Great Western Sav. Bank v. George W. Easley Co., J.V., s. S-2344
| Decision Date | 28 July 1989 |
| Docket Number | S-2345,Nos. S-2344,s. S-2344 |
| Citation | 778 P.2d 569 |
| Parties | GREAT WESTERN SAVINGS BANK, Appellant, v. GEORGE W. EASLEY CO., J.V. Appellees. SATORI GROUP, LTD., Michael Emery, and Steve Matlin, Cross-Appellants, v. GREAT WESTERN SAVINGS BANK, Cross-Appellee. |
| Court | Alaska Supreme Court |
Phillip J. Eide and Michael S. McLaughlin, Guess & Rudd, Anchorage, for Great Western Sav. Bank, appellant/cross-appellee.
Duncan A. Stuart, Bankston, McCollum & Fossey, P.C., Anchorage, for George W. Easley Co., J.V., appellees.
Homer L. Burrell, Anchorage, for Satori Group, Ltd., Michael Emery, and Steve Matlin, cross-appellants.
Before MATTHEWS, C.J., RABINOWITZ, BURKE, and COMPTON, JJ.
These consolidated appeals arise out of a financially troubled construction project. In Great Western v. Easley, an Anchorage jury found the construction lender--Great Western Federal Savings Bank--liable to the general contractor--George W. Easley Company--under several tort and contract theories. It awarded Easley Company $367,000 in compensatory damages and $83,300 in punitive damages. The trial court then subordinated Great Western's deed of trust to Easley Company's mechanics' lien in Easley Company's lien foreclosure action against the developer of the project, Satori Group, Ltd.
In the second case, Satori v. Great Western, Great Western filed cross-claims against Satori for foreclosure, indemnity, and contribution. Satori then cross-claimed against Great Western. Satori failed to answer Great Western's cross-claims and the trial court entered a default judgment against Satori. At a later date, the trial court granted Great western's motion for a directed verdict on Satori's cross-claim.
Great Western and Satori appeal.
In May 1984 Satori submitted a $1.8 million construction loan application to Great Western for the development of a retail shopping center named the "Liberty Center." That same month, Great Western approved the application and issued a loan commitment letter to Satori and Satori's sole officers and shareholders, Steve Matlin and Michael Emery.
Satori then entered into a construction contract with Easley Company, a general contractor, on June 11, 1984. Because the Liberty Center plans were unfinished, the parties used a preliminary cost estimate of $1,205,800 as the tentative contract price. The parties agreed that once the architect completed the plans, Easley Company would submit a final cost estimate. If the final cost varied by more than ten percent from the tentative contract price, the contract allowed either party to terminate the agreement.
On June 26, 1984, Great Western closed the $1.8 million construction loan with Satori. In July, Great Western sent its construction budget for the Liberty Center to Satori. This budget allocated specific amounts of loan funds to the project's various components, such as electrical work, roof work, site work, and the like. Great Western informed Satori that it would disburse loan funds up to, but not beyond, the amount budgeted in each category. Great Western further advised Satori that any change orders to the construction contract required Great Western's approval.
By August 1, 1984, the Liberty Center plans were essentially complete. After reviewing the plans and receiving bids, Easley Company submitted a final construction cost estimate of $1,283,736. 1 Satori then informed Easley Company that it had only $1,035,000 available for "hard construction costs." 2 Subsequently, on August 14, 1984, Easley Company and Satori amended their June 11 contract to provide that Satori, not Easley Company, would be responsible for the foundation and site work. This change brought Easley Company's contract with Satori within the $1,035,000 available for hard construction costs. The parties further agreed that should Easley Company become responsible for the site and foundation work, Easley Company's contract would return to $1,283,736.
On August 15, 1984, George Easley, President of Easley Company, met with Michael O'Brien, the Great Western Loan Officer responsible for the Liberty Center loan, and Matlin, Satori's vice president. Easley told O'Brien that his company was no longer responsible for the site and foundation work and that its contract with Satori totalled $1,035,000. Additionally, Easley asked Great Western to reserve $1,035,000 in construction funds solely for Easley Company and to pay Easley Company directly, instead of going through Satori. O'Brien agreed to both requests in an August 15, 1984 letter.
Construction of the Liberty Center began in September 1984 with Satori's subcontractors performing site and foundation work. On September 21, 1984, Great Western advised Satori that Satori would be solely responsible for site work charges that exceeded Great Western's site and foundation budget of $109,000. By early October, Satori apparently realized that it did not have enough money to pay for the site work. Accordingly, Satori discussed the cost overruns with O'Brien, who advised Satori to request an increase in the loan. On October 16, 1984, Satori wrote a letter to Great Western formally requesting an increase in the loan and outlining the reasons for the increased costs. O'Brien testified that as of October 16, 1984, he knew Satori had insufficient funds to complete the project.
Meanwhile, Satori asked Easley Company to agree to a change order that would include the site work in Easley Company's construction contract. George Easley agreed, and on October 5, 1984, Easley Company and Satori agreed to Change Order No. 1 which increased Easley Company's contract with Satori to $1,283,736. This change order made Easley Company responsible for paying Satori's subcontractors from construction loan funds received from Great Western.
