Lenders Financial Corp. v. Talton, 940563

• Citation: 455 S.E.2d 232,249 Va. 182
• Decision Date: 03 March 1995
• Docket Number: No. 940563,940563
• Court: Virginia Supreme Court
• Parties: LENDERS FINANCIAL CORPORATION v. David N. TALTON. Record

Page 232

455 S.E.2d 232

249 Va. 182

LENDERS FINANCIAL CORPORATION v. David N. TALTON.

Record No. 940563.

Supreme Court of Virginia.

March 3, 1995.

David C. Schroeder, Alexandria (Murphy, McGettigan, Richards & West, on briefs), for appellant.

Jon F. Mains, Alexandria (Mains & Mains, on brief), for appellee.

Present: All the Justices.

COMPTON, Justice.

This is an action brought by a mortgage banking company against a residential real estate developer on a written "broker fee agreement" to recover a sum allegedly due under the agreement for assistance in obtaining financing for one of the developer's projects.

In 1989, appellee David N. Talton, the defendant below, was involved in developing a 9.5-acre tract of land that he had purchased in 1981 in Fairfax County. The project is known as Williamsburg Commons and involves construction in two phases of houses on 38 lots. Each lot was valued at $175,000, and the anticipated sales prices of the homes ranged from $470,000 to $700,000.

In early 1992, the project was behind schedule and construction was stopped because defendant's lender, Dominion Bank, had ceased financing and begun foreclosure proceedings. At that time, defendant owed approximately $4 million to Dominion, which had committed funds for "acquisition," "development," and "construction." Defendant procured Dominion's tentative agreement to discount the $4 million debt to $2.5 million if defendant could find another lender to refinance the obligation to Dominion.

During the "first quarter of 1992," defendant contacted consultants and numerous banks seeking financing. These efforts produced several "financing packages," but they were unsatisfactory because, according to defendant, they "weren't going to occur timely enough." Defendant then contacted several brokers, including appellant Lenders Financial Corporation, the plaintiff below, to find him the necessary financing. Plaintiff was a mortgage banking company that, in 1992, "did some brokering of commercial type loans."

In early 1992, several of plaintiff's officers met with defendant on the project site. At the time, only one home, which was occupied by defendant, had been completed. Defendant "explained his predicament" and stated that "he really needed a new loan to keep the project going" and "to get out from under the present loan with Dominion Bank." The plaintiff's president, James R. Niblock, told defendant he "was very skeptical that anything at all could be done" and urged defendant "to work out something" with Dominion Bank.

About a week later, plaintiff's representatives, including William C. Harrison, its executive vice president, met defendant on the site. Defendant stated that he "just needed a loan to take out Dominion" and represented that he had procured sales contracts from six prospective purchasers who "were willing and able to sign for their own construction loans."

After further discussions, defendant and his wife signed a letter addressed to Harrison dated March 26, 1992 to "outline" the request for financial assistance. In a section of the letter labelled "What we need," defendant wrote, "A commitment for a two and one half million dollar loan ($2,500,000)" and "A letter of credit to Fairfax County for approximately $200,000." In the letter, defendant stated that "Six houses have been sold" and that he expected to sell "an additional two to three in April." Commenting on the progress of the project, he wrote, "All of the utilities are in for the eleven lots in Phase I with more than 40% of the work performed for Phase II. Three lots in Phase II are ready for construction." Defendant also wrote that the potential lender "would not have to provide the house construction loans, unless of course it would like to do so."

Against this background, Harrison, for the plaintiff, and defendant entered into the contract in dispute, which the plaintiff calls on brief a "finders fee agreement." The agreement is comprised of two writings, both executed by the respective parties: first, a letter drafted and signed by Harrison addressed to defendant dated March 30, 1992 from which defendant deleted one sentence that is not relevant to this controversy; and second, a paper labelled "First Amendment to Agreement," drafted by defendant.

The first writing follows, showing the deletion and complete with spelling and punctuation errors:

"This letter sets forth the terms pursuant to which Lenders Financial Corporation (placement agent) is being retained by David Talton and The Talton Company (borrower) to assist in the placement of an acquisition; development and construction loan (ADC) in the approximate amount of two million five hundred thousand dollars ($2,500,000).

