S. L. Hammerman Organization, Inc. v. Community Health Facilities, Inc.

McWilliams, J., delivered the opinion of the Court. In the Superior Court of Baltimore City both parties demanded summary judgment, each denying the existence of a dispute in respect of any material fact. The trial judge, Cole, J., hearkened to the behest of the appellee (Community) and gave judgment in its favor. The appellant (Hammerman) says Judge Cole was all wrong, that it should have been the other way around.

We shall affirm the judgment. Hammerman calls itself a realtor and a mortgage banker. Community is a creature of Dr. Joseph B. Francus and Richard Rynd, entrepreneurs in the nursing home business. Milton Schwaber’s name is mentioned here and there in the record but neither the nature nor the extent of his interest in Community appears.

The project which begat this litigation is known as the Pikes-ville Nursing Home. Early in 1968 Pikesville Nursing Home, Inc. 1 by Dr. Francus, its “sponsor,” applied to James W. Rouse & Company, Incorporated (Rouse) and the Federal Housing Administration (FHA) for a loan of $1,450,000. Rouse appended to the application a request for the issuance of a commitment by FHA that it would insure the ³⁹ mortgage securing the loan. Since it becomes significant later on, we have set forth below section “H. Total Requirements for Settlement” precisely as it appears in the application: “H. TOTAL REQUIREMENTS FOR SETTLEMENT: 70.

DEVELOPMENT COSTS ....... $1,481,500 71. LAND INDEBTEDNESS (Cash required for land ac- quisition) ........ $ 124,000 72. SUBTOTAL ..............$1,605,500 73. LESS Mortgage Amount . .. $1,450,000 74.

LESS Fees Paid by Other than Cash ... .............. $ 75. EQUITY INVESTMENT RE- QUIRED ..........$ 155,500 76. INITIAL OPERATING DEFI- CIT ...................$ 77. ANTICIPATED DISCOUNT .... $ 72,500 Letter of 78.

Working Cap. (2% of Mtge Amount) ...................... $ Credit 79. ADD Off-site Construction Costs ...................$ 80. TOTAL ESTIMATED CASH REQUIREMENT ............ $ 228,000” Why no figure was inserted in line 78 we are unable to say.

It is obvious however that two per centum of $1,-450,000 is $29,000. If $29,000 is added to the “Total Estimated Cash Requirement” figure of $228,000 (line 80) then the total estimated cash requirement would seem to be $257,000. Whether the words “Letter of Credit” were intended to apply to the $29,000, to the $228,000, to the $257,000, or to some other figure then undetermined, is not wholly clear. In October 1968 Dr. Francus had become disenchanted ⁴⁰ with Rouse.

In the words of Herman Hammerman (Herman), at the time the executive vice president of Hammerman, Dr. Francus “bemoaned the fact that nothing was happening.” Because, in respect of an earlier matter, they had enjoyed a mutually satisfactory relationship Community retained Hammerman “to expedite” the Pikesville application as filed by Rouse. “Your fee,” said Community, “will be $25,000 payable if and when we receive a commitment acceptable to us within 90 days from today [22 October 1968].” Herman “got busy immediately.” He was “familiar with [FHA] procedures and with the people with whom * * * [one] had to do business.” He modestly agreed that his “know-how” and his entree at FHA made it possible for him to “receive perhaps a little more consideration than somebody coming in cold.” FHA officials promised Herman on five separate occasions that the commitment would be ready in a few weeks. In mid-January, when he realized it would not be forthcoming before the expiration of the 90 day period, he sought and obtained from Community a second arrangement. It is found in Floyd Abraham’s letter of 27 January, set forth below: “Mr. Herman Hammerman S. L. Hammerman Organization, Inc. 10 Light Street Baltimore, Md. 21202 Dear Herman: “The James W. Rouse and Company have relinquished their interest in obtaining FHA mortgage commitments for our Pikesville and Pine Ridge projects, and we hereby appoint you as our exclusive agent. “In consideration of your obtaining commitments on these two projects within ninety (90) days from January 16, 1969, we hereby agree to pay a fee of $25,000 on the Pikesville project, and $20,000 on the Pine Ridge project. Each of these fees will be payable if and when we re ⁴¹ ceive a commitment satisfactory to us within the time allotted. [Emphasis added.] “It is understood that these fees shall constitute the entire fee due you for representing us at FHA and for obtaining the FHA mortgage.” It will be observed that the letter is addressed to Herman personally, rather than to his company.

Floyd Abraham was Community’s project director. Nothing came of the Pine Ridge project; it is not an issue here. At this point it should be noted that on 31 December 1968 Community sought the approval of the Securities and Exchange Commission for a public offering of 400,-000 shares of its common stock. Hammerman seems to have been aware of this and it does not say any delay resulted therefrom.

