PART II: LOOK WHAT WE BOUGHT!
The Developer Demands More Money
The cloak of a saint may cover the character of a scoundrel. Quoted in Leo Rosten's Treasury of Jewish Quotations, McGraw Hill, 1972.
It is amazing to think, in retrospect, how smoothly construction proceeded on our home. Murdock's workmen seemed right on schedule. This fact, plus Nelson's letter, confirmed how right we were to build a new house. In April 1986 our eldest daughter had her Bat Mitzvah, a Jewish coming-of-age ceremony similar to a boy's Bar Mitzvah. Relatives came from all over for the joyous occasion. Naturally we took them to see our soon-to-be-completed house. Relations from New York and California, in particular, were impressed that we had custom- built a house on two acres for `only' $350,000; in their regions the price would have been considerably higher.
It was a wonderful weekend. We felt proud and thankful about a lot of things: our daughter's performance at the temple; the health of our children; that our relatives were able to come to Cleveland; and our new home. There were a few minor delays in completing the house that May, but at the time it didn't seem important to document every detail. I certainly kept no log, no journal of events, during those halcyon months. Some things, though, one never forgets, such as what Jake Cooper did on June 5, 1986.
By late May, except for an unpaved driveway, the house was sufficiently complete for us to move in. The building inspector for Emerald Heights gave us an occupancy permit on May 17. On May 18 I went on a final inspection tour with Nelson. At that time only minor problems were detected. Neither sloping floors nor bowing walls were apparent, at least to me. But what's a walk-through for the untrained eye? I certainly didn't go through the house with a carpenter's level! The magnitude of sloppiness in the finish work was also not apparent. In truth, on May 18 our new house looked OK. Accordingly, we signed a `punch list' of relatively minor items that needed correction, and prepared to move in as soon as feasible. Although our contract stipulated a May 15 possession date, we wanted to delay the closing a few weeks so the sale of our old house more closely coincided with buying the new one. This request was entirely reasonable. Not only was the house not ready for us on May 15, but Cooper was also not prepared to transfer title on that date. To begin with, the driveway wasn't finished by May 15 and we didn't have our occupancy permit until May 17. If Cooper had been prepared to close the deal, the earliest we could have taken possession would have been May 18.
The `Addendum to Building Contract' signed by Cooper stipulated that:
"[warranty] deed shall be deposited [by the Developer] with the escrow agent (Buyer's mortgagee or the title company) on or before May 15, 1986." (Para. 9)
This letter will confirm my consent and approval to the extension of the closing date...until not later than June 6, 1986...
June 6 still left us with a three week hiatus between selling and buying houses, and in the same May 30 letter Cooper agreed to give us a bridge loan of $50,000, payable by July 8. The loan, at 10% interest, was secured through a promissory note. There was no risk on Cooper's part, but it did save us the hassle of applying for an interim bank loan.
Once the extension agreement and bridge loan were signed by all parties, Schroeder wrote Cooper, also on May 30:
"I am enclosing...the form of Warranty Deed for signature by you and your wife...I would appreciate your forwarding the Deed directly to [the bank's loan officer] for closing." Now all Cooper had to do was get the Warranty Deed to the bank, and closing would take place June 6. Several days passed, and still the bank had no deed. Without the deed we could not take title. Then Cooper dropped a bomb. On June 5, 1986 my husband received a phone call from Schroeder. "Larry, Jake just came by the office. He told me to tell you that he wants more money. He says your delays are costing him extra interest. He's not turning over the deed until you pay him another $1700."
Larry couldn't believe it. Cooper had somehow computed that `our delays' were costing him interest. In reality he was causing the delays. If Cooper had sent the deed by May 15 we could have taken possession after receiving the occupancy permit. He had not, and so we asked for and obtained an extension to June 6. If Cooper had sent the deed after granting the extension the closing would have been completed by June 6. Cooper, about to make an enormous profit on a house he had not even built, was now holding out for more money! We were understandably upset. We had cooperated in every way with Cooper and didn't deserve this treatment. We had agreed to his asking price for the house and to the interest he stipulated on the bridge loan, and had done everything possible to move in on time. Until June 5, transactions had been very cordial but also legal, with signed papers for every move. Cooper had signed the extension agreement without any quarrel. Now, suddenly, he was threatening to withhold the deed unless we paid extra. Was he stewing about it all week, or was this a last minute decision? Did he have legal counsel or was he acting impulsively?
