Bank of Albuquerque, N.A. v. Ambassador Dev., LLC

• Court: Court of Appeals of New Mexico
• Writing for the Court: MICHAEL D. BUSTAMANTE
• Decision Date: 12 March 2013
• Docket Number: NO. 30,810,30,810
• Citation: Bank of Albuquerque, N.A. v. Ambassador Dev., LLC, NO. 30,810 (N.M. App. Mar 12, 2013)
• Parties: BANK OF ALBUQUERQUE, N.A., Plaintiff-Appellee, v. AMBASSADOR DEVELOPMENT, LLC, MARTIN LENZER, PATRICIA LENZER, EDWARD L. ROMERO, Individually and as Personal Representative of the Estate of CAYETANA ROMERO, LAURIE J. ANDERSON, MARTIN LENZER AND PATRICIA D. LENZER REVOCABLE TRUST and LENZER ENTERPRISES, LLC, Defendants-Appellants.

BANK OF ALBUQUERQUE, N.A., Plaintiff-Appellee, v. AMBASSADOR DEVELOPMENT, LLC, MARTIN LENZER, PATRICIA LENZER EDWARD L. ROMERO, Individually and as Personal Representative of the Estate of CAYETANA ROMERO, LAURIE J. ANDERSON, MARTIN LENZER AND PATRICIA D. LENZER REVOCABLE TRUST and LENZER ENTERPRISES, LLC, Defendants-Appellants.

NO. 30,810

COURT OF APPEALS OF THE STATE OF NEW MEXICO

Dated: March 12, 2013

This memorandum opinion was not selected for publication in the New Mexico Appellate Reports. Please see Rule 12-405 NMRA for restrictions on the citation of unpublished memorandum opinions. Please also note that this electronic memorandum opinion may contain computer-generated errors or other deviations from the official paper version filed by the Court of Appeals and does not include the filing date.

APPEAL FROM THE DISTRICT COURT OF BERNALILLO COUNTY

Valerie A. Huling, District Judge

Modrall, Sperling, Roehl, Harris & Sisk, P.A.

Angelo J. Artuso

Emil J. Kiehne

Albuquerque, NM

for Appellee

Lorenz Law

Alice T. Lorenz

Albuquerque, NM

for Appellants

MEMORANDUM OPINION

BUSTAMANTE, Judge.

After a bench trial, the district court entered judgment against Ambassador Development, LLC for the outstanding balance of a $4.8 million loan, plus pre-judgment interest, post-judgment interest, costs, and attorney's fees. On appeal, our task is to determine whether the district court's rulings are supported by substantial evidence. The district court's core rulings are that (1) the disputed loan matured on December 15, 2007, (2) the Bank of Albuquerque did not breach its obligations under the loan agreement, and (3) the members of Ambassador and other guarantors were not relieved of their obligation to guaranty the full amount of the loan. Determining that the record supports these rulings, we affirm.

BACKGROUND

In 2003, Edward and Cayetana Romero, Laurie Anderson, and Lenzer Enterprises, LLC, a company owned by Martin and Patricia Lenzer, formed a new venture called Ambassador Development, LLC to take advantage of growth in the newhousing market.¹ Ambassador's business plan was to purchase model homes from builders, lease the homes back to the builders while their subdivisions were being developed and then sell the homes after the builders no longer needed them. To initiate the plan, Ambassador approached the Bank of Albuquerque's (Bank) private banking department for a line of credit of $1.2 million. Bank agreed to the loan² provided that Ambassador members submit personal guaranties and give Bank first mortgages on the homes. Also, Ambassador was to pay Bank monthly for interest accrued on the purchase amounts of the homes. The loan documents included a business loan agreement (BLA), promissory note, commercial guaranties, and a notice of final agreement (NFA), among others. After the initial transaction in 2003, the line of credit was renewed³ three times and eventually increased to $4.8 million. At each renewal, Bank prepared and Ambassador executed a BLA, promissory note, and NFA in addition to other documents. We refer to each document or set of documents by the year in which they were signed.

After a series of disagreements about the terms of the loan, which are the subject of this dispute, Bank filed a complaint seeking recovery of all outstanding debt and foreclosure on Ambassador's properties in Bernalillo County. Ambassador answered with affirmative defenses and a counterclaim alleging that Bank had breached the 2006 BLA and acted "contrary to the doctrine of good faith and fair dealing[]." After a bench trial, the district court entered judgment for Bank for the remaining balance of the loan (over $1.7 million), pre-judgment interest, post-judgment interest, costs and attorney's fees. Ambassador appealed. Additional facts are included as needed in our analysis of Ambassador's arguments.

DISCUSSION

We address Ambassador's arguments in the order presented.

