Dubin Weston, Inc. v. Louis Capano & Sons, Inc.

• Decision Date: 28 April 1975
• Docket Number: Civ. A. No. 4140.
• Citation: 394 F. Supp. 146
• Court: U.S. District Court — District of Delaware
• Parties: DUBIN WESTON, INC., Plaintiff, v. LOUIS CAPANO & SONS, INC., Defendant.

394 F. Supp. 146

DUBIN WESTON, INC., Plaintiff, v. LOUIS CAPANO & SONS, INC., Defendant.

Civ. A. No. 4140.

United States District Court, D. Delaware.

April 28, 1975.

Joseph A. Rosenthal of Morris & Rosenthal, Wilmington, Del., for plaintiff.

Howard L. Williams of Morris, James, Hitchens & Williams, Wilmington, Del., for defendant.

OPINION AND JUDGMENT

LATCHUM, Chief Judge.

In this diversity suit,¹ Dubin Weston, Inc.² ("plaintiff") seeks to recover a brokerage fee in the amount of $23,250 from Louis Capano & Sons, Inc. ("defendant") allegedly due under a mortgage brokerage contract entered into between the parties. The case was tried by the Court without a jury on December 19, 1974. The Court, having considered the testimony and evidence adduced at trial and the post trial memoranda of the parties, enters the following findings of fact, conclusions of law and judgment.

Since 1970, the plaintiff has been and is a real estate and mortgage brokerage firm with its principal office in New York City. As such plaintiff has often been engaged as an agent by prospective borrowers to "find" interested lenders of money for permanent mortgage financing and building construction loans. (Tr. 26-27; Docket Item 27A, par. c 6).³

The defendant, a Wilmington construction company established in 1958, has built several residential home developments in Delaware, as well as small scale commercial projects and individual apartment units. Defendant's president and sole shareholder is Louis Joseph Capano ("Capano"). (PX 30, at 12). In 1969 the defendant entered into a contract with the Cavalier Country Club to purchase a 52 acre tract of land south of Wilmington for $700,000, intending to develop an apartment complex on the site. The contract called for the defendant to purchase a minimum of 10 acres each year over a five year period, purchase and payment to be made annually on February 1 (Tr. 80).

Financing for the first 10 acre parcel purchased ("Section I") consisted of a $2,300,000 construction loan provided by the Bank of Delaware and a permanent mortgage in the same amount was taken up by Colonial Mortgage Service Company. (PX 30, pp. 13-14). Because the mortgage market in the latter half of 1970 was very tight, (Tr. 27), as of December 1, 1970, the defendant had been unable to obtain financing for the second ten acre tract that had to be purchased and paid for by February 1, 1971 ("Section II").⁴

Sometime about December 2, 1970, Leon Siegel, one of plaintiff's salesmen, met with Capano, having been directed to the defendant by a mutual acquaintance. (Tr. 84; PX 30 at 83-84). Capano explained the type of financing the defendant needed for Section II and had the following authorization to the plaintiff typed out on defendant's stationery, which he then signed on behalf of the defendant:

"We hereby authorize you to obtain for us a permanent mortgage of $2,400,000 with a construction loan take out. The permanent mortgage to be at the rate of 9¾% interest, 25 year take out, 10.91 constant, 15 year loan; with an additional interest of 15% over and above the projected gross rentals, and a 1% fee to lender non-refundable. This authorization will expire the 25th of December 1970.

"The arrangement of the construction loan will be such that we will take down the payment for the second section mortgage of approximately $225,000, plus the interest, plus a 1% service charge to Dubin, Weston & Baum." (PX 14).

Capano also gave Siegel the plans and specifications for the proposed buildings to be constructed on Section II.

Siegel turned defendant's letter of authorization and the plans and specifications over to Herman D. Dubin ("Dubin"), plaintiff's president. (Tr. 29, 84-85; PX 30 at 90-91; Docket Item 27A, par. c 5). After telephoning Capano for further information, Dubin set about contacting some twenty-four prospective lenders on defendant's behalf. (Tr. 29-34; PX 33 a-j). About December 8 or 9, 1970, Dubin received a proposal from Dollar Savings Bank of New York ("Dollar") offering to take a permanent mortgage on Section II along the lines that defendant had authorized the plaintiff to find. (Tr. 34). Dubin telephoned Capano and told him of Dollar's proposal and while Capano seemed pleased he asked Dubin to "go back" to Dollar with a view to obtaining a $2,400,000 permanent mortgage loan on a 25 year pay-out. (Tr. 35). Dubin was unsuccessful in attempting to get Dollar to modify its proposal and upon notifying Capano of Dollar's position, Capano said he would come to New York City on December 14, 1970 and asked Dubin to set up an appointment with the bank officer handling the matter for Dollar. (Tr. 36).

