IVOR B. CLARK CO. OF TEX., INC. v. SOUTHERN B. & ID CO.

• Decision Date: 24 October 1974
• Docket Number: Civ. A. No. 72J-157(N).
• Parties: IVOR B. CLARK COMPANY OF TEXAS, INC., et al., Plaintiff, v. SOUTHERN BUSINESS AND INDUSTRIAL DEVELOPMENT COMPANY, Defendant.
• Court: U.S. District Court — Southern District of Mississippi

399 F. Supp. 824

IVOR B. CLARK COMPANY OF TEXAS, INC., et al., Plaintiff, v. SOUTHERN BUSINESS AND INDUSTRIAL DEVELOPMENT COMPANY, Defendant.

Civ. A. No. 72J-157(N).

United States District Court, S. D. Mississippi, Jackson Division.

October 24, 1974.

COPYRIGHT MATERIAL OMITTED

James Leon Young, Jackson, Miss., for plaintiff.

Robert H. Weaver, Jackson, Miss., for defendant.

MEMORANDUM OPINION

NIXON, District Judge.

ISSUES OR CONTENTIONS

This diversity suit seeks recovery of a $201,000.00 brokerage fee with interest which the defendant allegedly owes plaintiffs for two stand-by loan commitments of $6,000,000 and $4,050,000 for a construction project issued by an investment lender, B. F. Saul Real Estate Investment Trust (Saul) on June 25, 1971 and January 13, 1972, respectively. The primary basis for plaintiffs' claim is a written contract entered into between the plaintiff, General Mortgage Securities Corporation (General) and the defendant, Southern Business and Industrial Development Corporation (Southern) on January 22, 1971 (Ex. G-1), and a subsequent oral agreement between the defendant and plaintiffs. In the alternative, plaintiffs contend they are entitled to a brokerage fee on at least one of the two above commitments, or to a reasonable fee on the $4,050,000 commitment on a quantum meruit basis.

In answer, the defendant, Southern, denies liability to both plaintiffs, contending that General at no time obtained for it a loan commitment in accordance with the terms specified in the written contract and that this agreement either expired or was expressly or impliedly cancelled by the defendant prior to the time that any other commitment was obtained. Southern further contends that the plaintiff, Ivor B. Clark Company of Texas (Clark) failed to obtain for it a firm $6,000,000 fundable or bankable commitment and thereafter abandoned any efforts to do so prior to the time that the $4,050,000 commitment was issued. The defendant also alleges that the $4,050,000 commitment from Saul was a new and independent commitment obtained by others than the plaintiffs and not an amendment of the previous $6,000,000 commitment. Lastly, Southern contends that General and Clark, by negotiating for a stand-by commitment for the construction of the defendant's Hilton Hotel in Jackson, Mississippi, were doing business in the State as foreign corporations without having first qualified to do so pursuant to the laws of the State of Mississippi, and thus barred from bringing this action.

THE FACTS

The defendant, a Mississippi corporation, with its domicile in Jackson, Mississippi, was incorporated on February 28, 1968 and made several real estate investments, including the building of an office building in Jackson and a Ramada Inn Motel in Biloxi. It then purchased and leased property on North State Street in Jackson for the construction of a Hilton Hotel and received a franchise or "Hilton License Agreement" therefor. They then commenced construction of a 225-room hotel on the site with funds raised by public sales of stock and a construction loan commitment issued by the Investors Diversified Savings Mortgage Corporation of Minneapolis, Minnesota (IDS) to be disbursed through the Mississippi Valley Title Insurance Company. The construction of this hotel was contracted, without performance bond, to Earl Allen, a stockholder of defendant.

Southern experienced difficulty in obtaining a permanent loan commitment for this project, and in December, 1969 its directors authorized the acceptance of a $3,000,000 stand-by commitment at a 6% discount, with an additional 4% discount for a second year, a three year discount upon closing, 12% interest per annum, plus 25% of the gross room income above 75%. On March 12, 1970, Southern's directors authorized its executive committee to accept a permanent loan commitment and an interim loan commitment at a rate 15% per annum plus a 1% discount.

