Gibraltar Sav., FA v. First Mortg. Corp., Civ. A. No. 90-392-A.

• Decision Date: 06 May 1993
• Docket Number: Civ. A. No. 90-392-A.
• Citation: Gibraltar Sav., FA v. First Mortg. Corp., 825 F. Supp. 746 (M.D. La. 1993)
• Parties: GIBRALTAR SAVINGS, F.A. in Conservatorship with the Resolution Trust Corporation v. FIRST MORTGAGE CORPORATION, et al.
• Court: U.S. District Court — Middle District of Louisiana

825 F. Supp. 746

GIBRALTAR SAVINGS, F.A. in Conservatorship with the Resolution Trust Corporation v. FIRST MORTGAGE CORPORATION, et al.

Civ. A. No. 90-392-A.

United States District Court, M.D. Louisiana.

May 6, 1993.

S. Layne Lee, Kantrow, Spaht, Weaver & Blitzer, Baton Rouge, LA, for the Resolution Trust Corp., in its Capacity as Receiver for Gibraltar Savings, F.A.

John O. Shirley, Sr., Roedel, Parsons, Forrester, Hill & Koch, Baton Rouge, LA, for First Mortg. Corp. and Premier Bancorp.

Susan F. Clade, Christopher M. Guidroz, Susan Beth Kohn, Simon, Peragine, Smith & Redfearn, New Orleans, LA, for Verex Assurance, Inc.

FINDINGS OF FACT AND CONCLUSIONS OF LAW

JOHN V. PARKER, Chief Judge.

This matter was tried before the court on February 8, 1993. Having carefully considered the evidence and argument of counsel, the court now renders it findings of fact and conclusions of law in accordance with Fed. Rule Civ.P. 52(a).

Findings of Fact

1. In the early 1980's, defendant, First Mortgage Corporation, was engaged in the business of originating, selling and servicing mortgage loans.¹

2. In September of 1983, First Mortgage entered into an agreement with Gibraltar Savings F.A., whereby Gibraltar agreed to purchase residential mortgage loans from First Mortgage. In the agreement, First Mortgage warranted that each loan would be duly executed, acknowledged and recorded, and that each of the mortgages would be covered by valid and enforceable insurance through a private mortgage insurance company.

3. By act of sale dated October 31, 1983, Fred M. Roberson and Jo Ellen Roberson sold their residence on Sophia Lane in Shreveport, Louisiana, to Alvin Wade Gore and Cheryl Barron Gore. The stated consideration for the sale is $21,000 cash in hand and assumption of the mortgage and note executed by the Robersons in 1981. The act of sale was recorded in the public records in Caddo Parish on November 2, 1983.

4. By act of sale dated October 31, 1983, the Robersons purchased a house located on Cobblestone in Shreveport from William James Phillips and Sandra Jean Cason Phillips. The consideration stated in that act of sale is $210,000 cash in hand. The act of sale was recorded in the Caddo Parish public records on November 2, 1983.

5. On October 31, 1983, the Robersons executed a mortgage on the Cobblestone property in favor of The First National Bank of Shreveport in the principal amount of $200,000. Thus, comparing the amount of the mortgage with the amount of the purchase price on the act of sale, it appears that the Robersons may have made a $10,000 down payment.

6. The evidence establishes that a common practice for home buyers at the time was to acquire interim financing while awaiting approval of permanent financing. The court finds that the First National loan closing was such an interim financing arrangement, pending application by the Robersons for permanent financing with First Mortgage.

7. In connection with the permanent loan application, First Mortgage applied for mortgage loan insurance from Verex Assurance, Inc. A commitment for insurance was issued by Verex, effective October 27, 1983, subject to certain conditions, including a sales price of $210,000 and a loan to value ratio of 90%, which essentially means the Robersons had to make a ten percent down payment in the amount of $21,000.

8. A certificate of insurance was issued by Verex, effective December 2, 1993, subject to "proof of sale of real estate i.e. the Sophia Lane property showing net proceeds of at least $14,000".

9. On December 2, 1983, the Robersons executed an adjustable rate note in favor of First Mortgage, in the amount of $189,000, secured by a mortgage given the same day on the Cobblestone property.

10. On December 12, 1983, First Mortgage sold the Roberson loan to Gibraltar.²

11. The Robersons ultimately defaulted on the loan and Verex denied a claim for loss submitted on behalf of Gibraltar.

12. The court received evidence (subject to objection by First Mortgage) that clearly establishes the Gores did not pay the Robersons $21,000 in cash as recited in the recorded act of sale for the Sophia Lane property.

13. There is no evidence to show that the Robersons made any down payment on the Cobblestone property at the First Mortgage loan closing. The documentation submitted in connection with the interim loan is perhaps indicative of a $10,000 down payment. At the time of the permanent financing, the payoff to First National was $191,112.66, which suggests an additional $9,000 may have been paid on the $200,000 interim loan. Consequently, the documentary evidence indicates that the Robersons may have paid as much as $19,000 by the time of the permanent financing.

14. However, according to Dr. Roberson, he did not make any down payment on the Cobblestone property. Dr. Roberson thought the purchase price was $189,000 rather than $210,000.³ Dr. Roberson's recollections are neither precise nor reliable. It is clear from the evidence that others drew checks for his signature and he was not at all sure how much he paid or to whom. In any event, the evidence clearly shows that the Robersons did not make a down payment of $21,000 on the Cobblestone property.

Conclusions of Law

1. The court has subject matter jurisdiction pursuant to 28 U.S.C. §§ 1331, 1345.

2. The issues before the court relate solely to Verex's liability under the mortgage insurance policy. The parties have stipulated that if the court finds the insurance policy to be valid, RTC will be entitled to recover from Verex. On the other hand, if the court finds that no coverage exists, then First Mortgage will be liable for breach of warranty.

3. Verex contends that the loan insurance policy was issued contingent upon certain "conditions precedent" that were not met, hence the risk never attached. In particular, Verex contends that the certificate of issuance was conditioned upon: (i) the Robersons purchasing the Cobblestone property for $210,000 and making a ten percent cash down payment toward the purchase price, and; (ii) the Robersons selling their prior residence on Sophia Lane with net proceeds of at least $14,000.

4. A condition precedent is one that must be performed before the contract becomes effective and calls for the happening of some event or the performance of some act (after the terms have been agreed upon) before the contract shall be binding on the parties. Benton Casing Service, Inc. v. Avemco Ins. Co., 379 So.2d 225 (La.1979). See also, Couch on Insurance 2d § 36:46.

5. A condition precedent is a contractual limitation to the attachment of the risk, Couch, supr...