Childersburg Bancorp. v. Peoples State Bank

• Decision Date: 02 June 2006
• Docket Number: No. 2040899.,2040899.
• Citation: 962 So.2d 248
• Parties: CHILDERSBURG BANCORPORATION, INC. v. PEOPLES STATE BANK OF COMMERCE.
• Court: Alabama Court of Civil Appeals

962 So.2d 248

CHILDERSBURG BANCORPORATION, INC. v. PEOPLES STATE BANK OF COMMERCE.

No. 2040899.

Court of Civil Appeals of Alabama.

June 2, 2006.

Certiorari Denied March 9, 2007 Alabama Supreme Court 1051316.

Thomas R. Elliott, Jr., Paige Elliott-Pinson, and J. Michael Keel of London Yancey & Elliott, L.L.C., Birmingham, for appellant.

Richard F. Ogle of Ogle, Liles & Upshaw, LLP, Birmingham, for appellee.

CRAWLEY, Presiding Judge.

Childersburg Bancorporation, Inc. ("CBI"), appeals from a summary judgment in favor of Peoples State Bank of Commerce ("Peoples") on CBI's counterclaim alleging the breach of a settlement agreement. We reverse the judgment in favor of Peoples and render a judgment in favor of CBI.

In the companion case of Childersburg Bancorporation, Inc. v. Alabama Department of Environmental Management, 893 So.2d 1142 (Ala.2004), Peoples filed a complaint for interpleader, naming CBI and the Alabama Department of Environmental Management ("ADEM") as parties. Peoples deposited with the court $140,000, the amount in an escrow account established pursuant to a settlement agreement between CBI and Peoples. CBI answered the complaint for interpleader and asserted a counterclaim against Peoples, alleging a breach of the settlement agreement. The trial court ultimately entered a judgment awarding the interpleaded funds to ADEM and made that judgment final pursuant to Rule 54(b), Ala. R. Civ. P. CBI's counterclaim against Peoples was left pending in the trial court. The trial court entered a summary judgment in favor of Peoples on the counterclaim, and CBI appealed to the Alabama Supreme Court. The supreme court transferred the case to this court, pursuant to § 12-2-7(6), Ala. Code 1975.

Because the procedural history and many of the facts relevant to this appeal are outlined in Childersburg Bancorporation, Inc. v. Alabama Department of Environmental Management, supra, we quote at length from the opinion of the supreme court in that case:

"In 1985, the First National Bank of Childersburg (`FNBC') issued an irrevocable letter of credit on behalf of Alabama Plating, Inc. (`Alabama Plating'), and in favor of ADEM. The letter of credit was intended to provide financial assurance in the event an environmental cleanup at Alabama Plating's facilities ever became necessary. CBI owned FNBC at the time the letter of credit was issued and at all relevant times until 1999, when it sold FNBC.

"Alabama Plating was to provide additional financial assurance that it could handle any environmental cleanup that became necessary. However, problems arose getting Alabama Plating to provide that assurance, and ADEM ultimately required that a trust agreement be executed; Alabama Plating was the grantor, FNBC the trustee, and ADEM the beneficiary of the trust created by the agreement. The trust was funded by the entire amount pledged in the letter of credit. Following an environmental cleanup of Alabama Plating's facilities, ADEM attempted several times to access the funds held in the trust to cover a portion of the cleanup costs. However, FNBC maintained that it had neither a valid letter of credit nor a trust agreement with Alabama Plating.

"In 1999, CBI sold FNBC to Marion Lowery and Peoples State Bank of Commerce (`Peoples'). After FNBC was sold, disputes arose between CBI and FNBC, prompting CBI to file a declaratory-judgment action against FNBC and Lowery. The parties successfully negotiated the dispute and entered into a settlement agreement and release (the `settlement agreement'). The settlement agreement specifically addressed the 1985 letter of credit used to fund the trust created by the trust agreement, providing, in pertinent part, as follows:

"`1. The consideration for the settlement is as set forth below:

"`. . . .

"`(d) CBI stipulates and agrees that after FNBC has been reimbursed for the $60,000.00 as set out in paragraph 1(c) above that all payments made on the Medac loan^[1] shall be placed in an escrow account at FNBC until said escrow account shall reach a total of $140,000.00.

"`(1) Said escrow account shall draw interest semi-annually at the prime rate of interest charged by the Federal Reserve Bank of Atlanta to banks in the state of Alabama.

"`(2) Said escrow funds shall be used exclusively to pay any judgment against FNBC obtained by ADEM enforcing the ADEM letter of credit or to fund payment of any settlement with ADEM of FNBC's obligations under the ADEM letter of credit.

"`(3) CBI agrees to defend FNBC in any action brought on behalf of ADEM to collect under said letter of credit and to pay all costs and expenses in defense of the same.

"`(4) CBI shall have the full authority in its absolute discretion to defend and/or settle any claim made by ADEM under the ADEM letter of credit.

