Bank of Red Bay v. King
| Decision Date | 20 December 1985 |
| Citation | 482 So.2d 274 |
| Parties | BANK OF RED BAY v. Paul D. KING, Diane King, Malcolm King and Jessie King. Paul D. KING, Diane King, Malcolm King, and Jessie King v. BANK OF RED BAY. 84-323, 84-350. |
| Court | Alabama Supreme Court |
Bob Rogers of Bedford, Bedford & Rogers, Russellville, for appellant/cross-appellee.
Ernest N. Blasingame, Jr. of Potts, Young, Blasingame & Putnam, Florence, for appellees/cross-appellants.
This is a fraud case in which the jury returned a verdict in favor of the plaintiffs/appellees (the Kings) and judgment was entered thereon. The appellant, Bank of Red Bay (the Bank), appeals from the trial court's order denying its post-judgment motion for judgment notwithstanding the verdict or in the alternative a new trial or in the alternative a remittitur. The appellees, Malcolm King, Jessie King, Paul King, and Diane King, cross-appeal, raising only damages issues.
The pertinent facts are as follows:
On July 28, 1980, Robert Winter, joined by his wife Melissa Winter, and Malcolm King, 1 joined by his wife Jessie King, executed a promissory note in favor of the Bank in the amount of $79,925.90 to finance the purchase of the Vina Packing Company. As security for the note, a mortgage on the packing company property was executed in favor of the Bank. As additional security for the note, Malcolm and Jessie King gave the Bank a mortgage on their home and 40 acres of land situated in Colbert County, Alabama.
The Bank's loan officer with whom the Winters and the Kings dealt was Mr. Kelly Moore. At trial, Robert Winter testified that, during the initial financing negotiations, Moore informed him of the existence of some sort of "typographical error" in the legal description of the Vina Packing Company property. The Bank contends this error consists of a typographical or scrivener's error wherein, at some point in the chain of title, the symbol for "minutes" as used in a metes and bounds description was misinterpreted as the symbol for "feet." For example, rather than the metes and bounds description reading "South 7 degrees 10 minutes East," the description reads "South 7 degrees 10 feet East." The plaintiffs claim that in addition to the minutes/feet problem, there is a directional problem in that the description contains no direction after the words "52 degrees" in one part of the description.
Apparently, Robert Winter never told any of the Kings about the typographical error Moore had informed him of.
During the first year, the Winter-King promissory note was twice renewed, but, nevertheless, again became delinquent for nonpayment. In an attempt to collect payment on the note, Moore contacted Harold King, who is the son of Malcolm and Jessie King. According to the plaintiffs, Harold had only occasionally worked with his uncle, Robert Winter, in the packing company business. Winter testified, however, that a partnership existed between himself and Harold King. Harold King further testified that, when Moore contacted him regarding the delinquency, Moore suggested that he (Harold) purchase the Vina Packing Company from his uncle. Moore, however, testified that Harold approached him about buying the business.
In any event, Harold and his wife, Carol, did purchase the company; Robert Winter and his wife conveyed the packing company property by deed to Harold and his wife. Pursuant to the financing arrangement with Moore, Harold paid the Bank the interest (approximately $8,000) overdue on the first note (the Winter-(Malcolm) King note), and, on August 27, 1981, executed a new promissory note and mortgage in favor of the Bank in the amount of $75,117.50. Malcolm and Jessie King also joined in this new note and mortgage and continued to pledge as security their Colbert County realty. Harold and Malcolm then began operating the packing company as partners.
Thereafter, Malcolm King borrowed $45,000 from the Franklin Federal Savings & Loan Association in Russellville, Alabama (now Phenix Federal Savings & Loan Association). He used this money to reduce the balance due on the Bank's note on the Vina Packing Company, thereby obtaining a release of his Colbert County property from the mortgage held by the Bank. 2
Subsequently, Malcolm's other son, Paul King, and Paul's wife, Diane, became involved in the operation of the Vina Packing Company, and, when Harold got a better job offer, Paul and Diane agreed to buy the company from Harold and Carol.
