Ellerin v. Fairfax Savings Ass'n

552 A.2d 918, 78 Md. App. 92, 1989 Md. App. LEXIS 33
CourtCourt of Special Appeals of Maryland
DecidedFebruary 1, 1989
Docket595, September Term, 1988
StatusPublished
Cited by13 cases

This text of 552 A.2d 918 (Ellerin v. Fairfax Savings Ass'n) is published on Counsel Stack Legal Research, covering Court of Special Appeals of Maryland primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Ellerin v. Fairfax Savings Ass'n, 552 A.2d 918, 78 Md. App. 92, 1989 Md. App. LEXIS 33 (Md. Ct. App. 1989).

Opinion

ROSALYN B. BELL, Judge.

Two appeals are combined in this opinion. Both appeals arise from Fairfax Savings Association’s loan of over $5,000,000 to Sherwood Square Associates to develop a shopping center complex in historic Westminster. Fairfax Savings Association sued Charles and Naoma Ellerin, Louis and Gloria Seidel, and Tri-Ess, Inc. for $2,300,000 in payment guaranties included in the loan (Guaranty Cases), as well as Charles Ellerin and Louis Seidel, the general partners of Sherwood Square Associates, (Partnership Cases) for the amount left due on the loan when they stopped making payments.

In the first appeal, R. Bruce Alderman, the attorney who represented Sherwood Square Associates at the loan closing, presents one issue:

—Does an attorney have a right to intervene in an action in order to protect his interest in a subsequent legal malpractice action which may be filed against him?

Based on these particular circumstances, we hold that the trial court did not err in denying Alderman’s intervention motion.

In the second appeal, Charles and Naoma Ellerin, Louis and Gloria Seidel, and Tri-Ess, Inc., contest the jury’s verdict of over $2 million in favor of Fairfax Savings Association. They present the following questions:

—Did the trial court err in instructing the jury that ratification of specific fraudulent provisions in a contract by the defrauded party barred that party from recovering any damages resulting from the fraud?
—Should the trial court have admitted evidence that Fairfax Savings Association waived its right to require an architect’s certificate to show completion?
—Did the trial court err in determining as a matter of law that there was 120,000 square feet of leasable space *96 where damages were to be based on a “rent roll” formula in which leasable square footage was a component?
—Did the trial court err in granting Fairfax Savings Association’s summary judgment motion in the Partnership Cases?

We reverse and remand for a new trial. For clarity, we analyze the two appeals in separate sections. But first, we set forth the somewhat complex factual and procedural background common to both.

Charles Ellerin and Louis Seidel (Partners) were the general partners in Sherwood Square Associates (SSA), a limited partnership. 1 Fairfax Savings Association (Fairfax) loaned SSA $5.7 million so that SSA could acquire and renovate a group of very old buildings in a historic section of the City of Westminster (City). These buildings, known as the Barrel House Buildings, were essentially empty shells when the project began.

The loan transaction was structured in the following manner. The City issued two Industrial Revenue Bonds (IRBs), the first in the amount of $3,050,000 and the second for $1,800,000, both of which were acquired by Fairfax. Fairfax also made a conventional loan of $850,000 to SSA. SSA repaid the conventional loan before this litigation ensued. The City assigned all its rights in regard to the IRBs to Fairfax, 2 but did, however, maintain an interest in the successful rehabilitation of the buildings, as shown by the Development Agreement entered into by the City and SSA. 3 *97 By the terms of this agreement, SSA agreed that the renovated property would contain “approximately 120,000 square feet of space, for use as retail and commercial facilities____” SSA subsequently assigned an interest in the Development Agreement to Fairfax.

Central to this controversy are the personal guaranties signed by the Partners at the loan settlement — two identical 16-page documents, one for each IRB. These personal guaranties were signed by Charles Ellerin, his wife Naoma Ellerin, Louis Seidel, and his wife Gloria Seidel; Louis Seidel’s signature appears again for Tri-Ess Corporation (Guarantors). (Tri-Ess was the general contractor on the project and was owned by Charles Ellerin and Louis Seidel.) All signatures were witnessed by attorney R. Bruce Aider-man of the law firm of White, Mindel, Clarke and Hill, who represented the Guarantors, the Partners, and SSA at settlement. Mortgages on the property and buildings provided additional security for the loan.

The twin documents entitled “Completion Guaranties” provided that the Guarantors would complete the project and personally guarantee repayment on the IRB loans. The maximum the Guarantors could be required to repay was $2.3 million — $1.15 million on each IRB. The guaranty provided that this liability would be reduced proportionately as the property was leased, i.e., a “rent roll” formula. The Guarantors’ liability was to terminate when the project was completed and 70 percent of its total square footage was leased. 4

*98 Given that the project met with reverses, one needs no lengthy experience to predict what happened next. SSA defaulted on the loan and Fairfax filed complaints against Charles Ellerin and against Louis Seidel as the general partners of SSA on November 26, 1985. Fairfax also filed complaints against the Guarantors, based on the previously described personal payment guaranties. Judgments by confession were docketed the next day. The Guarantors filed motions to vacate the confessed judgments, claiming, inter alia, that Fairfax had fraudulently hidden the two 16-page guarantees amidst the many and varied settlement documents at the closing. The Guarantors also claimed that the documents, which had been pre-approved, had been changed between the approval and settlement. They also claimed that they had signed the documents under duress, without an opportunity to read them, because Fairfax had told them that the deal could not be consummated unless the documents were signed. On December 30, 1985, the Guarantors filed an affirmative suit against Fairfax, including counts of fraud, duress, and negligent misrepresentation, and claiming $6 million in compensatory and $10 million in punitive damages against Fairfax. An extremely lengthy motions battle ensued — it is sufficient for our purposes here to note that ultimately the Guarantors’ affirmative suit took on the guise of a counterclaim. The Guaranty cases were consolidated, the Partnership cases were consolidated, and the trial judge ordered that they be tried in sequence.

R. Bruce Alderman and the law firm in which he was then a partner, White, Mindel, Clarke and Hill (who, the reader may remember, represented the Guarantors, the Partners, and SSA at the closing), 5 filed a motion to intervene in the litigation on July 30, 1987. Alderman asserted that, because both the Guarantors and Fairfax had threatened to sue him (and his law firm) if they lost the case, he had a right to intervene under Rule 2-214(a) to protect his inter *99 ests. The trial judge, after a hearing on August 18, 1987, denied Alderman’s motion.

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Bluebook (online)
552 A.2d 918, 78 Md. App. 92, 1989 Md. App. LEXIS 33, Counsel Stack Legal Research, https://law.counselstack.com/opinion/ellerin-v-fairfax-savings-assn-mdctspecapp-1989.