when McFadden was not in the room, Dr. Howes informed the Committee that the proposal did not provide for payment of a real estate commission by MCU, as none was to be payable by them.
Between October and December of 1971, McFadden frequently visited Pittsburgh and Hugh McShane continued to perform many services for him. G. H. McShane, who at this time was living in Sarasota, Florida, also made many trips to Pittsburgh in connection with this transaction. On December 28, 1971, Prudential bought out the Mellon construction loan and McFadden took over Smithfield Plaza under the lease. On August 25, 1972, McFadden acquired title to Epworth Woods for the purchase price of one million dollars, payable on or before December 31, 1972. At this same time, MCU transferred the Smithfield Plaza land to McFadden's nominee, Con-Dev Dairy Corporation, for no additional consideration under an option to purchase for two and a half million dollars during the first twenty-five years of the ninety-nine year lease.
Not long afterward, on November 4, 1972, McFadden obtained a loan of $2,300,000.00 from Great American Mortgage Investors (GAMI) for the development of Epworth Woods. Of that loan, $1,000,000.00 was used to pay the purchase price of Epworth Woods; $594,300.00 was used to replenish McFadden's line of credit at the Chase Manhattan Bank in New York City; $118,000.00 went for a small piece of land and dwelling adjacent to Epworth Woods (the Dessecker property); $109,371.72 was placed in a bank account entitled, "Warren A. McFadden, Escrow Account Epworth Woods"; and the remaining $478,328.28 was used to pay interest on the GAMI loan, or was not accounted for. Interest on the GAMI loan was paid through April of 1974, and the unpaid interest thereon from May 1, 1974 through November 30, 1975 (the Hearing date) amounted to $543,087.08.
Con-Dev received formal title to Smithfield Plaza, land and building, on April 19, 1973, and on May 8 and 9, 1974, McFadden transferred title to Epworth Woods to Schriber Deed Security, Incorporated, as there was an option agreement between McFadden and a third party to purchase approximately one-third of Epworth Woods. These transfers were made without the knowledge of G. H. McShane, and when he became aware of them he called McFadden to request payment of his commission. McFadden denied there was any agreement regarding a real estate commission, refused to discuss the matter, and directed McShane to his lawyer. Shortly thereafter this action was brought.
It is noted that Epworth Woods at the time of Hearing had produced no income, except for about $3,000 rental from the Dessecker Property. Smithfield Plaza sustained a net deficit in expenses over income through August 31, 1975 of $3,590,816.25, so that on September 8, 1975, Prudential foreclosed on its mortgage on Smithfield Plaza and purchased the premises.
There is little dispute that McShane brought together a willing buyer and a willing seller, and that no commission was to be paid by MCU. Nor is it controverted that G. H. McShane Co., Inc., through G. H. McShane and Hugh McShane, was the moving force in finding a buyer who had previously known nothing about the properties and who purchased them under terms and conditions which were satisfactory to MCU. But McFadden denies the existence of an enforceable contract.
During his first trip to Pittsburgh on October 5, 1971, McFadden assured Dr. Howes that MCU would not be responsible for payment of any commission by making it clear that there was an "arrangement" for the commission with McShane. This was reiterated by his statement to Hugh McShane that he (McFadden) "would pay Mickey's (G. H. McShane) commission". On December 20, 1971, G. H. McShane presented McFadden with a letter which set forth the terms of the commission agreement as follows:
"December 20, 1971