On October 7, 1984, Easley Company submitted Pay Request No. 1 for $252,043, which included $232,144 for foundation and site work performed by Satori's subcontractors. Great Western's consulting engineer, Quadra Engineering, Inc., inspected the project, confirmed that the amount requested by Easley Company fairly reflected the work done, and recommended full payment.
Great Western received and processed Easley Company's first pay request but refused to pay for site work charges beyond the $109,600 budgeted for that work. On October 26, 1984, Great Western issued a check for $155,607 3 and, instead of paying it directly to Easley Company, paid the money to Satori.
When Easley Company received $110,000 less than requested, George Easley discussed the shortfall with Satori. George Easley testified, and the trial court found, that Satori assured him that Great Western had approved the change order and that the shortfall would be funded in the second pay request. At this time, Satori's loan increase application was still pending.
On November 8, 1984, Great Western's credit review committee considered and rejected Satori's request to increase the Liberty Center loan by $300,000 to $2.1 million. O'Brien testified that the credit committee required additional security before it would increase the loan. The trial court found that from this day forward the Liberty Center loan was "out of balance." 4
Meanwhile, work continued on the Liberty Center. In early November Easley Company submitted Pay Request No. 2 for $335,073. This request included money requested, but not received, for site and foundation work in Pay Request No. 1. Quadra inspected the site and approved the second pay request.
Great Western disbursed $335,073 to Satori, which then forwarded the entire amount to Easley Company. By November 26, 1984, Easley Company had received $476,826--the total amount requested in Pay Requests Nos. 1 and 2.
At Satori's request, Great Western disbursed the full amount requested by Easley Company by changing the allocations within Great Western's loan budget to reflect, as completed items, work that Easley Company had not performed. For example, in order to fully fund Easley Company's second pay request, Great Western indicated on its internal budget that it disbursed approximately $59,000 for plumbing and mechanical work when, in fact, Easley Company certified having performed about $12,000 worth of mechanical work. As discussed below, Great Western followed this policy until the money was exhausted and did not inform Easley of this practice.
The trial court found that Great Western's disbursement practices led Easley Company to believe that Great Western had approved Satori's November 8, 1984 loan request to cover all construction costs. Great Western's expert witness, Chuck Homan, testified that Great Western had not informed Easley of the loan's imbalance because Great Western feared that Easley Company would walk off the job. The trial court found that as of November 8, 1984, Great Western knew that there were insufficient funds available to complete the project and that Easley would go partly unpaid.
On December 10, 1984, Easley Company submitted Pay Request No. 3 for $277,387. Quadra approved the request and forwarded it to Great Western. O'Brien approved the request and disbursed payment to Satori. On December 19, 1984, Easley Company received full payment from Satori. Great Western again disbursed money for items neither completed by Easley Company nor certified by Quadra as having been performed. Consequently, after the third disbursement, Great Western had disbursed 81% of the $1,035,000 available for construction costs. However, the project was only 65% complete.
In early December 1984, George Easley met with the architect and Satori and discussed additional construction changes which culminated in Change Order No. 2. This change increased the total project cost by $48,479.
In January 1985, Easley Company submitted Pay Request No. 4 for $318,417. This request included the adjustments made in Change Order No. 2 and indicated that the total project cost...
To continue reading
Request your trial
-
St. Denis v. Dept. of Housing and Urban Develop., A92-041 CV (JKS).
...or fraudulent misrepresentation. See ARCO Alaska, Inc. v. Akers, 753 P.2d 1150, 1153 (Alaska 1988); Great Western Sav. Bank v. George W. Easley Co., 778 P.2d 569, 580-81 (Alaska 1989); Turnbull v. LaRose, 702 P.2d 1331, 1334 (Alaska 1985) (non-disclosure).7 The United States has not consent......
-
2002 Lawrence R. Buchalter Alaska Trust v. Phila. Fin. Life Assurance Co.
...causation; and (4) damages.” Nicdao v. Chase Home Fin., 839 F.Supp.2d 1051, 1068 (D.Alaska 2012) (citing Great W. Sav. Bank v. George W. Easley Co., 778 P.2d 569, 577–78 (Alaska 1989) ; Winn v. Mannhalter, 708 P.2d 444, 450 (Alaska 1985) ). Under New York law, the elements of a cause of act......
-
Tilt-Up Concrete, Inc. v. Star City/Federal, S-99-799.
...267, 271 (8th Cir. 1904). See, generally, 53 Am.Jur.2d Mechanics' Liens §§ 338 and 339 (1996). See, also, e.g., Great Western Sav. v. George W. Easley, 778 P.2d 569 (Alaska 1989); Pine Gravel, Inc. v. Cianchette d/b/a Site Prep., 128 N.H. 460, 514 A.2d 1282 (1986); Sentry Engineering v. Mar......
-
Frontier Properties Corp. v. Swanberg
...(1950); Madison Highlands Dev. Co. v. Dean & Son Plumbing Co., 415 So.2d 1129, 1131 (Ala.Civ.App.1982); Great W. Sav. Bank v. George W. Easley Co., 778 P.2d 569, 578 (Alaska 1989); Phoenix Title & Trust Co. v. Garrett, 73 Ariz. 55, 56-57, 237 P.2d 470, 471 (1951); Nibbi Bros., Inc. v. Brann......