Lincoln Nat. Life Ins. Co. v. NCR Corp.

• Decision Date: 23 May 1984
• Docket Number: Civ. No. F 77-26.
• Citation: 603 F. Supp. 1393
• Parties: The LINCOLN NATIONAL LIFE INSURANCE COMPANY; Provident Life and Accident Insurance Company; Provident Mutual Life Insurance Company of Philadelphia; and Life and Casualty Insurance Company of Tennessee, Plaintiffs, v. NCR CORPORATION, Defendant.
• Court: U.S. District Court — Northern District of Indiana

603 F. Supp. 1393

The LINCOLN NATIONAL LIFE INSURANCE COMPANY; Provident Life and Accident Insurance Company; Provident Mutual Life Insurance Company of Philadelphia; and Life and Casualty Insurance Company of Tennessee, Plaintiffs, v. NCR CORPORATION, Defendant.

Civ. No. F 77-26.

United States District Court, N.D. Indiana, Fort Wayne Division.

May 23, 1984.

COPYRIGHT MATERIAL OMITTED

Harlan K. Holly, Fort Wayne, Ind., Robert P. Johnstone and Daniel W. McGill, Barnes, Hickam, Pantzer & Boyd, Indianapolis, Ind., for plaintiffs.

Robert J. Parrish, Fort Wayne, Ind., for Life and Cas. Ins. Co. of Tenn.

J. Michael O'Hara and William L. Sweet, Jr., Barrett, Barrett & McNagny, Fort Wayne, Ind., for defendant.

MEMORANDUM OPINION AND ORDER

WILLIAM C. LEE, District Judge.

This matter is before the court for a decision on the merits. Plaintiffs brought this diversity action seeking damages for losses resulting from an alleged breach of contract. This court having considered the entire record and being duly advised, hereby renders and enters the following Findings of Fact and Conclusions of Law pursuant to Rule 52(a) of the Federal Rules of Civil Procedure.

Findings of Fact

1. This diversity action was brought by four life insurance companies. Plaintiff, The Lincoln National Life Insurance Company (hereinafter Lincoln), is organized under the laws of the State of Indiana and has its principal place of business in the State of Indiana. Plaintiff, Provident Mutual Life Insurance Company (hereinafter Provident Mutual), is organized under the laws of, and has its principal place of business in, the State of Pennsylvania. Plaintiffs Provident Life and Accident Insurance Company (hereinafter Provident Life) and Life and Casualty Insurance Company of Tennessee (hereinafter Life and Casualty), are organized under the laws of the State of Tennessee and have their principal places of business in that state. Defendant, NCR Corporation (hereinafter NCR), is a Maryland corporation with its principal place of business in the State of Ohio.

2. The amount in controversy, exclusive of interest and costs, exceeds the sum of $10,000 (Ten Thousand Dollars).

3. Diversity jurisdiction is invoked under 28 U.S.C. § 1332.

4. This action arises out of a "Mortgage Loan Commitment Letter" (hereinafter loan commitment letter) issued by plaintiff Lincoln as the lead lender for itself and on behalf of the other plaintiffs. The loan commitment was sought by defendant NCR through the services of a mortgage broker, United California Mortgage (hereinafter UCM), for the purposes of financing the construction of NCR's world headquarters building in Dayton, Ohio. NCR agreed to pay UCM a fee of one-half of one per cent (½ of 1%) of the principal amount of the loan for use of UCM's services.

5. The determination that UCM should secure loans for construction of the project occurred after NCR determined that competitive bidding should not be undertaken. Rather, UCM would undertake the project of putting together the best loan package for financing NCR's new headquarters building.

6. Throughout the relevant period, UCM operated as an intermediary between the parties to this action and in such capacity arranged the participation amounts of the parties, the loan terms, and interest rates.

7. In an effort to insure that UCM could act for NCR in the transaction, plaintiff Lincoln requested and received a $50,000 good faith deposit. The plaintiffs then secured approval for the loan from their respective loan committees. Following loan committee approval, each plaintiff placed the NCR loan on its cash flow chart. These charts list investments to be funded at certain dates in the future and are used to predict future cash needs.

8. Assured that UCM had control of NCR's business, plaintiff Lincoln, as lead lender, drafted a loan commitment letter and circulated it among the other three plaintiffs for review. Upon receipt of the draft, Mr. Craig L. Snyder, Vice President in charge of mortgage loans of plaintiff Provident Mutual, suggested to Lincoln that a one per cent (1%) fee also be obtained from NCR to secure the deal. Notwithstanding this suggestion, the plaintiffs agreed to the proposed loan commitment.

9. By date of November 5, 1975, Charles Marcus, Administrative Manager of plaintiff Lincoln, on behalf of plaintiffs, signed the Mortgage Loan Commitment letter in Fort Wayne, Indiana and sent the same to NCR in Dayton, Ohio for signature. On November 17, 1975, Robert C. James, NCR's Director of Financial Planning and Analysis, accepted the loan commitment letter subject to certain proposed amendments.

