON MATTHEWS,^* Senior United States District Judge for the United States District Court for the District of Columbia.

MATTHEWS, Senior District Judge:

This is the second appeal in this case. Mr. and Mrs. Ammerman, plaintiffs-appellants, first appealed from a District Court judgment dismissing their complaint on the ground that it failed to state a claim upon which relief could be granted. On that appeal this Court reversed, holding that the allegations of the complaint were sufficient to withstand defendant's motion to dismiss. Ammerman v. Miller, 139 U.S.App.D.C. 188, 432 F.2d 621 (1970).

After a trial on the merits, the District Court found against the Ammermans on their complaint for recission of two promissory notes on grounds of mistake and lack of consideration, and rendered judgment for Louis Miller, defendant-appellee, on his counterclaim for the balance allegedly due on the second of these notes.^**

The present appeal by the Ammermans followed. They claim that the District Court, having found that Ammerman believed himself to be liable as a guarantor under pertinent documents, erred in not rescinding the Ammermans' December 30 note on the ground of mistake. They also assert that the District Court erred in concluding that the Ammermans, when they sold their interests in a joint venture, became liable to Miller, since the Ammermans received no money which belonged to Miller, and Miller had no contractual basis for interfering with the Ammermans' right to alienate their own interests. Further, the Ammermans contend that if the court correctly held them liable to Miller, the court erred in failing to reduce their liability because of Miller's usury.

THE BACKGROUND

In the main the facts are not in dispute. The controversy is as to the legal consequences which flow from the facts. Hence a factual recital is indicated.

Jerry Wolman, H. Max Ammerman, Daniel Melnick, Melvin A. Robinson, and their respective wives, were venturers in a Maryland real estate venture pursuant to a written instrument designated as the Grigsby Joint Venture Agreement. The venturers acquired land in Prince George's County, Maryland, and built thereon the Dodge Park View Apartments. Their percentage participation was allocated as follows: the Ammermans, 42.5%; the Wolmans, 32.5%; the Melnicks, 12.5%; and the Robinsons, 12.5%.

In January 1966, Melnick and Robinson sought to borrow $125,000 from the defendant Louis Miller for personal purposes unrelated to the Grigsby Joint Venture. They offered Miller a "bonus" of $11,000 for the loan and an assignment of their ownership interests in the Grigsby Joint Venture as security. Miller indicated that he would make them the loan provided Ammerman and Wolman would agree to purchase the Grigsby ownership interest of the Melnicks and the Robinsons, to be assigned to Miller as security, in the event Melnick and Robinson defaulted on their promissory notes, and also provided Ammerman and Wolman would sign their notes.¹

At the request of Melnick and Robinson, Ammerman and Wolman consented to the assignment of the Melnicks' and Robinsons' ownership interest to Miller,² and agreed that upon 30 days' written notice from Miller they would purchase from him the Melnick and Robinson ownership interests in Grigsby for the face amount of the promissory notes of the Melnicks and Robinsons if they were not paid at maturity.

All the documents intended to express the loan deal were drawn up by an attorney for Melnick and Robinson. Two promissory notes were prepared for $68,000 each, payable to Miller's order, dated January 24, 1966, with interest at the rate of 6% until paid, payable monthly, and the principal payable January 24, 1967, one note to be signed by Melnick and his wife, and the other by Robinson and his wife.³

Two identical instruments headed COLLATERAL ASSIGNMENT, were also prepared. By each Collateral Assignment, the borrower and his wife were thereby to

"set over, assign and convey unto the Assignee, Miller as collateral and for security purposes, their twelve and one-half * * * percent ownership interest in the Grigsby Joint Venture, a Maryland Joint Venture, originally formed pursuant to a Joint Venture Agreement executed on the 15th day of April, 1963, which Joint Venture the Assignors * * * represent to be the owner of the Dodge Park View Apartments, Sections 1, 2 and 3, located in Prince George\'s County, Maryland."⁴

Ammerman's and Wolman's commitment was set forth only in a writing known as Consent By Remaining Venturers (hereinafter Consent Agreement). At the end of the notarial acknowledgement of each of the above described COLLATERAL ASSIGNMENTS, the Consent Agreement appears as an appendage. In its entirety, it reads:

"We, the undersigned, being all of the remaining Venturers in the GRIGSBY JOINT VENTURE, DO HEREBY CONSENT to the foregoing Collateral Assignment and, in addition, agree that in the event the Promissory Note referred to in the Collateral Assignment is not paid at maturity, that upon thirty (30) days\' written notice from the Assignee Miller, we will purchase the Joint Venture interest for the face amount of the note."⁵

After these documents had been executed by the necessary parties, a meeting took place between Melnick, Robinson, Miller, and Samuel B. Block, an attorney representing Miller. The documents were read by Miller and his attorney⁶ after which Miller took possession of them,⁷ and later passed $125,000 in checks over to Melnick and Robinson.⁸ The $11,000 difference between the $125,000 loaned and the combined face amount ($136,000) of the Melnick-Robinson promissory notes was regarded by Miller as his "profit"⁹ or "bonus"¹⁰ on the deal. Ammerman was unaware of this "bonus" at the time and believed that the value of the Melnick-Robinson joint venture ownership interests was about $136,000.

Although Miller had possession of the executed Collateral Assignments of the twenty-five percent ownership interests of the Melnicks and Robinsons in the Grigsby Joint Venture, he did not record the Assignments. Because of such failure, the Melnicks and Robinsons continued to appear of record as the holders of the interests they had conveyed to Miller as collateral and for security purposes.

The United Community Bank recorded a judgment lien, effective August 31, 1966, against the Melnicks and Robinsons in the amount of $123,200, plus costs and interest.¹¹

Wolman was a substantial builder of apartments and office buildings in different areas. Running into a very difficult money market in the summer of 1966 and a resultant diminution in real estate sales, and with construction commitments not fully met, Wolman desired to work out his problems by effecting sales of property in which he had an interest.

Wolman had a prospect, Investors Funding of New York, interested in acquiring several thousand apartment units. Hence Wolman sought to purchase all of the Ammerman interests in several separate ventures. This led to an agreement between the Wolmans and the Ammermans for the sale or trade or transfer to Wolman or his nominee of the Ammerman interests in four ventures, including Grigsby,¹² the terms for the different venture interests being separately stated.

As to the Ammerman interests of 42½ percent in Grigsby, such agreement dated September 20, 1966, provided:

"1. For all of their interests in the Dodge View properties, Wolman shall make no payment to said Ammermans, but the sum of $295,000.00 in cash shall be paid to the Grigsby Limited Partnership and Ammermans shall cause a conveyance of their interest to Wolman." (Emphasis supplied.)¹³

"2. Wolman will convey to said Ammermans a one-half undivided interest in and to property described as Dodge View Park, subject to a mortgage secured thereon in the approximate balance sum of $200,000.00, said property being unimproved land."¹⁴

On October 16, 1966, Mr. and Mrs. Wolman entered into an agreement with Melnick and Robinson and their respective wives whereby the Melnicks and Robinsons agreed to sell and Mr. and Mrs. Wolman agreed to buy "all of the Sellers' Joint Venture Ownership Interest" in the Grigsby Joint Venture.¹⁵ The purchase price was stated as $75,000 in cash. The "vacant land"¹⁶ was excluded from the contract.

Wolman knew that the Melnick-Robinson joint venture interests were already pledged to Miller but was assured by Melnick and Robinson that Miller was no problem and that they would work out matters with him.

However, Melnick and Robinson did not advise Miller that they intended conveying their joint venture interests to the Wolmans. They did ask Miller to accept the $75,000 which they expected to receive from Wolman under the last-mentioned agreement. In the promissory notes which the Melnicks and Robinsons had given to Miller and which were not due until 1967, they had reserved "the right of prepayment of part or all of the principal sum, at any time and from time to time, without penalty."¹⁷ But their proposal to Miller for prepayment of the $75,000 seems to have contemplated a refinancing of the rest of their indebtedness to him and it did not materialize.

While attempting to acquire all outstanding ownership interests in the Grigsby Joint Venture, Wolman learned of the recordation by the United Community Bank of its judgment lien in the amount of $123,200 against the Melnicks and Robinsons. Realizing that this judgment lien would have to be lifted before he could convey to his outside buyer a clear title to the Dodge Park View...