Pulliam Inv. Co., Inc. v. Cameo Properties, 86-1028

Decision Date05 March 1987
Docket NumberNo. 86-1028,86-1028
Citation810 F.2d 1282
PartiesPULLIAM INVESTMENT CO., INC., Appellant, v. CAMEO PROPERTIES; Banner Equities, Inc.; Independence Construction Company; Freedom Savings and Loan Association; Independence Investment Company, Appellees.
CourtU.S. Court of Appeals — Fourth Circuit

H. Spencer King (James C. Cothran, Jr., Spartanburg, S.C., on brief) for appellant.

Carl G. Ferguson (R. Frank Plaxco, Leatherwood, Walker, Todd & Mann, Greenville, S.C., on brief) for appellees.

Before WIDENER, HALL and SPROUSE, Circuit Judges.

SPROUSE, Circuit Judge:

Pulliam Investment Company (Pulliam) appeals from the district court's grant of summary judgment in favor of the defendants, Freedom Savings and Loan Association (Freedom), Independence Investment Company (Independence), Independence Construction Company (Construction), Banner Equities, Inc. (Banner) and Cameo Properties (Cameo), in this diversity action for breach of contract, civil conspiracy and unfair trade practices. Because we hold that genuine questions of material fact exist with respect to Pulliam's breach of contract claim, we reverse and remand to the district court for further proceedings.


Pulliam is a South Carolina corporation engaged in the development and syndication of real estate. The defendants are related entities organized under Freedom, a savings and loan association chartered by the State of Florida. Independence is a wholly-owned subsidiary of Freedom. Construction and Banner are wholly-owned subsidiaries of Independence. Cameo is a general partnership in which Banner is the sole remaining partner.

Pulliam and Banner originally formed Cameo in 1981 to acquire Wellesley Place, a large apartment complex in Columbia, South Carolina. Independence provided financing for Cameo's acquisition of Wellesley Place and apparently carried Banner's share of the property as an asset on its books. In 1983, Pulliam sold all but one percent of its interest in Cameo to Banner. In January 1984, Pulliam sold its remaining interest in Cameo to Banner in return for, among other things, a right of first refusal to purchase Wellesley Place. The right of first refusal, which is at the center of this dispute, granted Pulliam the opportunity to acquire Wellesley Place on "the same terms and conditions as offered or afforded [a] third-party offeree." The right of first refusal was executed by Cameo, Banner, Construction and Pulliam.

During approximately the same period of time as these events, Freedom experienced substantial financial difficulties. As a result, it entered into a supervisory agreement with the Federal Home Loan Bank Board, the federal agency which regulates savings and loans, and the State of Florida in June 1984. The Bank Board required Freedom to write down the value of Wellesley Place as carried on Independence's books by over $2,300,000. In order to avoid the loss which would result from such a write down, Freedom decided to sell Wellesley Place. Freedom contacted an individual investor, Lawrence Malanfant, to ascertain his interest in purchasing the property. Malanfant, a Freedom customer known for buying troubled real estate and achieving successful results, had previously approached Freedom to obtain financing for the purchase of a large parcel of unimproved real estate in California. Although Freedom had initially decided against financing that purchase, it now proposed to Malanfant that Freedom would finance Malanfant's purchase of the California property if Malanfant would agree to purchase Wellesley Place.

Malanfant expressed interest in Freedom's proposal and sent employees to South Carolina to inspect Wellesley Place. Both parties needed to reach an agreement quickly since Malanfant's option to purchase the California property would expire on November 21, 1984 and Freedom had to dispose of Wellesley Place prior to the end of 1984 to avoid writing it down. On October 9, 1984, Malanfant wrote Freedom that he would purchase Wellesley Place if Freedom would provide financing for that purchase, the purchase of the California property, and the purchase of some condominiums in Arizona. 1 Several officers of Freedom then met with Malanfant in Arizona and, after inspecting the California property, agreed in principle to loan Malanfant the funds necessary to purchase both the California property and Wellesley Place. Freedom retained counsel in California to draft the loan agreement.

On October 17, 1984, Malanfant submitted a formal offer to Freedom to purchase Wellesley Place for $7,000,000. Independence responded to Malanfant with a counteroffer. On October 23, 1984, Malanfant, his wife, Cameo and Banner executed a contract for sale of Wellesley Place. The contract named Independence as a "seller", although its agents did not sign the agreement. The contract provided for a purchase price of $7,000,000, payable by Malanfant in cash at the closing.