"LFC will introduce David Talton to specific lenders that have an interest in lending such monies as needed to finance such project known as Williamsburg Commons, Vienna, Virginia. If the transaction is closed with the borrower and lender then a fee of (3%) of gross sales is due Lenders Financial Corporation. Such fee will be no less than two hundred and fifty thousand dollars ($250,000), paid as follows; one hundred thousand ($100,000) from the proceeds of the first 4 settlements and ten thousand dollars ($10,000) on each settlements thereafter until the project is sold out. Any balance owed to LFC will be paid from the last sale.

". Agent will be protected for a period of twenty-four (24) months with such lenders as maybe introduced.

"We are looking forward to working with you on this transaction."

The second writing provided:

"An agreement between David Talton and Lenders Financial was set forth on March 30, 1992. This first amendment to that agreement shall be incorporated into that agreement.

1. In no event shall the total fees due Lenders Financial Corporation exceed five hundred thousand dollars ($500,000).

2. It is expressly agreed that no fee shall be earned by Lenders Financial Corporation unless and until closing has been held and proceeds have been funded and received by Talton.

3. Lenders Financial Corporation shall register each lender with David Talton."

Following execution of the agreement, plaintiff introduced defendant to Virginia First Savings Bank, actively assisted defendant during his negotiations with Virginia First, and contacted Dominion Bank regarding its discount. In June, Virginia First agreed to advance defendant $2.8 million, and the loan was closed. As a result of the Virginia First loan and additional construction financing by that bank, work on the project resumed. Subsequently, a number of houses were sold, and defendant refused to pay plaintiff's fee for services. This action followed.

In a motion for judgment filed in December 1992, plaintiff sued on the agreement, asserting that it "successfully provided the services that Talton requested in the contract." Plaintiff alleged that the refusal to pay the agreed fee constituted a breach of the contract because "at least four houses at the Williamsburg Commons project referred to in the contract have gone or will go to settlement prior to the end of 1992" and that "more houses are expected to go to settlement within the next several months." Plaintiff asked for "at least $100,000 under the terms of the contract" and asserted that it had "suffered damages of up to $500,000 due to Talton's breach of contract."

Responding, defendant generally denied that plaintiff was entitled to recover under the agreement, that he had breached the agreement, and that plaintiff had suffered any damages. Additionally, without elaboration defendant asserted defenses of fraud, duress, undue influence, "No meeting of the minds," breach of contract, and lack of consideration.

In a January 1994 bench trial, the defendant moved to strike the plaintiff's evidence at the conclusion of the plaintiff's case-in-chief. The defendant's motion had three bases: first, plaintiff had failed to perform the contract in that the Virginia First loan only provided "acquisition" funds, not "development" and "construction" funds, contrary to the agreement which specified "placement of an acquisition; development and construction loan;" second, plaintiff had failed to perform because the contract provided that plaintiff would introduce defendant to lenders having an interest in lending monies "as needed to finance such project," and the project was the development and construction of Williamsburg Commons, not the refinancing of the Dominion loan; and, third, plaintiff had failed to prove damages.

The trial court denied defendant's motion on the first two grounds, ruling the plaintiff had established, prima facie, that it had performed the contract and that the defendant had breached the contract by nonpayment. The court sustained defendant's motion on the third ground, however, ruling that the plaintiff had failed to prove damages with reasonable certainty. The court, based upon its interpretation of the contract, opined that plaintiff failed to show the sale prices of the approximate six houses and two lots that, according to the evidence, had sold by the time of trial. The court stated: "Even if all eight of those properties sold at $700,000, the three percent gross sales still wouldn't come to the minimum $250,000 that is being sought to be imposed here." Accordingly, the court entered summary judgment in favor of defendant.

We awarded the plaintiff an appeal based upon its assignments of error asserting the trial court incorrectly ruled it had failed to prove damages. We also awarded the appeal upon defendant's assignments of cross-error asserting the trial court incorrectly ruled plaintiff...