643 F.2d 1185 (5th Cir. 1981), 80-3065, Houston Dairy, Inc. v. John Hancock Mut. Life Ins. Co.

Docket Nº:80-3065.
Citation:643 F.2d 1185
Party Name:HOUSTON DAIRY, INC., Plaintiff-Appellant, v. JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY, Defendant-Appellee.
Case Date:May 01, 1981
Court:United States Courts of Appeals, Court of Appeals for the Fifth Circuit

Page 1185

643 F.2d 1185 (5th Cir. 1981)

HOUSTON DAIRY, INC., Plaintiff-Appellant,



No. 80-3065.

Unit A

United States Court of Appeals, Fifth Circuit

May 1, 1981

Darden, Sumners, Carter & Trout, Lester F. Sumners, New Albany, Miss., for plaintiff-appellant.

Grady F. Tollison, Jr., Mary Ann Connell, Oxford, Miss., for defendant-appellee.

Appeal from the United States District Court for the Northern District of Mississippi.

Before GOLDBERG, AINSWORTH and RUBIN, Circuit Judges.

Page 1186

AINSWORTH, Circuit Judge:

This is an appeal from a Mississippi diversity action in which appellant Houston Dairy, Inc. attempted to recover $16,000 sent to appellee John Hancock Mutual Life Insurance Company as a "Good Faith Deposit" on a loan application which Houston Dairy claims never became binding. At the conclusion of the nonjury trial, the district court ruled that there was a binding contract between the parties and that the $16,000 deposit represented valid, liquidated damages forfeited by Houston Dairy when it breached the contract. We reverse.

I. Facts

John Hancock mailed a commitment letter to Houston Dairy on December 30, 1977 in which it agreed to lend Houston Dairy $800,000 at 91/4% provided that within seven days Houston Dairy would return the commitment letter with a written acceptance and enclose either a letter of credit or a cashier's check in the amount of $16,000. The commitment letter stated the $16,000 was a "Good Faith Deposit" and was the appropriate measure of liquidated damages to be awarded John Hancock should Houston Dairy default. Dr. Dyer, president and principal shareholder of Houston Dairy, did not execute the letter until eighteen days later, on January 17, 1978. Along with the letter, Houston Dairy mailed a $16,000 cashier's check.

Upon receiving the returned commitment letter on January 23, an agent for John Hancock mailed the cashier's check to the John Hancock Depository and Service Center in Champaign, Illinois, for deposit and sent the loan-closing attorney, Harvey Henderson, the necessary information to close the loan. Meanwhile, Dr. Dyer delivered a copy of the commitment letter to Houston Dairy's attorney and asked him to call Henderson to ascertain his fee for closing the loan. On January 28, the two attorneys talked and agreed to the method they would use to close the loan and the manner in which the fee would be charged. However, on January 30, Houston Dairy was able to obtain a 9% loan from a state bank. Houston Dairy then requested a refund of its $16,000 deposit, which was refused by John Hancock.

In the district court, Houston Dairy contended that the return of the commitment letter constituted a counter offer since the seven-day time period for acceptance had expired, that John Hancock never communicated its...

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