Colonial Bank of Alabama v. Coker

• Decision Date: 20 December 1985
• Citation: 482 So.2d 286
• Parties: COLONIAL BANK OF ALABAMA v. Stephen D. COKER and Insurors of Mobile, Inc. 84-656.
• Court: Alabama Supreme Court

Page 286

482 So.2d 286

COLONIAL BANK OF ALABAMA v. Stephen D. COKER and Insurors of Mobile, Inc.

84-656.

Supreme Court of Alabama.

Dec. 20, 1985.

Bradley R. Byrne and M. Kathryn Knight of Miller, Hamilton, Snider & Odom, Mobile, for appellant.

Jon A. Green of Sintz, Pike, Campbell & Duke, Mobile, for appellees.

ADAMS, Justice.

Plaintiff, The Colonial Bank of Alabama (hereinafter Colonial), appeals from the order of the Circuit Court of Mobile County granting summary judgment in favor of defendants-appellees, Stephen D. Coker and Insurors of Mobile, Inc.

The issue to be decided on appeal is whether the trial court erred by granting the defendants' summary judgment motion. We affirm the grant of summary judgment in favor of Insurors of Mobile, Inc., but reverse the grant of summary judgment as to Coker.

This cause arose from the following facts:

Prior to March 1981, Steven Coker was a shareholder and vice-president of Insurance Concepts, Inc., d/b/a The Insurance Center, located in Birmingham, Alabama. On February 20, 1981, Insurance Concepts, through Coker, contracted with Lady Diane, Inc., to sell a policy of insurance covering a fishing trawler owned by Lady Diane, Inc.

The Lady Diane insurance contract, which also contained a promissory note and security agreement, reflected an unpaid balance of $18,647.86 on the price of the insurance policy. The reverse side of the combined contract, note, and security agreement document contained a form for assignments to City National Bank of Birmingham (now Colonial Bank of Alabama). On February 26, 1981, Insurance Concepts executed an assignment of the Lady Diane insurance contract to Colonial.

In a letter dated February 27, 1981, Colonial informed The Insurance Center that Colonial would "accept the (Lady Diane) contract ... only on the condition that the first time it is over 30 days delinquent, your firm guarantees to pay the loan off within 15 days of our demand." The letter went on to state "should this be acceptable, then, please sign the attached copy and return to me and upon my receipt of your acknowledgment, the contract will be processed." Coker placed his signature on the letter without qualification and acknowledged the guarantee letter and returned a copy to Colonial as requested.

Colonial accepted the Lady Diane insurance contract assignment. Upon acceptance of the contract, Colonial deposited $16,162.51 into The Insurance Center's account at the bank on March 6, 1981, and applied the remaining $2,485.35 to pay "another loan of Lady Diane, Inc." Although it is clear that the funds advanced by the bank were to finance the premium due on the insurance contract, it is disputed by the parties whether the loan of the premium from the bank was to Lady Diane, Inc., or to Insurance Concepts.

In addition to the February 27th guaranty executed by Coker, Coker on December 10, 1980, had executed a pre-printed guaranty agreement drafted by Colonial which obligated Coker to personally guarantee indebtedness of Insurance Concepts owed to Colonial.

Sometime in March 1981, Coker allegedly severed his association with Insurance Concepts, and became the sole shareholder of Insurors of Mobile. Originally, Insurors of Mobile was incorporated by Insurance Concepts, with Insurance Concepts owning 51 per cent of Insurors of Mobile, and Coker owning the remaining 49 per cent. Apparently, Coker purchased the interest of Insurance Concepts in March 1981, to become the sole owner of Insurors of Mobile.

Lady Diane, Inc., defaulted on its payments on the note financing the premiums for the insurance policy, and Colonial made demand upon Coker and Insurors of Mobile to pay off the Lady Diane loan pursuant to the 1981 guaranty agreement. Coker refused to satisfy the balance owing on the note, and Colonial brought suit against Coker and Insurors of Mobile to recover the outstanding indebtedness. After learning of the existence of the 1980 guaranty agreement through discovery, Colonial asserted that Coker and Insurors of Mobile were liable by virtue of the 1980 and 1981 guaranty agreements. Upon discovery that United States Central Underwriters Agency of Alabama, Inc., had agreed to purchase the assets of Insurors of Mobile, Colonial amended its complaint to add United States Central as a party defendant.

On November 5, 1984, after considering the briefs and arguments of counsel, along with the evidence before the court, the trial judge granted Coker's and Insurors of Mobile's motion for summary judgment. Colonial's Rule 59, A.R.Civ.P., motion to vacate the judgment was denied by operation of law pursuant to Rule 59.1, Ala.R.Civ.P., whereupon Colonial appealed to this Court.

