Brown-Marx Associates, Ltd. v. Emigrant Sav. Bank
| Decision Date | 02 May 1983 |
| Docket Number | BROWN-MARX,No. 82-7023,82-7023 |
| Citation | 703 F.2d 1361 |
| Parties | ASSOCIATES, LTD.; and Gary E. Smith, Plaintiffs-Appellants, v. EMIGRANT SAVINGS BANK; and Prudential Savings Bank, Defendants-Appellees. |
| Court | U.S. Court of Appeals — Eleventh Circuit |
Ollie L. Blan, Jr., Spain, Gillon, Riley, Tate & Etheredge, Birmingham, Ala., for plaintiffs-appellants.
James L. North, North, Haskell, Slaughter, Young & Lewis, Guy Martin, Birmingham, Ala., for defendants-appellees.
Appeal from the United States District Court for the Northern District of Alabama.
Before GODBOLD, Chief Judge, FAY and SMITH *, Circuit Judges.
This diversity case concerns a dispute between a prospective borrower and a bank over a $1.1 million loan commitment for financing an office building. Emigrant Savings Bank refused to lend the money, maintaining among other things that Brown-Marx Associates, the would-be borrower, had failed to satisfy the minimum rental requirement of the commitment. Brown-Marx sued the bank alleging breach of contract and various tort theories of recovery. The matter was tried to a jury which found for Brown-Marx on its contract claim. The district court granted the bank's motion for new trial, primarily on the ground it had erroneously instructed the jury on the applicable law. Later the court granted summary judgment for the bank on all claims. We affirm.
Brown-Marx is an Alabama limited partnership with Gary Smith its sole general partner. Smith formed the partnership to purchase and renovate an office building in Birmingham. In May 1978 Brown-Marx obtained a loan commitment for permanent financing of the building from Emigrant Savings Bank 1 of New York. Brown-Marx paid the bank $22,000 for the commitment, which was to expire May 1, 1979. Later Brown-Marx paid the bank $11,000 to extend the commitment to November 1, 1979.
Under the commitment the bank agreed to lend Brown-Marx $1.1 million, the "ceiling loan," if Brown-Marx provided satisfactory documentation of renovations, signed leases providing for at least $714,447 annual rentals, and a satisfactory appraisal that the building was worth at least $2.4 million. The commitment provided in the alternative for a "floor loan" of $750,000 if the major requirements for the ceiling loan were not met. The provisions for the alternative loans, floor or ceiling, are at the heart of the dispute:
The Bank has agreed to lend the sum of $1,100,000 secured by a permanent mortgage on the ... [building].
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2. Loan to close upon the following conditions being satisfactorily complied with:
a. Exhibition of all required government certificates, permits, licenses, etc.
b. [Details of renovation to be done "in a workmanlike manner satisfactory to the Bank."]
c. Exhibition of signed leases for a term of not less than one year covering not more than 140,449 net rentable square feet at a rental of not less than $714,447 per annum and the space rented is rented on a basis so that if the building were 100% rented, the annual rentroll would be at least $840,526. Said rentals to be on an unfurnished basis without any concessions or offsets thereto. Leases to be approved by the Bank and assigned to the Bank.
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It is also understood and agreed that in the event that condition 2.a. is met, but conditions 2.b. and c. are not, the loan shall be in the amount of $750,000 ....
The loan, whether ceiling or floor amount, was to be secured by a first mortgage on the building.
On the strength of this commitment Brown-Marx obtained from two Alabama banks $1.1 million interim financing to purchase and renovate the building, to be repaid from the proceeds of the permanent loan from Emigrant. Brown-Marx bought the building, renovated it, and proceeded to lease space in it.
In September 1979, about six weeks before the commitment was to expire, Smith wrote the bank that he wanted to close the loan for the ceiling amount in mid-November; he desired the extension because he planned to be out of the country in October. The bank responded that the loan must close by November 1. Smith hired Norman King to compile information and documents needed to close the loan and submit them to the bank. He made tentative arrangements with an appraiser to appraise the building and submitted his credentials to the bank for approval. On October 5 Smith sent the bank a letter saying Brown-Marx intended to meet the November 1 closing deadline. He then left the country and did not return until shortly before the scheduled closing date.
