Berks Title Ins. Co. v. Haendiges, C 81-1308.

• Decision Date: 22 June 1984
• Docket Number: No. C 81-1308.,C 81-1308.
• Citation: 591 F. Supp. 879
• Parties: BERKS TITLE INSURANCE CO., et al., Plaintiffs, v. Roger M. HAENDIGES, et al., Defendants.
• Court: U.S. District Court — Northern District of Ohio

591 F. Supp. 879

BERKS TITLE INSURANCE CO., et al., Plaintiffs, v. Roger M. HAENDIGES, et al., Defendants.

No. C 81-1308.

United States District Court, N.D. Ohio, E.D.

June 22, 1984.

Robert F. Linton, Akron, Ohio, for plaintiffs.

Stephen M. Darlington, Cleveland, Ohio, for defendant Fulton & Goss, Inc.

Michael F. Waiwood, Cleveland, Ohio, for defendants Roger and Lee Haendiges.

MEMORANDUM OPINION AND ORDER

LAMBROS, District Judge.

This is an action for the recovery of money allegedly due for the breach of various related real estate contracts. This Court has jurisdiction over the matter pursuant to 28 U.S.C. § 1332.

Plaintiffs' complaint essentially claims that Berks Title Insurance Co. (Berks), as subrogee to the rights and remedies of plaintiff Metropolitan Life Insurance Co. (Metropolitan), is entitled to recovery of certain sums it expended in defense and as a consequence of an action in state court known as S & S Ceiling Partition Co. v. Calvon Corporation, et al., Case No. 30507, 75 CIV 0725 (Ct. Common Pleas, Medina Cty). That action arose as a result of the alleged breaches of contracts by the defendants Fulton & Goss, Inc. (Fulton & Goss), Roger M. Haendiges and Lee Haendiges, in incurring mechanics' liens on the real estate involved.

Defendant Fulton & Goss has answered, counter-claimed against Berks, and cross-claimed against the Haendiges. The Haendiges have answered, denying any breach of contract or liability.

Presently before the Court are motions for summary judgment on behalf of each party. William Steck, an original named defendant, has been dismissed pursuant to plaintiffs' notice of dismissal. Based on the pleadings and accompanying affidavits, it appears that there exist no genuine issues of material fact.

The essential facts in this case are that Roger Haendiges was the owner of a parcel of land on which he desired to construct a warehouse. Haendiges contacted Fulton & Goss, a mortgage broker, to obtain a permanent loan. The usual procedure for this type of transaction is for the mortgage broker to obtain a loan commitment from a permanent lender. The permanent lender ordinarily only agrees to loan upon completion of the building; the building being part of the security for the loan.

On September 12, 1973 Metropolitan issued a "commitment" to a "first mortgage Loan" in the amount of $890,000.00. On September 17, 1973, Fulton & Goss issued its "Mortgage Loan Commitment" for $890,000.00 to Roger M. Haendiges. On September 20, 1973, Fulton & Goss accepted Metropolitan's commitment by signature, representing that its own commitment had been accepted by Haendiges.

In pertinent part, the commitment from Metropolitan stated:

Metropolitan Life Insurance Company agrees to purchase from you (or directly from a bank to be designated by you, if mutually agreeable to you and us) the first mortgage Loan, identified below and in your Loan Submission on which this Commitment is based. Our agreement to purchase the Loan is subject to the satisfaction prior to, or concurrently with, our purchase of the Loan of each of the conditions of this Commitment, including those on the reverse side hereof and on any supplementary pages attached hereto.

* * * * * *

This Commitment shall not be binding unless the attached counterpart is signed by you to evidence your acceptance and is returned to this office within twenty (20) days of the date hereof, together with your statement that the Borrower has accepted your commitment. Upon our receipt of the signed counterpart, subject to the terms and conditions of this Commitment, we shall be obligated to purchase and you will be obligated to sell the Loan herein described. If you do not offer the Loan to us for purchase in full compliance with the conditions of this Commitment on or before the expiration date, you, by your acceptance hereof, agree to pay to us forthwith as liquidated damages the amount, if any, shown under the caption "Liquidated Damages" to compensate us for time spent, services performed and expenses incurred in connection with this transaction. If the Loan has not been received by us for purchase by the expiration date, our obligations hereunder shall cease unless the Commitment is extended by us in writing.