Independence retained counsel in Columbia, South Carolina to represent it in connection with the sale of Wellesley Place. On October 25, 1984, Independence's attorney, Robert G. Currin, Jr., sent Pulliam a copy of the contract to sell Wellesley Place to Malanfant. Currin requested that Pulliam reply by November 14, 1984, as to whether it intended to exercise its right of first refusal to purchase the property on the same terms as set forth in the Malanfant contract. Pulliam was later given until November 25, 1984 to exercise its right. The contract sent to Pulliam, of course, provided that Malanfant would pay cash for Wellesley Place.

Freedom's counsel in California sent Currin a copy of the final draft of the loan agreement between Freedom and Malanfant on November 19, 1984. The agreement provided that Freedom would loan Malanfant $15,900,000 to be used as follows: (a) $5,100,000 to purchase the California property; (b) $7,000,000 to purchase Wellesley Place; (c) $3,060,000 to be retained by Freedom to make Malanfant's interest payments; and (d) the balance for loan fees and costs. The term of the loan was for two years with interest payable monthly at an annual rate of 13%. At the end of the two years, Malanfant could renew the loan for an additional year by paying a fee of 0.5% of the then outstanding principle balance. Freedom received a loan fee of $238,500 and a 25% profit participation in the development of the California property. As security for the loan, Malanfant gave Freedom a deed of trust on the California property, which had an appraised value of $26,000,000, and a $3,500,000 first mortgage on Wellesley Place. In addition, Malanfant and his wife were personally liable for the full amount of the loan, and Malanfant assigned a $1,000,000 life insurance policy to Freedom. Malanfant and Freedom executed the loan agreement on November 21, 1984, the same day Malanfant closed his purchase of the California property.

Upon learning that Freedom was providing financing for Malanfant's purchase of Wellesley Place, Currin contacted Freedom and recommended that it disclose all of the details of the transaction to Pulliam. Currin and Freedom also decided that Freedom should offer Pulliam the same financing for the purchase of Wellesley Place as it had offered Malanfant. Currin made this disclosure and offer to Pulliam in a letter on November 21, 1984. The letter stated that the California and Wellesley Place transactions were "intimately intertwined, and it is difficult, if not impossible, to separate one from the other." It summarized the terms of Freedom's loan to Malanfant, including the provision that as collateral Malanfant would provide Freedom with a first lien position on the California property worth $26,000,000 and on Wellesley Place worth $3,500,000. The letter concluded with the request that if Pulliam was "prepared to offer Freedom collateral of equal or similar value, under the same terms and conditions offered and afforded" Malanfant, it should notify Currin within twenty-one days of its exercise of its right of first refusal.

On November 27, 1984, Pulliam's counsel requested that Currin furnish copies of the actual documents comprising the transactions between Malanfant and Freedom or its subsidiaries and that he explain the inconsistencies between the latest disclosure and his earlier notice. Freedom took the position, however, that Florida law prohibited disclosure of the loan agreement without Malanfant's consent, which he apparently refused to give. Currin advised Pulliam's counsel on November 30, 1984 that Freedom was unable to produce the loan agreement, but maintained that the terms of the agreement were accurately reflected in his letter of November 21, 1984. Currin reminded Pulliam's counsel that Pulliam's right of first refusal would expire on December 13, 1984.

There was no further contact between the two sides regarding Pulliam's right of first refusal. On December 31, 1984, Malanfant closed his purchase of Wellesley Place. Freedom credited Independence's intra-company account with $6,800,000 in funds from the earlier loan to Malanfant. The remaining $200,000 of the purchase price of Wellesley Place was held in escrow and later divided between Malanfant and Independence. Freedom received a $3,500,000 first mortgage on Wellesley Place, which it recorded on May 13, 1985.

Pulliam subsequently brought this action against the defendants alleging that they had breached its right of first refusal, had conspired to breach its right of first refusal, and had engaged in unfair trade practices in violation of the South Carolina Unfair Trade Practices Act, S.C.Code Ann. Sec. 39-5-20 (Law. Co-op. 1985). Following extensive discovery by Pulliam, the defendants moved for summary judgment on all of Pulliam's claims. The district court found that Currin's letter of November 21, 1984 unambiguously set out the terms of Freedom's loan to Malanfant and offered financing on those same terms and...

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