On December 14, 1970 Capano and defendant's attorney, Howard L. Williams ("Williams") traveled to New York City in order to formally apply to Dollar for a permanent mortgage on Section II. Capano and Williams first met with Dubin at the plaintiff's offices. While in his office and on the way to the bank, Dubin repeated the terms of Dollar's proposal as he understood them, including the requirement that a M. A. I. (member appraisal institute) appraise Section II. (Tr. 41-42).

Before leaving plaintiff's office for the bank appointment, Capano and Dubin on behalf of the defendant and plaintiff executed an agreement⁵ on plaintiff's letterhead which reads as follows (PX 39):

"Dubin, Weston & Baum, Inc 331 Madison Avenue New York, New York 10017 Re: Cavaliers Golf View Apartments Wilmington, Delaware Gentlemen We hereby authorize you to obtain a first mortgage loan, for us, in the amount of $2,325,000 with interest at 9½% per annum, for 22 yr 5 mo. years, with amortization payments of 1.30%, making a constant payment of 10.80 per annum, payable monthly, on our property located at the above mentioned premises. We also authorize you to obtain a construction loan to finance the first mortgage mentioned above. Your commission for obtaining a commitment, on the above terms or on such other terms as we may approve shall be $34,875. This commission is due and payable upon our receipt and acceptance of the commitment. We agree to pay the usual disbursements which include the charge of attorney for mortgage, cost of title insurance policy, mortgage recording tax and Government stamps, if any, survey, appraisal, recording fees and all other disbursements in connection with closing of the loan. If we, or any company with which we are associated, negotiate for a loan with the lender involved with this commitment, within 3 years you are entitled to a full commission on said loan. This commission is due and payable upon our receipt of said loan commitment. This authorization is to remain in force until the close of business Dec. 31, 1970. Very truly yours, s/ Louis Joseph Capano, Inc. s/ Louis Joseph Capano, Pres. Employment Accepted Dubin Weston & Baum, Inc. s/ H. D. Dubin"

Penned in ink and initialed by Capano and Dubin on the lower left hand corner of the above letter was the statement "In the event that only the permanent mtge is accepted, the commission will be $23,500."

After this agreement was executed, Dubin then escorted Capano and Williams to Dollar's offices. There Dubin, Capano and Williams met with Fred Hanken ("Hanken"), a vice-president of Dollar. Hanken handed them a prepared printed application and attached rider for a $2,325,000 first mortgage loan on Section II. (PX 16). The term of the mortgage, interest rates, amount of monthly payments and other terms were typed in; just below this, the application contained the following printed paragraph with several underlined figures typed in:

"This application shall be irrevocable for a period of 20 days from the date hereof. Applicant deposits with the Bank, at the time of making this application, the sum of $23,250. to be held by the Bank without interest, as security for liquidated damages, which sum the parties hereto agree shall be liquidated damages, and shall be retained by the Bank in the event that: a) the applicant attempts to revoke this application or refuses to accept a commitment before the expiration of said 20 day period, or b) for any reason, other than the default of the Bank under its commitment, the loan does not close on or before June 30, 1972 or, as extended by the Bank in writing. This provision for liquidated damages is inserted herein in view of the difficulty of establishing the damages of the bank (sic) in either of the foregoing circumstances. Said deposit to be returned to applicant upon closing of this mortgage loan, or in the event that the Bank rejects this application."

Following this paragraph a printed statement appeared which reads:

"It is understood that, if the Bank accepts this application, its obligation to make the loan shall be conditioned upon:"

The three conditions then appearing required the defendant (1) to pay the charges of Dollar's counsel, expense of the title insurance, surveys, mortgage tax, recording fees incident to making the loan, (2) to deliver extended coverage fire insurance policies payable to Dollar in companies and amounts acceptable to Dollar, and (3) stipulated that Dollar's counsel must give an opinion that the title, closing documents and mortgage were satisfactory at the closing of the loan. Just below these provisions what would have been a fourth condition was crossed out and words "Rider attached" were typed in. The sheet attached to the application, entitled "Rider to Application No. 57069" contained items numbered 5 through 14.

Items 7 and 9, in relevant part, read as follows:

"7) Applicant shall pay to the Bank upon the signing of this application a non-refundable fee of $23,250. Which shall be deemed wholly earned by the Bank upon the issuance of its commitment based upon this application.

. . .

"9) Subject to an appraisal made by an M.A.I. selected by the Bank, in an amount not less than $3,200,000., the cost of which will be paid by the applicant."

Hanken explained...