10. The loan commitment document as executed by NCR ended as follows:

THE UNDERSIGNED HAS READ, APPROVED AND ACCEPTED* THE FOREGOING MORTGAGE LOAN COMMITMENT, INCLUDING THE GENERAL CONDITIONS AS OF THIS 17th DAY OF November, 1975.

NCR CORPORATION By: /s/ D.L. McIntosh (Name) (Title) D.L. McIntosh, Vice President, Finance

* Subject to Amendments enclosed with Mr. R.C. James' November 17, 1975 letter to C. Marcus.

(Plaintiffs' Exhibit 1).

11. The amendments proposed by NCR were accepted by plaintiffs on January 20, 1976 when Charles Marcus of plaintiff Lincoln executed the acceptance. Mr. Marcus then sent a letter to Mr. James of NCR stating, "it is agreed and understood that the mortgage loan commitment as amended is now acceptable to all parties involved in the transaction." (Plaintiffs' Exhibit 14).

12. The mortgage loan commitment provided that the plaintiffs would jointly loan up to $14,000,000 (Fourteen Million Dollars) unless the total capitalized costs of the project were less than that amount. Plaintiff Lincoln agreed to loan $5,000,000 (Five Million Dollars) or 35.7%, plaintiff Provident Life $4,000,000 (Four Million Dollars) or 28.6%, plaintiff Provident Mutual $3,000,000 (Three Million Dollars) or 21.4% and plaintiff Life and Casualty $2,000,000 (Two Million Dollars) or 14.3%. The interest rate for the loan was fixed at 9 7/8 % for a term of twenty-five (25) years with prepayment closed for ten years and a prepayment penalty thereafter.

13. In the loan commitment letter, NCR "agreed to take the loan funds down no later than the fourth quarter of 1976." (Plaintiffs' Exhibit 1).

14. The loan commitment letter further required that certain conditions be met by defendant NCR. These conditions included transfer of the real estate upon which the headquarters were to be built to a subsidiary, lease of the building to NCR and assignment of the lease and mortgage to plaintiffs as security for the loan.

15. On November 19, 1975, the Board of Directors of NCR adopted a resolution which authorized the officers of NCR to establish a real estate subsidiary to own the land and buildings for the new headquarters. This subsidiary, NCR Realty, was authorized to execute its note and mortgage to plaintiffs-lenders, and further authorized to assign the lease to the mortgagee as additional security for the loan.

16. On December 30, 1975, NCR sent UCM $70,000 (Seventy Thousand Dollars) for its services pending determination of the total capitalized costs of construction for the headquarters building.

17. During the first quarter of 1976, NCR noted a substantial increase in its cash balance. Because of this, questions arose regarding the need for external funding of its world headquarters building.

18. Partly in response to the increase of NCR's reserves, NCR's Treasurer, D.W. Russler, sent a letter to UCM regarding the mortgage loan. The letter included "an amended Letter of Authorization to either renegotiate the mortgage loan for the Headquarters Building or negotiate a reasonable penalty fee for cancelling the commitment." (Plaintiffs' Exhibit 15). The letter indicated that an acceptable loan would be one for $13,000,000 (Thirteen Million Dollars) at 9 3/8 % interest or alternatively a 1.5% penalty fee. For its efforts, UCM was offered a fee which was on a sliding scale and would increase as the rate of a new loan became less than 9 3/8 % or as the proposed penalty fee for cancellation became less than 1.5%.

19. Subsequently, on May 10, 1976, Mr. Russler of NCR sent another letter to UCM indicating that the mortgage loan should not be consummated because (1) the interest rate was above that generally found in the market and (2) NCR's need for such financing was no longer evident. (Plaintiffs' Exhibit 17).

20. UCM in turn notified plaintiff Lincoln by letter of May 14, 1976 and attached a copy of Mr. Russler's May 10, 1976 letter.

21. On May 26, 1976 plaintiff-lenders wrote NCR objecting to its decision not to take down the loan. Mr. Russler responded on July 13, 1976 and confirmed that NCR no longer desired to fund the building of the world headquarters by outside sources. The response further indicated that NCR had no legal obligations to the lenders.

22. Following the July 21, 1976 letter from NCR, plaintiff-lenders deleted the NCR loan from their cash flow charts.

23. The mortgage loan from plaintiff-lenders was never made.

24. Construction of NCR's world headquarters building began in 1974 and it was first put into partial use in the fall of 1976. The building was built for the sum of $12,975,931 (Twelve Million Nine Hundred Seventy-Five Thousand Nine Hundred Thirty-One Dollars). Had the loan been closed, it would have been in Dayton, Ohio for that amount.

Conclusions of Law

This case presents a variety of legal issues — some rather novel — which must be addressed in order to resolve the controversy between the parties. In an effort to sort out and clarify the issues, the remainder of this judgment will be divided based upon the following considerations. First, because there exists complete diversity between the parties and jurisdiction is properly invoked under 28 U.S.C. § 1332, consideration must be given to a determination of which state's substantive law governs the legal issues. Second, since the parties are in complete...