DIAMOND v. BANK of Ala.

Decision Date19 February 2010
Docket Number1051033 and 1051034.
Citation43 So.3d 552
PartiesRichard A. DIAMOND v. BANK OF ALABAMA. Bank of Alabama v. Premier Business Centers, Inc., Richard A. Diamond, and O. William Evans.
CourtAlabama Supreme Court

OPINION TEXT STARTS HERE

COPYRIGHT MATERIAL OMITTED.

W. Scott Simpson of Batchelor & Simpson, P.C., Birmingham, for appellant/cross-appellee Richard A. Diamond.

Romaine S. Scott III of Haskell Slaughter Young & Rediker, LLC, Birmingham, for appellee/cross-appellant Bank of Alabama.

Richard W. Lewis of Austill, Lewis & Simms, P.C., Birmingham, for appellees Premier Business Centers, Inc., and O. William Evams.

PARKER, Justice.

Richard A. Diamond appeals and Bank of Alabama ("BOA") cross-appeals, both seeking relief from a judgment of the Jefferson Circuit Court awarding BOA $200,000 on a promissory note and awarding BOA $132,601.67 in attorney fees in an action brought by BOA against Diamond and others. Diamond disputes the trial court's holding that Diamond must reimburse BOA for payments BOA made pursuant to a letter of credit. BOA challenges the trial court's failure to award BOA interest as part of its judgment against Diamond, Premier Business Centers, Inc. ("PBC"), and O. William Evans.1 Because BOA was entitled to the reimbursement of payments it made pursuant to the letter of credit, we affirm the judgment of the trial court in Diamond's appeal (case no. 1051033). Because in BOA's cross-appeal (case no. 1051034) we hold that BOA was entitled to interest on the moneys advanced pursuant to the letter of credit, we remand the case for the trial court to determine the appropriate amount of interest due BOA.

Background and Procedural Posture

Diamond was a director of HQ Birmingham, Inc., the name by which PBC was formerly known, and Evans was its president. When the name was changed to PBC,2 Diamond became the president and 50% owner of PBC, Evans owned 45% of the stock of PBC, and Evans's wife, Denise, owned 5%.

Effective April 7, 2003, HQ Birmingham, Inc., entered into a lease agreement with Gateway Alabama Properties, Inc., pursuant to which HQ Birmingham acquired 19,984 square feet of rentable space in suite no. 400, One Chase Corporate Center, in Birmingham. HQ Birmingham divided and sublet the office space to small businesses and provided other services to the sublessees. The lease with Gateway was executed by Evans as then president of HQ Birmingham. It required no rental payments for the first nine months, and HQ Birmingham was to provide a standby letter of credit for Gateway's benefit to secure HQ Birmingham's obligations and the rental payments when due.

On December 1, 2003, BOA, on application by "Premier Business Centers, Inc. f/k/a HQ Birmingham, Inc.," issued a $200,000 standby letter of credit for the benefit of Gateway Alabama Properties, Inc. In its commitment letter, BOA advised Diamond, who was negotiating the terms of the letter of credit on behalf of PBC, that BOA required collateral in the form of a blanket lien on furniture, fixtures, and equipment and joint and personal guaranties by Diamond and Evans. The commitment letter also provided that the letter of credit was to be in the amount of $200,000 until August 1, 2004, and in the amount of $120,000 from August 1, 2004, through August 1, 2005. The irrevocable letter of credit actually issued by BOA, however, was in the amount only of $200,000. It reads, in pertinent part, as follows:

"We [BOA] hereby establish our Clean Unconditional Irrevocable Transferable Letter of Credit No. ____ (the `Letter of Credit') in favor of Gateway Alabama Properties, Inc., a California corporation, and its successors and permitted assigns (collectively, the `Beneficiary') for an aggregate amount not to exceed the amount indicated above [$200,000], expiring at office located at 2340 Woodcrest Place, Suite 200, Birmingham, AL 35209 ATTN: Lester O. Hamiter with our close of business on August 1, 2004 (the `Expiry Date').