Even more disturbing than Cooper's attempt at extracting more money was how he had proceeded. He went to our lawyer as if the law firm still represented him, as if Zack Schroeder was his lawyer. Using Zack as our contract lawyer was now seen as a big mistake. Perhaps Schroeder could have threatened Cooper with a lawsuit or tried some other legal maneuver to knock sense into this greedy man, but he did nothing of the sort. Instead he put the ball entirely in our court, and we were unprepared for this bit of negotiation. That Schroeder had not stood up to Cooper seemed a conflict of interest, a clear result of Cooper's prior business with the firm. When Larry expressed this feeling to Schroeder our lawyer admitted "being caught in the middle."
Imagine this! We had used a lawyer for the better part of a year and he was now acknowledging a conflict! "What should I do?" Larry asked Schroeder. "Can Jake legally keep the deed and screw up our taking title?" Schroeder admitted Cooper was wrong ethically and legally but said a legal fight could take months, well beyond our deadline for moving. Schroeder did agree to convey any message to Cooper, to act as a go-between. But what message to send? Tell Cooper to shove it? Walk away from the deal? Stonewall? We were in a bind. If he withheld the deed we could not take title, yet we had already sold our existing home. In another few weeks we would have no place to live and Cooper knew it.
Larry asked Schroeder to call Cooper (who had since left the office) and express our outrage at this blatant demand. He should tell Cooper we had no intention of paying any more money. Schroeder agreed, but in a way that sounded more like an impartial arbitrator than our paid advocate. Within the hour Schroeder called Larry back. Cooper was willing to `compromise.' He would accept $850. $850? What happened to the $1700? This was curious indeed. With Schroeder's permission Larry called Cooper directly.
"Jake, why are you doing this to us? Why are you demanding more money at the very last minute?" Larry asked.
"My profit is very thin on this house," Cooper replied. "Your delays are cutting me pretty close."
FOOTNOTE. We later learned, through depositions, that Cooper's profit on
Cooper simply didn't care what we or anyone else thought of him or his behavior. He was displaying a business ethic that was totally foreign to us. Had we understood Cooper's true character we would never have done business with him. The fact that we were to be his son's neighbor evidently meant nothing to this man.
FOOTNOTE. The reader might legitimately ask what all this has to do with
After some negotiation Cooper agreed to turn over the deed if we paid him an extra $850. There was to be no signed note and he would wait until the end of the year for his money. He trusted us, he said. In reality, Cooper had challenged us with a ridiculously high figure just so he could walk away with something extra. But, since he wasn't demanding a signed note, Larry accepted the $850 figure. It was that or face a lockout.
Larry called Schroeder and told him the final result. Our contract lawyer was relieved we had reached an agreement, and that the warranty deed was on its way to his office. Schroeder also affirmed that we really had no legal obligation to pay the $850. Even so, we were confused about our lawyer's role here. Was he representing us or Cooper? Schroeder again confirmed that he felt caught in an ambiguous position.
"What happens if this $850 turns into a legal dispute?" Larry asked. "Can you represent us?"
"No. Not the way things have evolved."
"Would you represent Jake?" Larry was only half serious in asking this, but Schroeder answered like it was an entirely legitimate question.
"No, I wouldn't represent Jake either."
Not `Are you crazy Larry?' Not `What an insulting question you're asking me!' To Schroeder the question seemed reasonable. Without any surprise at the question, our lawyer affirmed he would not side against us. We felt sorry for Zack Schroeder, a nice guy but caught in a bind because of his firm's prior business with Cooper. Schroeder should never have accepted our business for the house contract. And we should never have used his firm.
Although we had encountered the real Jake Cooper and no longer trusted him, this feeling did not translate into walking away from the deal. We were realistic. The house was finished and it had passed inspection. We were unconcerned about the $850. We might or might not pay it. Without a signed note Cooper had no legal recourse. Certainly if we found a lot wrong with the house before December he could kiss the money goodby. On the other hand we would probably pay if there were no major problems, just to avoid any hassle. Those were our honest thoughts at the time.
On July 1, 1986, about 5:30 P.M., Mrs. Cooper answered the door. Larry introduced himself (they had never met), told her he had come to pay off the loan and handed over an envelope containing a check for $50,301.37.
"Do you want to talk to Jake?" she asked.
"No, that's not necessary. I'm on my way home. Thank you," Larry responded.
Jake Cooper could just as well have answered the door and Larry would have handed him the check and been on his way. However, Larry really had nothing to say to our developer and saw no reason to prolong the visit. The entire transaction, with my husband at the front door and Mrs. Cooper in the doorway, lasted about half a minute. Larry was very polite, as always, and nothing in Mrs. Cooper's reaction gave any hint of offense.