King gathered and sent to the bank the documents required to close the ceiling loan, including those set out in paragraph 2 of the commitment plus appraisal, survey, title binder and certificates of occupancy. On October 18 King sent the rentroll, renovation summary, and copies of about 75 leases to Richard Mulcahy, an officer of the bank. A week later, in a phone conversation with Mulcahy, King inquired whether Mulcahy had received the documents and whether everything needed was there. Mulcahy said the leases were satisfactory, and he asked no questions about them. King inquired whether the appraiser named by Smith would be acceptable, and Mulcahy replied the bank hadn't yet approved him but that he expected no problem. King also asked if the bank had chosen its attorney for the loan closing. Mulcahy responded that the bank had not decided on the attorney. Mulcahy asked King to send him photos of the building, a description of some of the improvements, and information about possible new tenants.
The next day King talked again with Mulcahy and discussed the bank's requirements for the title binder and survey. King confirmed that the bank would waive its requirement for a personal financial statement on Smith's limited partner. Mulcahy told King the name of the law firm that the bank would use to close the loan. King called this firm to discuss the particulars of closing, but the firm had not scheduled it. King mailed Mulcahy the photographs he had requested. Smith returned and on October 29 phoned Mulcahy to discuss the documents that had been furnished. Mulcahy indicated that everything he had received was satisfactory. The next day Smith again talked with Mulcahy and was told the bank needed the appraisal and title binder. Mulcahy did not mention any problems with closing. King sent the title binder, zoning certificate, survey, permits and licenses to Mulcahy on October 30. The appraisal prepared by Smith's appraiser was sent to Mulcahy on October 31. Smith tried unsuccessfully to reach Mulcahy by phone on the 31st to confirm the closing and then sent a telegram saying the banks that had provided interim financing would not extend their loans and that he would be in New York on November 1 to close the loan. Smith's mortgage loan broker did reach Mulcahy on the 31st. He told Mulcahy that Smith, Smith's attorney, and the broker would be in New York the next day to close the loan. Mulcahy said there was no point in coming because the bank was not ready to close.
Nonetheless Smith, his attorney, and the loan broker went to New York on November 1 and tried to close the loan. They met Mulcahy at lunch. Mulcahy said they would have to see Barbey, senior vice president of the bank, about the closing. That afternoon they went to the bank and waited two hours for Barbey. Smith had with him a "lapful" of documents, including more leases, to give the bank. It was late afternoon when they saw Barbey. He informed them that the bank could not close the loan that day because it was too late in the day. Also the bank had not yet inspected the building. Barbey said, however, that he would extend the commitment. Smith insisted that the bank give him not only a written promise to extend the commitment but also a statement that Brown-Marx had met all conditions of the commitment and that the bank would close the loan. This the bank refused to do although it continued to offer to extend the commitment for a reasonable time to allow for closing. At the end of the meeting Brown-Marx tendered a default letter to the bank stating that it had fully complied with the commitment and was ready, willing and able to close the loan according to the terms of the commitment.
On November 5 the bank sent a man to inspect the building and verify the renovation and leases. The inspector noticed that some space listed by Brown-Marx in the rentroll as leased was vacant and some was occupied by one of Smith's other business enterprises. On November 15 Brown-Marx sent the bank several additional leases and an addendum to another lease. On November 30 a representative of the bank called Smith to discuss the situation. He told Smith the bank considered the appraisal Brown-Marx had submitted unacceptable, 2 that there was an $85,000 shortfall in the rents required under paragraph 2.c., and that the bank planned another inspection of the building on December 3. The representative arrived December 2 and told Smith the bank was still willing to close the loan if the commitment terms were met. Smith refused the representative permission to inspect the building to verify the rentroll unless the bank would make a settlement offer. He maintained the bank was looking for an excuse not to close the loan. On December 3 another bank representative phoned Smith and reiterated that the bank was willing to make the loan in either the ceiling or floor amount if a satisfactory appraisal were submitted and the other commitment requirements were met. As for the offer to close the floor loan, Smith said the bank should have made that offer on November 1. Smith maintained all requirements were met; he refused to supply another appraisal and said he was not going to negotiate for a loan any more. The bank's attorney contacted Smith's attorney with the same message and received the same reply: that...
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