Greenebaum-Mountain Mtg. Co. v. Pioneer Nat. Title Ins. Co.

• Decision Date: 01 November 1976
• Docket Number: Civ. A. No. 75-F-569.
• Citation: 421 F. Supp. 1348
• Parties: GREENEBAUM-MOUNTAIN MORTGAGE COMPANY, Plaintiff, v. PIONEER NATIONAL TITLE INSURANCE COMPANY, Defendant, v. DUANE INVESTMENTS, INC., et al., Third-Party Defendants.
• Court: U.S. District Court — District of Colorado

421 F. Supp. 1348

GREENEBAUM-MOUNTAIN MORTGAGE COMPANY, Plaintiff, v. PIONEER NATIONAL TITLE INSURANCE COMPANY, Defendant, v. DUANE INVESTMENTS, INC., et al., Third-Party Defendants.

Civ. A. No. 75-F-569.

United States District Court, D. Colorado.

November 1, 1976.

Jack N. Hyatt, Judith D. Levine, Brownstein, Hyatt, Farber & Madden, Denver, Colo., for Greenebaum-Mountain Mortg. Co.

James E. Brown, Charles Haines, Nanaruth Haines, Grant, McHendrie, Haines & Crouse, Denver, Colo., for Pioneer Nat. Title Ins. Co.

MEMORANDUM OPINION AND ORDER

FINESILVER, District Judge.

THIS MATTER comes before the Court on Defendant's Motion for Withdrawal of Plaintiff's Counsel. The Motion, which was an alternative motion filed in the event that this Court denied Defendant's cross motion for summary judgment, is based on Canon 5 of the Code of Professional Responsibility. This Court denied Defendant's cross motion for summary judgment on August 18, 1976. The Court then scheduled a hearing on the motion to disqualify in accordance with the Tenth Circuit's ruling in Fullmer v. Harper, 517 F.2d 20 (10th Cir. 1975).

At the hearing Plaintiff and Defendant submitted the motion upon affidavits, exhibits and Defendant's Designation of Record Re Hearing on Withdrawal of Plaintiff's Counsel. The Court has reviewed the papers filed at the hearing, the briefs, and has conducted its own research into the issues presented. After carefully weighing the various interests involved, we rule that only attorney Kenneth Robins need be disqualified from further participation as an attorney in this lawsuit. Attorneys from the law firm of Messrs. Brownstein, Hyatt, Farber and Madden, other than Mr. Robins, may continue their participation in this litigation.

FINDINGS OF FACT

Many of the factual contentions in this lawsuit are still in dispute. As noted above, on August 18, 1976 this Court denied cross-motions for summary judgment for the reason, inter alia, that genuine issues of material facts remained outstanding. In Fullmer v. Harper, the Tenth Circuit mandated that trial courts, in ruling on motions for disqualification of counsel, make specific findings of fact and conclusions of law "to the end that the appellate court will then have a record before it which will permit a meaningful review, should review be sought." 517 F.2d at 20.

Defendant's position in this motion is that Mr. Robins was deeply involved in the negotiations which led to the present impasse. In particular, Mr. Robins drafted what is alleged to be an agreement between Plaintiff and Defendant which, in a serious way, could be determinative of the outcome of the litigation. Defendant contends that Mr. Robins will be called as a witness at the trial of this lawsuit and for that reason, under Canon 5 of the Code of Professional Responsibility, he and his law firm should be disqualified from further participation in the litigation.

Because the facts of this motion are inextricably bound with the merits of the case itself, Fullmer's requirement of findings of fact puts this Court in a difficult position. While the Court shall make such findings, we wish to underscore that the Court is not prejudging any of the issues which are to be litigated at the trial itself.

Any "findings" which are made, however, shall be restricted to use in the decision of this motion and, of course, to the use of any appellate court reviewing the Court's order. These findings shall in no way be binding upon the parties for any other purposes in this litigation.

I

In July of 1973 Greenebaum-Mountain Mortgage Company entered into a construction loan agreement with Hill Pond Development Corporation. The agreement provided for the construction of some 70 residential housing units on 8.4 acres of Hill Pond's 98 acre tract in Fort Collins, Colorado. To facilitate the orderly progression of the project, Greenebaum and Hill Pond signed a construction disbursement escrow agreement C.D.E. with Defendant Pioneer National Title Insurance Company (Defendant's Exhibit A-18).¹ The C.D.E. provided that Pioneer was to disburse the funds loaned to Hill Pond as certain phases of construction were completed. In the event the project was not completed according to schedule, paragraph thirteen of the C.D.E. provided:

13. That should Owner Greenebaum and Contractor Hill Pond fail to complete in accordance with the terms hereof, Escrowee Pioneer is obligated to Lender Greenebaum, at Escrowee's option, either (a) to complete the improvements substantially in accordance with plans and specifications, or (b) to purchase Lender's note and mortgage by paying Lender all sums then due under said instruments. . . . (footnote omitted)

Greenebaum alleges that Pioneer was to have monitored the progress of the construction so that it could intelligently disburse the loan funds under the C.D.E. Pioneer maintains that it had no obligation to monitor the project, although for some months a Pioneer subsidiary did, in fact, report on the advances made on the project. By May of 1974, Hill Pond was seriously "out of balance" in regard to the state of the construction compared with the expenditures of the loan proceeds. Pioneer alleges that an official of Greenebaum informed Pioneer that, as of June 25, 1974, the project was not in default or behind schedule.

Greenebaum gave Hill Pond "official" notice of default on the construction loan agreement in October of 1974 and therein made a demand for payment of the promissory note in accordance with the acceleration clause of the note. To satisfy the demand, Hill Pond proposed to transfer its fee interest in the 98 acre site to Greenebaum. Greenebaum approved of this solution and, on November 14, 1974 mailed a letter to Pioneer informing it of the agreement and asking Pioneer to "formally indicate your concurrence in the appropriate space on a copy of this letter and return such copy, as executed, to me." (Exhibit A-12) The letter was sent to Pioneer Vice President Patrick Galvin by attorney Kenneth M. Robins. Mr. Galvin, after meeting with Mr. Robins, executed and returned a copy of the letter on December 11, 1974. Subsequently, Greenebaum exchanged its construction loan agreement note for the fee title to the realty.

By accepting the fee title from Hill Pond, Greenebaum prevented Pioneer from purchasing the lender's note in the event of default on the construction — an option given to Pioneer in paragraph thirteen of the C.D.E. It is Pioneer's contention that by this action, Greenebaum breached the terms of the C.D.E., waived any rights under the document, and thereby relieved Pioneer of any obligations.

II

Kenneth M. Robins is a member of the Denver law firm of Brownstein, Hyatt, Farber and Madden. In the summer of 1973 Mr. Robins was consulted by Greenebaum concerning the drafting of the Greenebaum-Hill Pond loan commitment agreement. (Robins deposition at 15).² Mr. Robins' work on the Hill Pond documents continued until September of 1973. (Deposition at 34) Attorney Robins did no further work on the project until the end of May, 1974. (Deposition at 34) It was at this time that the parties allege that the project was seriously "out of balance." Mr. Robins was contacted by someone in the Greenebaum home-office in Chicago, presumably because of the problems with Hill Pond, including the cost overruns associated with the project. (Deposition at 36) During the May-June period Mr. Robins contacted representatives of Pioneer, including Vice President Galvin, to discuss the Hill Pond problem and other construction projects in which Plaintiff and Defendant were cooperating. (Deposition at 44-45) During September and October, discussions were held within the Greenebaum organization in an attempt to devise an "internal" resolution of the situation. (Deposition at 55-56)

In mid-October, Robins participated in negotiations between Greenebaum and Hill Pond wherein some accommodation was to be arranged concerning the outstanding promissory note, which by that time was clearly in default. For many months prior to this negotiation, Mr. Robins attempted to arrange the refinancing of the mortgage with a third-party (Deposition at 51-55), but those attempts proved unsuccessful. In the October Hill Pond negotiations the transfer of the fee title was discussed and it was Mr. Robins' opinion that before such an exchange should take place, Pioneer should be contacted. (Deposition at 76-77) Certain contacts were made with Pioneer, particularly with Patrick Galvin. Telephone conversations and letters were exchanged on and around November 11 and November 14 (Deposition at 81); face-to-face meetings were had in Los Angeles on November 27 (Deposition at 87-88); Mr. Galvin returned the executed letter mentioned above on December 11; telephone conversations were attempted on December 15 (Deposition at 99); and finally a formal letter was mailed to Pioneer on December 26 (Deposition, id.). While this itemization is not totally complete, it does convey the intensity of negotiations that were carried on between Greenebaum and Pioneer on the subject of the transfer of the 98 acre fee title.³ The exchanges listed all involved attorney Robins and all have a bearing on the intent of the parties concerning the disputed "formal concurrence" by Pioneer to the surrender of the Hill Pond fee.

Finally, we note that this litigation was commenced on May 23, 1975 and has been hard fought at every step. The "designation of record" for this motion alone contains nearly one thousand pages which the Court has reviewed. The cross-motions for summary judgment contained documentation which went well into the hundreds of pages. The factual issues, as well as certain legal issues upon which we do not comment at this time, are complex and require the devoted attention of any counsel who go forward with the case. In monetary terms the stakes are high; and while the Court has not yet focused on the issues, the pleadings indicate...