Callison v. Glick, Record No. 180555
| Decision Date | 18 April 2019 |
| Docket Number | Record No. 180555 |
| Court | Virginia Supreme Court |
| Parties | Jean T. CALLISON v. James B. GLICK, Substitute Trustee, et al. |
William E. Shmidheiser, III (Lenhart Pettit, on briefs), Harrisonburg, for appellant.
Kevin M. Rose (BotkinRose, on brief), for appellee David A. Trainum.
John C. Wirth, Staunton (Jessica L. Robinson; Nelson, McPherson, Summers & Santos, on brief), for appellee William J. Elliott, IV.
John I. Hill (PoindexterHill, on brief), Waynesboro, for appellee Mark D. Bowles.
(David A. Penrod ; Hoover Penrod on brief), Harrisonburg, for appellee ET Investments.
No brief filed by appellees James B. Glick, Substitute Trustee, Angela Vanlear Whitesell, Substitute Trustee, and Elliott Chevrolet, Inc.
PRESENT: All the Justices
OPINION BY JUSTICE S. BERNARD GOODWYN
In this appeal, we consider whether the circuit court erred in refusing to declare a party a subsurety to a loan obligation, holding that a purchase option contract was enforceable, and declining to explain the meaning of its final order upon request of a party.
On March 1, 2007, Waller Callison (Mr. Callison) leased his commercial property in Staunton, Virginia (Property) to Elliott Chevrolet, Inc., which is owned by William Elliott, IV (Elliott).1 The Property had a single building on it that Elliott Chevrolet used as an automobile service center. The lease term was five years with an automatic renewal. Under the lease, Elliott Chevrolet could "make additions or alterations to the Property" with Mr. Callison’s consent.
The lease gave Elliott Chevrolet an "Option to Purchase" (Option). Elliott Chevrolet had the right to purchase the Property if Mr. Callison decided to sell the Property, if Mr. Callison passed away, or "after the end of the first renewal term of this Lease." The Option set a purchase price to be determined by an appraiser. It also stated:
If Tenant exercises the right to purchase the Property, the Property shall be conveyed to Tenant, or its assign, by General Warranty Deed with English Covenants of Title, free and clear of all liens and encumbrances , in exchange for payment of the full purchase price in immediately available funds.
(Emphases added.) The Option gave Elliott Chevrolet the "unqualified right to assign the [Option] at any time and such assignment shall be binding on Landlord," and stated it would "survive the death of Landlord, and shall be binding on their heirs and successors in interest." Mr. Callison and Elliott signed the lease and Option.
On March 25, 2011, Mr. Callison and Elliott signed a lease addendum, which fixed the Option purchase price for the Property at $ 550,000.
Elliott and David Trainum (Trainum) owned ET Investments, LLC, which leased its various properties to Elliott’s car dealerships. Elliott Chevrolet wanted to renovate the Property’s existing building and also to construct a second building on the Property for an auto paint shop. Elliott and Trainum decided that ET Investments would fund the construction of the second building and the renovations on the Property, and that Elliott Chevrolet would eventually assign the Option to purchase the Property, at the fixed Option purchase price, to ET Investments.
Trainum’s "Share of Indebtedness" was 50% of any outstanding debt on the Note. Another guaranty was signed by Elliott, personally, with the same terms as the Guaranty signed by Trainum, including responsibility for a 50% share of the indebtedness.
Also on May 10, 2011, Mr. Callison signed a "Construction Deed of Trust" (Deed of Trust), which secured the Note with the Property. The Deed of Trust stated:
(Emphases added.) The Deed of Trust specified that the Bank’s successors and assigns could enforce the Note.
Construction of the Property improvements began in 2011. In addition to paying Mr. Callison rent under the terms of the lease, Elliott Chevrolet also paid ET Investments $ 4,250 per month for the construction and renovations, and ET Investments in turn made monthly payments of a similar amount to the Bank on the Note.
Mr. Callison passed away intestate on November 26, 2011. His wife, Jean Callison (Mrs. Callison), was his only heir.
In early 2012, the construction and renovations suffered unanticipated cost overages. As a result, on April 23, 2012, ET Investments and the Bank increased the Note amount to $ 600,000.
The same day, Mrs. Callison signed a "Modification Agreement" (Modification Agreement) changing the Deed of Trust’s language so that it secured "the repayment of any and all loans and/or advance" from ET Investments up to $ 600,000. The Modification Agreement also stated:
Except as expressly modified above, the terms of the original Deed of Trust shall remain unchanged and in full force and effect .... It is the intention of [the Bank] to retain as liable all parties to the Deed of Trust and all parties, makers and endorsers to the Note , including accommodation parties, unless a party is expressly released by [the Bank] in writing.
(Emphasis added.)
The improvements were completed in 2012. Elliott Chevrolet continued its payments to Mrs. Callison under the terms of the lease, and to ET Investments for payment on the Note.
In the fall of 2015, Elliott’s car dealerships began closing. On January 1, 2016, Elliott Chevrolet ceased its operations at the Property. Elliott Chevrolet subsequently stopped making its $ 4,250 monthly payments to ET Investments, and Elliott transferred his 50% interest in ET Investments to Trainum’s wife.
At the end of January 2016, Trainum ceased ET Investment’s monthly payments to the Bank on the Note. On February 8, 2016, Trainum executed a promissory note of approximately one million dollars to the Bank in exchange for acquiring several loan assets, including the Note. As manager of ET Investments, Trainum prevented ET Investments from paying anything further on the Note. Instead, Trainum arranged for ET Investments to pay his personal obligation on the one million dollar promissory note.
On February 19, 2016, Trainum—as the Note’s holder—sent ET Investments, Elliott, and Mrs. Callison a default notice demanding immediate payment of the Note. In the notice, Trainum stated he would foreclose on the Property via the Deed of Trust if the Note’s balance of approximately $ 544,000 remained unpaid as of March 1, 2016. On March 23, 2016, Trainum sent Mrs. Callison a foreclosure sale notice for the Property, and set a foreclosure date of April 8, 2016.
On March 29, 2016, Mrs. Callison filed a complaint in the Circuit Court of the City of Staunton against Trainum and ET Investments.2 She asked the court:
On March 29, 2016, Mrs. Callison moved for a preliminary injunction to stop the foreclosure sale. At a hearing on the motion, Trainum agreed to postpone the foreclosure sale until resolution of the claims against him.
On June 20, 2016, Elliott Chevrolet assigned the Option to Mark Bowles (Bowles) for one dollar, after Trainum told Elliott that Bowles might be interested in the Option. Between July and September 2016, ET Investments paid Elliott Chevrolet’s rent for the Property to Mrs. Callison.
On June 24, 2016, Mrs. Callison filed a lawsuit against Bowles.3 In her complaint, Mrs. Callison sought a declaratory judgment that Bowles must pay Mrs. Callison the $ 550,000 Option price without deduction for any amount due on the Note, or alternatively that Elliott Chevrolet must pay off the Note before Bowles can enforce the Option.
On August 2, 2016, Bowles notified Mrs. Callison that he was exercising the Option, and demanded she deliver title to the Property free of liens, including the Deed of Trust. A month later, Bowles filed a complaint against Mrs. Callison seeking specific performance of the Option.
The circuit court consolidated Mrs. Callison’s claims against Trainum, Elliott, and ET Investments, along with her claim against Bowles, and Bowles’ claim against Mrs. Callison for specific performance, for purposes of a single trial.
At trial, Elliott testified as an adverse witness for Mrs. Callison, stating that Mr. Callison asked him to renovate the building and that Mr. Callison was...
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