The issue to be resolved on appeal is whether Colonial produced a scintilla of evidence giving rise to a genuine issue of material fact as to whether Coker and Insurors of Mobile are liable for the outstanding indebtedness arising from the Lady Diane, Inc., insurance contract by virtue of the 1980 and 1981 guaranty agreements executed by Coker. We are of the opinion that the trial court correctly granted summary judgment for Insurors of Mobile, but erred in granting summary judgment for Coker.

There is a material issue of fact presented by the evidence before us as to whether the guaranty agreement executed by Coker on December 10, 1980, made him personally liable for the indebtedness owed to Colonial as a result of the Lady Diane contract. The portion of the 1980 guaranty agreement in dispute reads as follows:

GUARANTY AGREEMENT

WHEREAS Insurance Concepts, Inc. hereinafter referred to as the debtor, is indebted to, or has applied for a loan, or extension of loan to be made by City National Bank of Birmingham, hereinafter referred to as the Bank, which debt, loan or extension, is evidenced by note or notes of the debtor now held by the Bank, or executed to the Bank contemporaneously herewith.

In addition to said indebtedness, the debtor has applied to the Bank for a line of credit. It is agreed that future advances on said line of credit shall be evidenced by notes on form now in general use by the Bank executed by the debtor to the Bank, and this guaranty agreement shall cover all such loans or advances made in the future, as well as said note or notes first above described. It is also agreed that all indebtedness of the debtor arising out of rediscounts or out of endorsement liability, shall be covered hereby and included in the indebtedness guaranteed hereby. It is the intention and agreement of the undersigned that this guaranty shall cover and guarantee payment of all such loans, advances, rediscounts, endorsement liability and other indebtedness at any time owing by the debtor to the Bank. The term "the indebtedness" or "said indebtedness" as hereinafter used shall be taken to refer to all such future loans or advances made to the debtor by the Bank, as well as any and all rediscounts, endorsement liability and other indebtedness at any time owing by the debtor to the Bank. This guaranty agreement is made in order to induce the Bank to advance to the debtor part or all of the credit evidenced by said note or notes of the debtor held by the Bank, as well as all of such line of credit which the Bank may hereafter advance to the debtor. All of said loans, notes, and advances made on said line of credit are hereinafter referred to as "the indebtedness" or as "said indebtedness."

This guaranty agreement shall remain in full force and effect until terminated in writing signed and delivered by the undersigned and acknowledged by the Bank, and even after any such termination, shall be and remain effective as to obligations of the debtor then outstanding incurred as a part of said line of credit. This guaranty shall not be construed as having become terminated by payment in full of the debtor's obligations to the Bank, if, thereafter, in the absence of written termination by the undersigned, the debtor obtains new loans or advances from the Bank....

WHEREAS, the Bank has agreed to make said loan or loans, or increase or extend the same, (as the case may be) above referred to, provided the undersigned will execute this guaranty agreement, which the undersigned has or have agreed to do.

NOW, THEREFORE, in consideration of the premises, and in order to carry out the agreement of the undersigned to execute this guaranty as an inducement to the Bank to make said loan, or loans, or increase or extend the same, (as the case may be) or to grant said line of credit and of other valuable considerations, the undersigned does or do hereby unconditionally guarantee the payment to the Bank, its successors and assigns, of said indebtedness.

The undersigned hereby further agrees (or if more than one, the undersigned jointly and severally agree) to pay said indebtedness and interest upon demand at any time after maturity thereof, or any part thereof, or of any renewal of same....

Although Coker denies having signed the agreement, his signature appears at the bottom of the document.

If Coker in fact executed the above contract of guaranty, then Coker undertook unconditionally to pay the debt of Insurance Concepts if Insurance Concepts, as principal, did not. The document is an absolute guarantee. Huckaby v. McConnon & Co., 213 Ala. 631, 105 So. 886 (1925). Because it is an absolute guarantee, Colonial, as creditor, may pursue its remedy against Insurance Concepts, as principal, or Coker, as guarantor, at Colonial's option. Ehl v. J.R. Watkins Medical Co., 216 Ala. 69, 112 So. 426 (1927).

However, Coker asserts that, as a matter of law, the 1980 guaranty agreement does not obligate him to repay the disputed indebtedness. Coker correctly points out that "a guarantor is bound only to the extent and in the manner stated in the contract of guarantee." Pate v. Merchants Nat. Bank of Mobile, 428 So.2d 37, 39 (Ala.1983) (quoting Furst v. Shows, 215 Ala. 133, 137, 110 So. 299, 302 (1926)).

Coker contends that...