Two months later Community formally appointed Hammerman as its “mortgagee for this project.” In his pre-trial deposition Herman testified that on 28 February a “Mr. Knickerbocker of FHA” called him and said he was ready to send the application to Philadelphia “for final approval upon receipt of a, Letter of credit from bank re: Francus and Rynd; b, exact balance due on the land; c, the discount rate; d, updated financial statements of Francus and Rynd.” Abraham provided Herman with the above mentioned items; he said he (Herman) sent them on to FHA. What the nature of this letter of credit, item a, was we are unable to say but obviously it could not have been the letter of credit ($250,000) hereinafter discussed. He testified further that he told Abraham and Dr. Francus on 12 March that a “letter of credit was a distinct requirement of FHA as preliminary to [the] approval of [the] commitment, as indicated on Line 78 of [the] original application * * This appears to have been the first time, except as noted above, that a letter of credit was discussed but no amount seems to have been mentioned. Herman said, in respect of the letter of credit, that he ⁴² “offered to approach Equitable [Trust Company] * * * [himself] so that * * * [they] could get going.” A day or so later Abraham discussed the case with Allen Clapp, the FHA director.

A summary of what transpired at that meeting appears in Clapp’s letter of 18 March addressed to Hammerman and directed to the attention of Herman. A copy went to Community. The pertinent part of the letter follows: “Last week we discussed the arrangements for financing the Pikesville Nursing Home with the project director, Mr. Floyd Abraham. It was shown that with proposed stock issuance, sufficient current cash assets would become available for the cash requirements above the mortgage. “It was pointed out to Mr. Abraham that an irrevocable letter of credit could be used as an interim assurance until liquid assets became available.

We await your decision on this part of the financing. In the meantime, we have placed this project in abeyance awaiting a favorable reply.” (Emphasis added.) Herman testified that on 14 March (which was about the same time Abraham was talking to Clapp at FHA) he “personally went to see Mr. Wennagel, Vice President in Charge of Loans at the Equitable Trust Company.” He said Wennagel declined to issue a letter of credit for $235,000 “without the personal guarantee of Mr. Milton Schwaber and his wife.” Wennagel wanted a $4,000 fee for the letter of credit but he said this “might be reduced to $2,000 if the SEC approval was forthcoming.” Whether Schwaber was ever approached was not shown. If we go by the record nothing whatever happened between 18 March and 8 April when Community settled with its underwriters and received $3,800,000 in cash for the 400,000 shares of its common stock. Herman said ⁴³ that on 11 April he “made it very clear to both Abraham and Dr. Francus that we’ve got to have this letter, the FHA says, ‘that’s it, you know you’ve got to have it and that’s it,’ and Abraham authorized me to get Wennagel of Equitable to provide \the\ letter of credit.” (Emphasis added.) There is in the record a letter, dated 11 April, addressed to Wennagel and signed by Dr. Francus, requesting the issuance of “a letter of credit in the amount of $250,000.” Copies to Herman and Clapp of FHA are indicated.

Herman said that on 14 April he discussed the amount of the letter of credit with the FHA credit manager who agreed that although $234,998 would be sufficient the letter of credit ought to be for $250,000. Why he did not obtain the letter of credit from Wennagel on that day or on the next day, 15 April, neither Herman nor anyone else has said. The 90 day period expired on 16 April. Herman said that on 18 April he spoke again to Wennagel who said he would issue the letter upon receipt of a request from Community.

(What happened to the letter of 11 April was not shown.) Herman said “he so advised Mr. Abraham.” Herman admitted that “as of April 18 * * * no letter of commitment from FHA had been forthcoming.” On 1 May he retired from the Ham-merman organization without having done anything more about it. There is in the record the letter which follows: “Mr. Art Kahn April 30, 1969 S. L. Hammerman Organization, Inc. 10 Light Street Baltimore, Md. 21202 Dear Mr. Kahn: “As per our telephone conversation, and as per your request, we are hereby notifying you that because you are unable to deliver a commitment for Pikesville and Pine Ridge within the one hundred and eighty (180) days we have ⁴⁴ previously allotted you, we are now compelled to seek placement of these mortgages elsewhere. Sincerely, COMMUNITY HEALTH FACILITIES, INC. Joseph B. Francus” Arthur C. Kahan, a Hammerman vice president, in an affidavit filed in the case, denied “requesting, receiving or ever having seen” the letter of 30 April prior to these proceedings.

He also denied the telephone conversation therein mentioned. Herman was succeeded as executive vice president by Jonas Brodie. On 8 May he (Brodie) sent to Community the letter which follows: “Gentlemen: “On March 10, 1969, you were advised by Herman Hammerman of our office that we had obtained the F.H.A. mortgage commitment you had requested for the Pikesville Nursing Home, and that said commitment would be delivered to you upon the filing of Form 2530 and posting a letter of credit. Form 2530 was filed with the F.H.A. on March 18, 1969, but you have never posted the letter of credit about which we have continually reminded you. “We have performed the services for which we were engaged by your letter of January 27, 1969, and in accordance with our agreement enclose herewith our bill in the amount of $25,-000.00 for which we expect