Thereafter, Paul and Diane went to Moore at the Bank to arrange the financing for their purchase of the Vina Packing Company. The Bank prepared the note and the mortgage. The plaintiffs allege that during the closing of this transaction Paul asked Moore whether or not he needed to obtain a new title opinion on the property. They further allege that Moore responded by saying that, since the Bank still had the title opinion prepared for Harold King's purchase of the company, they did not need to have a new one done.
Moore, on the other hand, testified he told Paul King
On October 5, 1982, Paul and Diane, joined by Malcolm and Jessie, gave the Bank a promissory note in the amount of $36,461.75. As security, Paul and Diane executed a mortgage on the packing company in favor of the Bank. On October 7, 1982, Harold and Carol King deeded the Vina Packing Company to Paul and Diane King.
The Bank maintains that it was not until after Paul and Diane had bought the business that Malcolm and Jessie "paid down" the note on the packing company in order to obtain a release of their Colbert County property from the mortgage. There is testimony to the contrary, however, and the amount borrowed by Paul and Diane ($34,461.75) to finance their purchase of the company indicates that a large portion of the balance of the previous loan ($75,117.50) had been paid.
Nevertheless, Paul and Diane King maintain that Malcolm and Jessie operated the Vina Packing Company with them as partners following their purchase of Harold and Carol's interest in the company.
In 1983, Paul and Diane attempted to borrow $40,000 from another lending institution known as Bank Independent, at an interest rate more favorable than the rate they were paying on their note with the Bank of Red Bay. Their plans were to pay off that note, and obtain further operating capital, giving Bank Independent a mortgage on the packing company property as security for the $40,000 loan. In connection with Bank Independent's preparation of the mortgage, Paul King had an abstract on the Vina Packing Company property updated. A Tuscumbia, Alabama, attorney examined the abstract and concluded that, due to certain deficiencies in the legal description of the property (described above), he was unable to issue a title opinion or title insurance on the property to Bank Independent. On that basis, Bank Independent could not approve Paul and Diane King's loan.
After being advised of the deficiencies in the description, Paul King took the abstract to Mr. Moore at the Bank, and inquired as to why Moore had not informed him of the problems in the description, since Moore had previously told him the Bank had a title opinion on the property. Paul King testified that it was then that Moore told him that the Bank had mortgagee title insurance on the packing company property rather than a title opinion.
Thereafter, Paul and Diane King made no further payments on their note, thereby defaulting on it. In due course, the Bank began its foreclosure proceedings on the packing company mortgage, giving notice by correspondence and publication. Prior to the foreclosure sale, however, Paul and Diane King commenced this action on October 5, 1983, in Franklin Circuit Court against the Bank. In their complaint, Paul and Diane alleged, among other things, that the foreclosure proceedings were invalid due to the erroneous and insufficient description of the Vina Packing Company property, and they sought a preliminary injunction to restrain the Bank from proceeding with the foreclosure sale. Paul and Diane also stated a claim in fraud alleging that, in response to their inquiry as to the sufficiency of the legal title to the packing company property, the Bank intentionally and fraudulently deceived them by failing to disclose the existence of the error in the legal description of the property. Paul and Diane claimed that they relied upon this deception by executing a mortgage in favor of the Bank.
Following a hearing on Paul and Diane's request for injunctive relief, the trial court issued an order enjoining any further foreclosure proceeding provided they furnished security in the amount of $30,000. Paul and Diane failed to file the required bond and the foreclosure sale was conducted, with the Bank being the highest and best bidder.
Numerous pretrial motions were filed by each side, all of which were denied. However, in response to the Bank's motion for a more definite statement regarding the allegation of fraud, Paul and Diane King amended their complaint on September 11, 1984, adding Malcolm King and Jessie King as parties plaintiffs, and pleading more specifically as to the alleged fraudulent concealment. In effect, each of the Kings claimed that a fiduciary relationship existed between the Bank and the Kings, which obligated the Bank to disclose to the Kings the existence of the title defect in the legal description of the Vina Packing Company property. The Kings alleged that the Bank's failure to do so amounted to suppression of a material fact constituting fraud under Code of 1975, § 6-5-102, which provides:
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