Subsequent to the commencement of construction, it became apparent that the defendant under estimated its costs, and by July, 1970, its construction lender, IDS, and its disbursing agent, Mississippi Valley, began making demands on the defendant and threatened foreclosure. Earl Allen's construction contract was terminated by authority of Southern's Board of Directors, and there was a shake-up or change in management. It then had a feasibility study made by experts, and based on their recommendation, decided to build a 375-room hotel instead of the 225 room one originally conceived and planned. On September 29, 1970, Southern's directors authorized its officers to make efforts toward obtaining financing for the enlarged structure, which they did by first employing different architects who redesigned it and obtained cost estimates therefor. In November, 1970, IDS advised Southern that it would make no more advances on its construction loan until a permanent loan commitment had been obtained for the enlarged structure, and made demand for payment of past due interest.

The defendant's officers began efforts to obtain financing, and one Bill Williams, an independent broker of Jackson, informed Jacques L. Fortier, the president of General, an established mortgage brokerage firm in New Orleans, Louisiana, of the defendant's desire. At this time the defendant's project was in bad shape since construction had stopped and liens had been filed against the project. Fortier went to Jackson and met with Charles "Chuck" Wynn, who at all times herein was the president and managing agent of the defendant, and another member of its Board. Discussion was had concerning the desired commitment and required brokerage fee.

On January 22, 1971, the defendant entered into a written agreement with General acting through its president, Fortier, which was in two parts (Ex. G-1), the first consisting of one page and relating to the agreed brokerage fee and the other, consisting of three pages dealing with the commitment, including the investment lender's fee or discount and interest to be charged.

The one page brokerage fee contract which gave General exclusive authorization to make application of an interim and permanent first mortgage loan in the amount of $6,500,000, to one or more lending institutions of its selection, provided that Southern would pay General a 2% brokerage fee on the amount of the loan commitment at the time of its delivery in accordance with stated terms i. e., for a period of ten years with interest of not more than 9.5% per annum and a constant payment of 10.50%. This contract further provided:

5. We agree that the lending institution providing the financing of the subject loan may be interested in either interim or long-term financing of various other projects. In view of the fact that contact between this lending institution and ourselves was procured and arranged by you, we agree to pay you the same percentage fee as provided in Paragraph 6 below of the loan amount of any financing which, within thirty-six (36) months of this date, might be committed or paid to us, or any person or entity affiliated with, associated with, owned by or owning, or controlled or controlling us."

"6. . . . Your fee shall be deemed to be earned upon receipt by us of a loan commitment with the terms described in Paragraph 2 above or with such other terms as may be accepted by us.

Paragraph 14 of the three-page agreement provides in part:

"This application is subject to the following conditions:

14. We herewith deposit with you in escrow the sum of $3,000.00 as a good faith deposit. Said sum will be refunded without interest and less any traveling expenses or other direct expenses, in the event you do not deliver a loan commitment as herein described, within 30 days, expenses not to exceed $250.00."

General then obtained numerous documents from Southern, including an MAI appraisal, financial statement and feasibility report and began contacting various lending institutions throughout the United States without any success because of the tight money market. Fortier then talked to Howard S. Barksdale of Houston, Texas, the vice-president and manager of the plaintiff, Clark, which was an individually owned mortgage service and placement corporation incorporated in the State of Texas with its prinicipal office in Houton. Barksdale was at once interested because he had relatives living in Jackson, Mississippi, had read of the dynamic growth of Jackson and had obtained loans from John Hancock Mutual Life Insurance Company (John Hancock) for several large motel construction projects throughout the United States. Fortier and Barksdale orally agreed that Clark would receive one-half (½) of the 2% brokerage fee provided for in the written contract between General and Southern, that is, 1% of the loan commitment. Clark, through Barksdale, was of the opinion that it could obtain the desired loan through John Hancock for whom it was a contractual agent placing and collecting loans for it in various areas throughout the country. Clark never was an institutional investor itself, that is, a source of lending funds. Barksdale made a preliminary contact with John Hancock's representative and obtained an expression of interest in making the permanent loan desired by Southern, and then relayed this information to Fortier, who in turn wrote to Southern's president and manager, Wynn, on January 29, 1971 (Ex. P-2):

"As you know, your entire package for mortgage processing is with our investor for the finalization and issuance within thirty (30) days, of a $6,500,000 construction and permanent first mortgage commitment on the captioned project . . . ."

Thereafter, on February 11, 1971, Fortier again wrote to Wynn (Ex. D-1) asking him to have defendant's executive committee members available to meet with Fortier on February 17, 1971 at a designated time "for finalization of papers for the permanent mortgage you require to complete the captioned project . . . .". In this letter he...