"`(5) This escrow shall terminate and all funds, including interest earned, held by FNBC shall be paid to CBI two (2) years from the execution of this Settlement Agreement and Release so long as there is no litigation pending related to any claim made by ADEM. In the event such litigation is pending, the escrow shall terminate upon the conclusion of the litigation.'

"The settlement agreement was executed on August 6, 2001; therefore, the two-year window referenced in paragraph 1(d)(5) of the settlement agreement expired on August 6, 2003.

"In May 2003, through its attorney, Peoples contacted ADEM, inquiring as to when ADEM would be making a claim with FNBC for payment pursuant to the trust agreement. Thereafter, Peoples confirmed the existence of the trust agreement in a letter to ADEM. ADEM then once again sought payment from FNBC pursuant to the trust agreement. After ADEM demanded payment of cleanup costs under the trust agreement, FNBC's attorney wrote CBI's attorney indicating that FNBC intended to comply with ADEM's demand. CBI's attorney responded with a letter stating that, pursuant to the settlement agreement, FNBC had no right to comply with ADEM's demand.

"On June 20, 2003, Peoples filed a complaint for interpleader, naming CBI and ADEM as parties, and deposited with the court $140,000, the amount placed in an escrow account established pursuant to the settlement agreement. The complaint stated that ADEM had demanded payment pursuant to the letter of credit, which preceded the trust agreement, and that Peoples intended to comply with ADEM's demand. CBI answered the complaint and asserted a counterclaim against Peoples alleging a breach of the settlement agreement. Thereafter, Peoples moved to be dismissed from the action, but the trial court denied its motion.

"ADEM then moved for a summary judgment, claiming ownership of the interpleaded funds. In response, CBI moved for a summary judgment, also claiming ownership of the interpleaded funds. The trial court granted ADEM's motion and entered a summary judgment in its favor. CBI's counterclaim against Peoples is still pending. The summary judgment in favor of ADEM was made final pursuant to Rule 54(b), Ala. R. Civ. P. CBI appeals.

". . . .

"We first note that CBI's counterclaim against Peoples for breach of the settlement agreement is still pending in the trial court. Therefore, we need not address the issue whether Peoples's actions in initiating the current litigation or in contacting ADEM amount to a breach of the settlement agreement. The only issue raised on appeal is whether the trial court properly granted ADEM's motion for a summary judgment.

"¹ Medac, Inc., owed FNBC $749,847.26, of which FNBC had `participated out' to CBI $331,567.37."

Childersburg Bancorporation, Inc. v. Alabama Dep't of Envtl. Mgmt., 893 So.2d at 1143-45. On June 18, 2004, the supreme court affirmed the summary judgment in favor of ADEM in the interpleader proceeding.

On the counterclaim that remained pending in the trial court, the parties filed cross-motions for a summary judgment. On May 10, 2005, the trial court granted Peoples's motion and denied CBI's motion. CBI appeals, arguing that the trial court erred by denying its motion and by granting Peoples's motion because, CBI says Peoples breached the settlement agreement.

Appellate review of a summary judgment is de novo. Ex parte Ballew, 771 So.2d 1040 (Ala.2000). A motion for a summary judgment is to be granted when no genuine issue of material fact exists and the moving party is entitled to a judgment as a matter of law. Rule 56(c)(3), Ala. R. Civ. P. A party moving for a summary judgment must make a prima facie showing "that there is no genuine issue as to any material fact and that [it] is entitled to a judgment as a matter of law." Rule 56(c)(3); see Lee v. City of Gadsden, 592 So.2d 1036, 1038 (Ala.1992). If the movant meets this burden, "the burden then shifts to the nonmovant to rebut the movant's prima facie showing by `substantial evidence.'" Lee, 592 So.2d at 1038 (footnote omitted). "[S]ubstantial evidence is evidence of such weight and quality that fair-minded persons in the exercise of impartial judgment can reasonably infer the existence of the fact sought to be proved." West v. Founders Life Assurance Co. of Florida, 547 So.2d 870, 871 (Ala.1989); see § 12-21-12(d), Ala.Code 1975.

In order to be entitled to a summary judgment on a breach-of-contract claim, the movant must present evidence in support of the following elements of his claim: "(1) the existence of a valid contract binding the parties in the action, (2) his own performance under that contract, (3) the defendant's nonperformance, and (4) damages." Southern Med. Health Sys., Inc. v. Vaughn, 669 So.2d 98, 99 (Ala.1995); see also Shelton v. Clements, 834 So.2d 775, 782 (Ala.Civ.App.2002).

In the present case, there is no dispute with respect to the first two elements of a breach-of-contract claim. The parties agree that the settlement agreement is valid and that CBI performed its obligations under the agreement. The parties' dispute centers upon whether CBI established the third and fourth elements, i.e., that Peoples...