First Commercial Bank v. Spivey

• Decision Date: 09 May 1997
• Citation: 694 So.2d 1316
• Parties: FIRST COMMERCIAL BANK v. Sheryl SPIVEY. Curtis SPIVEY III v. FIRST COMMERCIAL BANK. 1951862, 1951872.
• Court: Alabama Supreme Court

Page 1316

694 So.2d 1316

FIRST COMMERCIAL BANK v. Sheryl SPIVEY.

Curtis SPIVEY III v. FIRST COMMERCIAL BANK.

1951862, 1951872.

Supreme Court of Alabama.

May 9, 1997.

Roderick K. Nelson, Robert S. Lamar, Jr., and Lynn B. Randall of Lamar, Nelson & Miller, P.C., Birmingham, for Appellant/Cross Appellee First Commercial Bank.

J. Gusty Yearout, William R. Myers, and John G. Watts of Yearout, Myers & Traylor, P.C., Birmingham; and Perryn G. Carroll of Carroll & Carroll, P.C., Birmingham, for Appellee Sheryl Spivey and Appellant Curtis Spivey III.

HOUSTON, Justice.

The defendant, First Commercial Bank, appeals from a judgment entered on a $1,000,000 jury verdict ($500,000 in compensatory damages and $500,000 in punitive damages) for one of the plaintiffs, Sheryl H. Spivey. Sheryl Spivey's husband, Curtis T. Spivey III, also a plaintiff, cross appeals from the denial of his motion for a new trial. The Spiveys sought damages based on allegations of breach of contract and fraud. The jury found for Sheryl Spivey, awarding $1,000,000, but found against Curtis Spivey. The trial court entered a judgment on the verdict. We affirm, both as to the appeal and as to the cross appeal.

This is the second time these parties have been before this Court. See Spivey v. First Commercial Bank, 681 So.2d 120 (Ala.1995) (Spivey I ), for a more complete understanding of the history of this litigation. In that opinion, we affirmed the judgment for First Commercial in part; however, we reversed that portion of the judgment based on a jury verdict for First Commercial, and we remanded the case for a new trial on the Spiveys' claims. Some of the facts and allegations pertinent to this appeal were summarized in that opinion as follows:

"This appeal arises from two cases consolidated for trial. On October 2, 1991, First Commercial Bank filed a complaint against the Spiveys, seeking a judgment on a promissory note and a judicial foreclosure on mortgages executed by the Spiveys to secure the note. On October 4, 1991, the Spiveys filed a complaint against First Commercial, in which they alleged breach of contract, breach of fiduciary duty, and fraud. They alleged that First Commercial had fraudulently induced them to enter into a loan agreement on October 31, 1990, and to give a mortgage on their property, by falsely representing to the Spiveys that they would be able to use the entire proceeds of the loan to pay for construction of their residence--they alleged that in fact a substantial portion of the loan proceeds were actually used by First Commercial to pay off unsecured business-related loans of Curtis Spivey and Curt's Cars, Inc.

"The transactions that led to this appeal began in February 1990, when Curtis T. Spivey III, as president of Curt's Cars, Inc., executed a promissory note to First Commercial Bank, specifically for business purposes. From February 1990 through June 1990, Curt's Cars, Inc., through Spivey as its president, entered into other business loan agreements with First Commercial Bank. None of the documents relating to those loans refers to personal purposes or to residential construction purposes. The Bank charged an interest rate on these business loans equal to the prime rate plus one percent.

"On August 13, 1990, the Spiveys executed a promissory note to First Commercial Bank in the amount of $150,000 at an interest rate equal to the prime rate plus two percent. The note stated on its face that it was for construction of a personal residence located at Route 1, Box 533, Pinson, Alabama. In connection with the promissory note, the Spiveys gave First Commercial a first mortgage on the real property where the Spiveys' home was located and upon which the new house was to be constructed. This promissory note contained a statement providing that no modification of the note or any agreement securing the note was effective unless in writing and signed by the borrower and the lender.

"The Spiveys executed a second promissory note, also secured by a mortgage on their real property, to First Commercial Bank on October 31, 1990, in the amount of $332,000. On the face of this note, the purpose is stated as being 'construction' and 'personal.' The Spiveys also, at the same time, executed a construction loan agreement, which stated that the purpose of the loan was to pay the cost of construction. Both the note and the loan agreement contained statements providing that no modification of the note was effective unless in writing and signed by the borrower and the lender. The Spiveys also signed a 'Truth-in-Lending Disclosure Form.' On that form, under the column entitled 'Amounts Paid to Others on My Behalf,' there are no entries.

