Opinion ID: 175882
Heading Depth: 1
Heading Rank: 2

Heading: Estoppel Certificate

Text: Before committing to a bridge loan, KFI sought to clarify Acklin's obligations to Shelton. KFI demanded Rest in Peace as collateral, but it was impossible to determine the amount due under the Note to Shelton. The value of the Mortgage was incalculable because Acklin had promised in the Note to make payments for a term of uncertain durationthe life of Shelton or his wife, whichever was longer. KFI was unwilling to loan Acklin a large sum without ascertaining the amount owing under the Note, because Shelton's Mortgage would have priority over any mortgage Acklin might give KFI. KFI asked Shelton whether he would waive his rights as first mortgage holder. Shelton refused. KFI then queried whether Shelton would sign an estoppel certificate. [4] KFI wanted Shelton to reduce the value of the Mortgage to a sum certain and attest to certain facts about Rest in Peace's title. KFI, Acklin, and Shelton negotiated the terms of an estoppel certificate. Shelton agreed to reduce the value of his Mortgage to a sum certain, $675,000. The sticking point in the negotiations was whether KFI would place $675,000 in an escrow account and, in the event Acklin defaulted on his loan to KFI, pay off the Mortgage. KFI drafted an estoppel certificate that did not provide for an escrow account, but simply stated, KFI will have the right to pay off the [Mortgage] in part or in full, upon the default of [Acklin], at any time. This proposal was unacceptable to Shelton, who insisted KFI set up an escrow account for his benefit. On January 22, 1999, Shelton signed a revised estoppel certificate (Estoppel Certificate). In relevant part, the Estoppel Certificate provided: [Shelton] is the Mortgagee under that certain Mortgage between [Acklin and Shelton concerning Rest in Peace]. Shelton acknowledges [KFI] intends to make a $2,200,000.00 loan to [Acklin].. ., that the [KFI-Acklin] Loan will be secured by a second mortgage on [Rest in Peace] (subordinate to the Mortgage) and that KFI will hold in an escrow account the amount of $675,000.00, the amount needed to satisfy [the Mortgage]. Upon the default of [Acklin], or payment of the loan in full, KFI will pay said sum into a trust or other tax deferred account designated by agreement between [Acklin] and Shelton. Said account is to serve as a substitution of collateral for said mortgage. Upon payment of the amount of $675,000.00[,] Shelton will release his lien on [Rest in Peace]. Prior and as a condition to such funding, KFI must have assurances as to the status of the loan. Accordingly, and in consideration of the payment of some or all of the obligations of [Acklin] to Shelton by KFI, . . . Shelton hereby certifies[:] 1) As of January 14, 1999, the outstanding principal and interest balance of the Loan is not more than $675,000.00. 2) To the best knowledge of the undersigned, no default exists under the Mortgage or any other documents executed and delivered in connection with the Loans . . . and no event has occurred which, with notice or the passage of time or both would constitute a default under the Mortgage[] or Loan Documents. 3) The Mortgage and Loan Documents have not been modified, amended or supplemented. A true and accurate copy of the Note is annexed hereto. 4) The Mortgage is the only security given by [Acklin] to Shelton for the Loan. Shelton and his family members also signed an Affidavit of Facts attesting to the circumstances surrounding Rest in Peace's incorporation, which KFI required to complete the bridge loan. KFI did not respond to Shelton upon receipt of the Estoppel Certificate or notify Shelton the Estoppel Certificate was unacceptable. KFI never signed the Estoppel Certificate. Like the version KFI drafted, the Estoppel Certificate only contained a blank line for Shelton's signature and no signature block for KFI.