Maturity Dates

In its first argument, Ambassador maintains that Bank could not declare a default based on Ambassador's failure to pay the loan in full on December 15, 2007, because the 2006 BLA did not include a "date certain maturity date." Therefore, "[b]ecause its 2006 BLA contained a flexible maturity date, . . . Bank lacked the right to declare a default." It is undisputed that the 2003 loan documents specified that the amount of the loan was due and payable in full one year later on August 19, 2004. Similarly, the parties do not dispute that 2004 and 2005 loan documents specified amaturity date. The 2005 loan documents increased the line of credit to $4.8 million with a maturity date of December 15, 2006. One day before the loan was to mature, new documents were executed with no increase in the line of credit. At trial the parties disputed whether the 2006 loan documents set forth a specific maturity date.

Questioning whether Ambassador sufficiently preserved this issue for appeal, Bank asserts that Ambassador argued at trial that "the parties had always agreed that the loans had no firm maturity date, but now . . . [Ambassador is] changing [its] story" to focus on an alleged inconsistency in the loan documents. See Am. Bank of Commerce v. U. S. Fid. & Guar. Co., 85 N.M. 478, 478, 513 P.2d 1260, 1260 (1973) ("A party cannot change his theory on appeal."). We determine that Ambassador sufficiently apprised the district court of both theories to preserve them for appeal. Ambassador asserted in its answer to the complaint that Bank's "cause of action is contrary to the [BLA and the BLA] attached to the [c]omplaint . . . continues. Therefore this cause of action is premature." Ambassador asserted in a trial memorandum requested by the district court that the language of the 2006 BLA "Term" provision and other parts of that agreement were in conflict. Finally, we note that Ambassador requested findings of fact relevant to an alleged conflict in the loan documents. We conclude that both of Ambassador's arguments as to why there was no default on the 2006 agreement were sufficiently before the district court to preservethem for review. Woolwine v. Furr's, Inc., 106 N.M. 492, 496, 745 P.2d 717, 721 (Ct. App. 1987).

Ambassador argues first that the 2006 BLA is ambiguous as to when it matures. Next it argues that "[t]he district court failed to apply . . . basic rules of [contract] construction and so erred by adopting" findings stating that the 2006 agreement matured on December 15, 2007. "Whether a contractual provision is ambiguous is a question of law, which we review de novo on appeal." Sitterly v. Matthews, 2000-NMCA-037, ¶ 15, 129 N.M. 134, 2 P.3d 871. "Once the agreement is found to be ambiguous, the meaning to be assigned the unclear terms is a question of fact." Mark V, Inc. v. Mellekas, 114 N.M. 778, 781, 845 P.2d 1232, 1235 (1993). When "the parties do not offer evidence of the facts . . . surrounding execution of the agreement . . . , the court may resolve any ambiguity as a matter of law by interpreting the contract using accepted canons of contract construction and traditional rules of grammar and punctuation." Id. at 782, 845 P.2d at 1236. When this is the case, our review on appeal is de novo. Id. On the other hand, any "factual issues . . . presented by an ambiguity must be resolved by the [fact finder] with the benefit of a full evidentiary hearing prior to deciding breach and damages." Id. In the latter case, we will affirm the district court when its resolution of the ambiguity is supported by substantial evidence. City of Sunland Park v. Harris News, Inc., 2005-NMCA-128, ¶ 21, 138 N.M. 588, 124 P.3d 566. In reviewing a substantial evidence claim, "[t]he question is not whether substantial evidence exists to support the opposite result, but rather whether such evidence supports the result reached." Las Cruces Prof'l Fire Fighters v. City of Las Cruces, 1997-NMCA-044, ¶ 12, 123 N.M. 329, 940 P.2d 177. "Additionally we will not reweigh the evidence nor substitute our judgment for that of the fact finder." Id.

The district court did not make a finding that the 2006 BLA was ambiguous, nor did it make findings from which we can determine that it resolved any ambiguity as a matter of law using the canons of construction. Assuming the district court did determine the 2006 loan documents were ambiguous, we conclude that it resolved any ambiguity based on the facts after a "full evidentiary hearing." Mark V, 114 N.M. at 782, 845 P.2d at 1236. Here, both Bank and Ambassador presented testimony about the circumstances surrounding the agreement and Bank presented correspondence about the agreement between Bank and Ambassador. Although Mr. Romero testified that he understood that the lifetime of the loan "was until the homes were sold," and the "Term" provision in the 2006 BLA is silent as to its maturity date, Patricia Lenzer, who signed the 2006 loan documents on behalf of Ambassador, testified that she understood Bank would not approve an agreement with a maturity date over a year from the date of execution and several Ambassador representatives acknowledged thateach loan until the 2006 loan expressly matured one year from the execution date. In addition, in correspondence prior to December 15, 2007, Bank repeatedly stated that the 2006 loan would mature on that date. Ambassador did not present evidence that it challenged the maturity date in its responses. This evidence supports the district court's finding that the 2006 loan matured on December 15, 2007.

Ambassador's Counterclaims

Ambassador next argues that Bank breached the terms of the 2006 BLA when it extracted over $50,000 from Ambassador's account under the BLA's setoff provision without having obtained Ambassador's certification of the amount owed. It also argues that Bank acted in bad faith in its negotiations with Ambassador over extension of the loan. Ambassador contends that because of these breaches, Bank was precluded from "declaring Ambassador in default, or filing suit against it, at least until...