* * * * * *

1. Assignment of Security; The Mortgage; Absence of Liens. The evidence of indebtedness (herein called the "Note"), the security instrument (herein called the "Mortgage") and each other instrument required by us as security for the Loan shall be transferred to us in form and manner satisfactory to us. The Note shall be secured by a Mortgage which shall be a first lien on the unencumbered, marketable, fee simple absolute title to the real property, to easements appurtenant thereto (if any) and to all improvements to the property described in this Commitment and in the Loan Submission (herein collectively called the "Real Property"), free of the possibility of any (a) prior mechanics' liens, (b) prior materialmen's liens or (c) special assessments for work completed or under construction on the date of our purchase of the Loan. Any title exceptions will be subject to the approval of our Law Division.

* * * * * *

18. AGREEMENT WITH CONSTRUCTION LENDER. At the time of the execution of the construction loan documents, the construction lender shall agree to sell the loan to you and you shall agree, subject to all the terms, including the satisfaction of each of the conditions of this commitment, to buy the loan from the construction lender, and the borrower shall consent to such agreement.

19. COMBINED CONSTRUCTION — PERMANENT LOAN. The terms of the construction loan documents shall be such as to meet all the requirements in this Commitment which are to be complied with on the date of our purchase of the Loan. Prior to the commencement of construction, the combined construction and permanent mortgage shall be recorded or filed for record.

20. At our option, this commitment may be terminated unless within 30 days from the date of your acceptance hereof, we receive a letter, in form and substance satisfactory to us, from a bank that it will furnish sufficient funds so that the building or buildings will be completed in accordance with the terms and conditions of this commitment.

This commitment was set to expire on December 12, 1974.

In pertinent part, the commitment between Fulton & Goss and Haendiges stated:

STANDARD CONDITIONS

1. Definition of Terms

"Applicant" means the person or persons by whom this commitment is signed. "Mortgagor" means any legal entity including the applicant who is or will execute the note and mortgage. "Lender" means Fulton & Goss, Inc. "Investor" means the third party who has issued a commitment to lender to purchase the mortgage from lender. "Issuance of this Commitment" means the date this commitment bears.

2. Agreement to Borrow and Lend

Applicant agrees to cause mortgagor to borrow from lender and lender agrees to lend the mortgagor the amount indicated herein subject to all of the terms, provisions and conditions of this commitment.

* * * * * *

5. Title Documents

Lender shall be furnished with a mortgage title insurance policy, in standard ALTA form, in the amount of the loan, issued by a title insurance company approved by lender, insuring the mortgage to be a valid first, prior, and paramount lien upon the premises, subject only to such exceptions as lender may approve. Lender shall also be furnished with a survey and licensed surveyor's certificate dated not more than 30 days before final disbursement of the mortgage proceeds and after the completion of all improvements.

The survey shall show all the dimensions and total square foot area of the plot, interior, lot lines if any, the dimensions and locations of all improvements, parking area and assessments, and the location of adjoining streets and the distance to and name of the nearest intersecting street.

* * * * * *

11. Liability of Borrower

The lender agrees that in the case of default the holder of the note and mortgage will be required to look solely to the property secured hereunder for satisfaction of said note and mortgage, thereby precluding the holder from obtaining a deficiency judgment against the borrower.

On November 6, 1973, Cleveland Trust Company executed a construction loan as interim financing to Roger Haendiges as "Borrower" and Fulton & Goss. The loan instrument, which was subsequently recorded on November 21, 1973, specifically recognized that Haendiges had obtained a mortgage loan commitment from Fulton & Goss and that Fulton & Goss had obtained a mortgage loan commitment from Metropolitan. These commitments were attached to the Cleveland Trust instrument and incorporated by reference. The instrument then stated:

NOW, THEREFORE, Lender agrees to lend to Borrower the sum of EIGHT HUNDRED NINETY THOUSAND DOLLARS ($890,000.00), secured by a mortgage on the above described land for the purpose of constructing thereon a one-story industrial building and parking lot and Borrower agrees to construct said building and parking lot in accordance with Plans and Specifications approved by Lender and Fulton; Borrower further agrees to complete said building and parking lot in compliance with the covenants and terms and conditions of the Commitment from Fulton to Borrower dated September 17, 1973, said Commitment from Metropolitan to Fulton dated September 12, 1973 and the Building Loan Agreement entered into by and between Borrower and Lender dated ______, 1973; Fulton agrees to comply with the covenants, conditions and terms of the Commitment issued to it by Metropolitan and further that if the one-story industrial building and parking lot is completed in compliance with its Commitment to Borrower and in compliance with the Commitment to Fulton from Metropolitan that it will cause to be paid to Lender the principal balance of its construction loan no later than October 12, 1974 or any extension of such date as agreed upon by

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