"On November 6, 1990, First Commercial disbursed funds from the Spiveys' construction line of credit to satisfy the business debts of Curt's Cars, Inc., and Curtis Spivey. The Spiveys contend that the disbursement was made without their knowledge or acquiescence. The evidence reflects that the promissory note executed by the Spiveys on October 31, 1990, was altered by First Commercial after they had signed it, to add the designation 'Master Note,' to add the designation 'Amended,' and to list the loan numbers of Curt Spivey's business loans. The Bank contends that the Spiveys did not complain about the disbursement of funds from the October 31, 1990, line of credit until July 1991. The Spiveys argue that they complained to the Bank upon learning of the disbursement.

"On May 20, 1991, the Spiveys signed a renewal note, which matured on August 20, 1991. The Spiveys made none of the interest payments on that loan, and on September 3, 1991, First Commercial sent a letter to the Spiveys informing them that they were in default. First Commercial Bank then sued the Spiveys on the promissory note of May 20, 1991, and sought foreclosure of the mortgage securing the note. The Spiveys sued First Commercial, alleging fraud and breach of contract. The cases were consolidated for trial."

681 So.2d at 121-22. (Emphasis in original.)

Other evidence presented at the second trial, viewed in the light most favorable to Sheryl Spivey, indicated the following: The Spiveys used the available funds from their construction line of credit after being falsely told by a representative of First Commercial, Don Garvick, that the bank would take care of the apparent shortfall in construction funds caused by the disbursement of those funds to satisfy the business debts of Curt's Cars, Inc., and Curtis Spivey. In reliance on Garvick's representations that everything would be taken care of, the Spiveys renewed the note on May 20, 1991. The disbursement of funds from the Spiveys' construction line of credit to satisfy the business debts of Curt's Cars, Inc., and Curtis Spivey ultimately had an adverse impact on Curtis Spivey's automobile business, and it eventually led to the bank's foreclosure of the mortgage securing the May 20, 1991, note. Because of the reduction in their construction line of credit, the Spiveys were forced to divert money from Curtis Spivey's business in an attempt to weatherproof their partially constructed house before it was damaged. This led to the demise of the business and the loss of the Spiveys' primary source of income. The Spiveys eventually filed for bankruptcy protection; Curtis Spivey lost his business and both he and his wife lost their real property, including their old house, the new one under construction, and approximately 21 acres of land. During this period, the Spiveys were under pressure by creditors and Sheryl Spivey was required to go back to work to help support her husband and three children.

The following issues are presented by First Commercial in its appeal:

1) Whether the trial court erred in refusing to enter a judgment for First Commercial as a matter of law on the ground that there was insufficient evidence that First Commercial's actions proximately caused the damage claimed by Sheryl Spivey;

2) Whether the trial court erred in refusing to enter a judgment for First Commercial as a matter of law on the ground that Sheryl Spivey had waived her claims for damages;

3) Whether the trial court erred in refusing to grant First Commercial a new trial on the ground that after closing arguments additional verdict forms were prepared and submitted to the jury;

4) Whether the trial court erred in refusing to order a reduction of the $500,000 compensatory damages award;

5) Whether the trial court erred in refusing to order a reduction of the $500,000 punitive damages award.

The cross appeal involves a single issue: Whether the trial court erred in denying Curtis Spivey's motion for a new trial on the ground that the court had improperly admitted evidence indicating that he had orally agreed with First Commercial to pay his business debts with the proceeds from the construction loan.

We will address these issues seriatim.

First Commercial contends, as to its first issue, that there was insufficient evidence of proximate cause to submit Sheryl Spivey's fraud claim to the jury. First Commercial argues that the Spiveys mismanaged their money and that that mismanagement, not any fraud on its part, was the proximate cause of the financial losses and emotional distress Sheryl Spivey claimed.

Proximate cause is an essential element of a fraud claim. City Realty, Inc. v. Continental Casualty Co., 623 So.2d 1039 (Ala.1993). Therefore, it was necessary for Sheryl Spivey to present sufficient evidence to allow the jury to reasonably conclude that First Commercial's actions had proximately caused the financial losses and emotional distress she alleged. After carefully examining the record, we agree with First Commercial that there was considerable evidence suggesting that the Spiveys had mismanaged their personal finances and that the mismanagement may have contributed to their financial plight. However, the record also contains evidence, including the testimony of the Spiveys'...