Carter v. Rary
Decision Date | 02 March 1970 |
Docket Number | No. 11047.,11047. |
Citation | 311 F. Supp. 1386 |
Parties | Hugh P. CARTER v. J. C. RARY. |
Court | U.S. District Court — Northern District of Georgia |
Kilpatrick, Cody, Rogers, McClatchey & Regenstein, Atlanta, Ga., for plaintiff.
Larry W. Thomason, Decatur, Ga., for defendant.
The question in this case is whether an escrow holder became liable for the conversion of escrow funds which he transferred upon receipt of a mortgage commitment agreement, without first ascertaining that the mortgage commitment fulfilled the exact requirements, or "matched", the mortgage commitment agreement, executed in conjunction with the escrow agreement. The court holds that the escrow holder should have ascertained that the mortgage commitment matched the requirements of the mortgage commitment agreement before releasing the funds, and that, because he did not, he is liable for the conversion of the escrow funds.
At the pretrial conference, it became apparent that, while the facts were undisputed, plaintiff construed the escrow agreement and mortgage commitment agreement to require the escrow holder to match the mortgage commitment with the mortgage commitment agreement before transferring the funds, while defendant contended that the escrow and mortgage commitment agreements imposed on him no such requirement. The parties requested, and the court granted, permission to file appropriate motions. Presently before the court are the plaintiff's motion for partal summary judgment, requesting the amount of the earnest money, $6,480, and the defendant's motion for total summary judgment, asking for a judgment for him as to all of the relief requested by plaintiff, to wit, the earnest money, and both consequential and punitive damages.
The facts are undisputed. As they are pertinent, plaintiff Hugh Carter desired to enter into a real estate venture. In order to obtain financing, he executed an escrow agreement with defendant J. C. Rary, and simultaneously executed a mortgage commitment application with First Fidelity Mortgage Company of Decatur, Georgia. The loan commitment sought to be secured by plaintiff was to be in the amount of $216,000 at the rate of 7½% per annum, with amortization over a period of twenty (20) years. Copies of all documents referred to in this order may be found attached to the deposition of defendant Rary.
Defendant Rary deposited plaintiff's earnest money in a separate escrow account at the Decatur Motor Bank of the Fulton National Bank, Atlanta, Georgia. First Federal applied to Continental Investment Bankers, Inc., 906 Grand Avenue, Kansas City, Missouri, which, on January 20, 1967, issued a commitment to plaintiff, #CIBI 00508. On January 24, 1967, Rary transmitted to plaintiff a telegram stating: "Your commitment is in my office awaiting your instructions concerning transmittal." On that same day, Rary wrote a check for $3,240.00 from the escrow account to Continental Investment Bankers, Inc. On the next day, January 25, 1967, Rary released an additional $2,700.00 from the escrow account to First Fidelity Mortgage Company. The remainder, $540.00, was retained by Rary as his fee.
On February 1, 1967, Rary forwarded a photocopy of the Continental Investment Bankers commitment #CIBI 00508 to plaintiff, in accordance with plaintiff's instructions. On February 6, 1967, Carter sent a letter to Rary in which he demanded that Rary return his earnest money. Also on that date, plaintiff sent a similar letter to First Fidelity Mortgage Company, with a copy to Rary.
Rary does not contend that he attempted to match the Continental Investment Bankers, Inc. commitment with the terms described in the mortgage commitment application. In his deposition, he readily admitted that he did not match the terms. Therefore, the only question remaining for the court is one of construction of the escrow agreement and the mortgage commitment application. In other words, did the two agreements, construed together, require Rary to match terms before releasing the earnest money?
The Continental commitment differed from the mortgage commitment application in that its terms were for a period of fifteen (15) years under a twenty (20) year amortization schedule with the balance remaining at the end of fifteen (15) years payable in a lump sum. The application had requested a twenty (20) year amortization schedule. The interest rate, rather than 7½% as requested, was to be either 7½% per annum or 1½% above prime rate, whichever was higher. The loan was to be closed at 97½% of par, rather than 100% as requested. There is no dispute that these differences were substantial.
The escrow agreement, in pertinent part, reads as follows:
To sharpen the focus on the bases for the respective contentions of the parties, attention is directed to the language beginning on the eighth line of the above quotation: " * * * the earnest money shall be held by the said J. C. Rary pending his receipt of a permanent mortgage commitment for Hugh P. Carter, at which time the said escrow agent shall disperse sic the escrowed monies to the committing companies. * * *" It is Rary's contention that the use of the non-specific article, "a", before the words "permanent mortgage commitment", authorized him to disburse the escrowed monies on receipt of any permanent mortgage commitment regardless of its terms. On the other hand, it is Carter's contention that the incorporation by reference of the more specific language in the commitment agreement controlled Rary's actions.
The mortgage commitment application, in pertinent part stated:
The italicized portions above, as incorporated by reference into the printed escrow agreement, provide the basis for ...
To continue reading
Request your trial