The opinion of the court was delivered by: LOUIS H. POLLAK
Before me are (1) a motion for partial summary judgment filed by plaintiff Crestar Mortgage Corporation ("Crestar"), (doc. #43), seeking a judgment of liability on Count I of the complaint, which demands indemnification from defendant Peoples Mortgage Corporation ("Peoples") for losses and expenses incurred with respect to a mortgage loan sold by Peoples to Crestar; and (2) Peoples' opposition to the motion for partial summary judgment, which it has resubmitted as a cross-motion for partial summary judgment on Count I (doc. #46). For the reasons that follow, Count I will be dismissed without prejudice as unripe.
Crestar and Peoples are each in the business of servicing and selling mortgage loans on the secondary market. On or about November 6, 1989, Crestar and Peoples entered into a Bi-Weekly Purchase Agreement ("the Purchase Agreement"), whereby Crestar agreed to purchase certain mortgage loans originated by Peoples. The Purchase Agreement-- a standard form contract drafted by Crestar-- contained a provision, entitled "Indemnity," requiring the mortgage seller (in this case, Peoples) to:
indemnify and hold harmless [Crestar], its officers, agents, employees and its affiliates (including its parent corporation), from and against any claims, demands, actions, losses, expenses (including reasonable attorney's fees) and liabilities of whatever nature which may be asserted against or incurred by [Crestar] in connection with Mortgage Loans made by [Peoples], any transactions contemplated by this Agreement or resulting from any act or omission to act of [Peoples] in connection with the performance or non-performance by it of this Agreement. This indemnity provision shall survive termination of this Agreement.
Plaintiff's Mem. in Sup., Exh. C. (the Purchase Agreement) at P XXVII [hereinafter "P XXVII"].
On or about January 30, 1990, defendant Richard Gottfried purportedly agreed to purchase a residential property at 4 Stonehill Lane in Paoli, Pennsylvania from his sister for $ 780,000. Three days later, Gottfried applied to defendant National Financial Corporation ("National Financial") for a mortgage loan to finance his purchase of the property. National Financial obtained an appraisal of the property, indicating that its market value was $ 780,000, and assigned the loan application to Peoples. Peoples thereafter extended a loan to Richard Gottfried in the principal amount of $ 507,000 and received from Gottfried a $ 507,000 note and mortgage on the property. After Peoples forwarded various documents to Crestar, including the appraisal valuing the property at $ 780,000, Crestar, on February 28, 1990, agreed to purchase the $ 507,000 loan from Peoples for that amount. The parties agree that the $ 780,000 appraisal was overinflated.
Gottfried defaulted on the mortgage note after the first payment became due, and Crestar ordered an appraisal of the property, which valued the property at $ 225,000 as of February 18, 1991.
In early September 1991, Crestar demanded that Peoples repurchase the Gottfried loan, citing the terms of the Purchase Agreement; Peoples did not do so. Thereafter, Crestar filed two actions: (1) a mortgage foreclosure action against Gottfried in the Chester County Court of Common Pleas, which is still pending; and (2) the instant federal action (filed on December 30, 1991), which-- in addition to asserting a number of claims sounding in contract, fraud and negligence against Gottfried,
Peoples, National Financial, and other party defendants-- included the indemnity claim at issue today.
Even to the date of the filing of this opinion, the subject property has yet to be sold. Expecting that eventual sale of the Gottfried property-- valued at $ 225,000 in 1991-- will not recoup its investment in the Gottfried loan (which Crestar estimates at $ 600,000, comprising what Crestar paid for the loan, plus other costs and expenses), Crestar seeks an immediate judgment that People must indemnify Crestar for its losses, the exact amount to be determined at a later date by submissions of proof as to the value of the subject property. Peoples opposes Crestar's motion for partial summary judgment and seeks judgment in its favor on Count I, arguing, among other things, that Crestar's indemnity claim is premature because Crestar's actual losses-- if such there will be-- cannot be known until the property is sold.
Crestar emphasizes that Count I is a claim for indemnity, not a claim for negligence and fraud. See Plaintiff's Reply Brief at 5. It is well settled under both Virginia and Pennsylvania law
that claims of indemnity for loss do not arise until the indemnitee has suffered actual loss or damage. See Coleman v. City of Bradford, 415 Pa. 557, 204 A.2d 260, 261 (Pa. 1964); Burke v. North Huntingdon Township Mun. Auth., 390 Pa. 588, 136 A.2d 310, 315 n. 7 (Pa. 1957); McClure v. Deerland Corp., 401 Pa. Super. 226, 585 A.2d 19, 22 (Pa. Super. 1991); City of Richmond v. Branch, 205 Va. 424, 137 S.E.2d 882, 886 (Va. 1964); American Nat'l Bank v. Ames, 169 Va. 711, 194 S.E. 784, 797 (Va.), cert. denied, 304 U.S. 577, 82 L. Ed. 1540, 58 S. Ct. 1046 (1938).
Additionally, federal ripeness doctrine advises against adjudication of questions dependent on "'contingent future events that may not occur as anticipated, or indeed may not occur at all.'" Lewis v. Continental Bank Corp., 494 U.S. 472, 480, 108 L. Ed. 2d 400, 110 S. Ct. 1249 (quoting Thomas v. Union Carbide Agricultural Products Co., 473 U.S. 568, 580-81, 87 L. Ed. 2d 409, 105 S. Ct. 3325 (1985)).
Although Crestar anticipates a loss because the Gottfried property has been appraised at a value lower than the amount that Crestar is owed, Crestar will suffer actual loss only if the property is sold for less than Crestar is owed (and if Gottfried does not pay the deficiency, see supra note 5). See Bank of Three Oaks v. Lakefront Properties, 178 Mich. App. 551, 444 N.W.2d 217, 219 (Mich. Ct. App. 1989) ("When property is purchased at a foreclosure sale for an amount equal to the amount due on the mortgage, the debt is satisfied."); Rohm & Haas Co. v. Lessner, 168 Pa. Super. 242, 77 A.2d 675, 677 (Pa. Super. 1951) (plaintiff suing under "hold harmless" clause has no cause of action when he has suffered no pecuniary loss).
Crestar's recommendation of an immediate determination as to liability and postponement of the question of damages to a separate hearing, where Crestar will submit proofs as to the value of the property, does not avoid the problem that damages based on the property's estimated value may not actually be realized in the event that the property is ultimately sold for more than the appraisers anticipate-- whether due to escalating market value of the property, inaccurate appraisal, or any individual bidder's willingness to pay more than "market" price. I suppose, in the event of a summary judgment of liability against Peoples on Count I,
the issue of damages might be postponed until the subject property were sold; even assuming that the apparent absence of a ripe cause of action and attendant Article III limitations do not deprive me of power to issue such a judgment, it would, in my view, be imprudent to follow such a course. See 13A Charles A. Wright et al., Federal Practice & Procedure § 3532.1, at 118 (1984) (the determination of ripeness rests both on Article III concepts and discretionary reasons of policy). It would be both a substantial waste and an improper use of judicial resources to adjudicate a question of liability that might prove to be utterly meaningless.
Further, I can see no great hardship for Crestar in withholding review until the property is sold, given that Crestar, if it ultimately prevails on its indemnity claim, presumably will factor into its damages any additional interest that accrues up to the date of judgment.
Accordingly, plaintiff's motion for partial summary judgment will be denied, defendant's motion for partial summary judgment will be granted, and Count I will be dismissed without prejudice to its reassertion, by amendment, if and when plaintiff's cause of ...