"Funds under this Letter of Credit are payable in immediately available funds of [BOA] (`Issuer') to Beneficiary upon presentation to [BOA] of Beneficiary's original of the Letter of Credit and a sight draft drawn on [BOA], in the form attached as Exhibit `A' hereto, or upon presentation to Issuer of Beneficiary's original of the Letter of Credit and a demand for payment, not to exceed $200,00.00, stating that: `Beneficiary hereby demands payment of $__________ [a sum not to exceed $200,000.00] under this Letter of Credit.'

"[BOA] shall honor the Letter of Credit against conforming documents without inquiry as to the incumbency or authority of the party executing the sight draft on behalf of Beneficiary, whether or not Applicant disputes the incumbency or authority of the party executing the sight draft on behalf of Beneficiary.

"Multiple demands for payment may be made hereunder.

"It is a condition of this Letter of Credit that it shall be automatically extended without amendment for an additional period of one (1) year from the present or each future Expiry Date, unless, at least ninety (90) days prior to such Expiry Date, we send you a notice in writing by certified mail, overnight courier or hand delivery at the above address, that we elect not to renew this Letter of Credit for such additional period."

In association with the letter of credit, PBC executed a promissory note to BOA agreeing to pay up to $200,000 conditioned on future advances "upon presentment of irrevocable commercial letter of credit issued to Gateway Alabama Properties, Inc." Other provisions of the note require the payment of "interest on the outstanding principal balance," the payment of monthly accrued-interest payments "beginning 01/01/2004," and the payment of principal "at maturity on 08/01/2004 if called upon." The note contains the following "ADDITIONAL TERMS":

"THIS NOTE IS SECURED BY BLANKET LIEN ON FURNITURE, FIXTURES AND EQUIPMENT.

"THIS NOTE IS SUPPORTED BY IRREVOCABLE LETTER OF CREDIT DATED 12/01/2003 TO GATEWAY ALABAMA PROPERTIES, INC.

"THIS NOTE IS FURTHER SUPPORTED BY UNLIMITED PERSONAL GUARANTY AGREEMENTS BY RICHARD A. DIAMOND AND O. WILLIAM EVANS."

(Capitalization in original.)

Page 2 of the note contains additional conditions that are incorporated by virtue of the following statement in bold print located on page 1 immediately above the signature block: "SIGNATURES: I AGREE TO THE TERMS OF THIS NOTE (INCLUDING THOSE ON PAGE 2)." (Capitalization in original.) Among the terms on page 2 is one that states that "interest accrues on the principal remaining unpaid from time to time, until paid in full. If I receive the principal in more than one advance, each advance will start to earn interest only when I receive the advance." Another relevant provision is titled "OBLIGATIONS INDEPENDENT" and states, in part:

"Any extension of new credit to any of us, or renewal of this note by all or less than all of us will not release me from my duty to pay it. (Of course, you are entitled to only one payment in full.) I agree that you may at your option extend this note or the debt represented by this note, or any portion of the note or debt, from time to time without limit or notice and for any term without affecting my liability for payment of the note."

The note was signed by "Premier Business Centers, Inc., Richard A. Diamond, President."

Diamond, as then president of PBC, also executed a line-of-credit agreement on behalf of PBC. That agreement identifies only PBC as the borrower, stating that "`I' includes each borrower above, jointly and severally." The lender is identified as BOA, stating that "`You' means lender, its successors and assigns." The agreement provides:

"You [BOA] have extended to me [PBC] a line of credit in the AMOUNT of TWO HUNDRED THOUSAND AND 00/100'S $200,00.00. You will make loans to me from time to time until ... 08/01/2004. Although the line of credit expires on that date, I will remain obligated to perform my duties under this agreement so long as I owe money advanced according to the terms of this agreement, as evidenced by any note or notes I have signed promising to repay these amounts.

"....

"AMOUNT: This line of credit is OBLIGATORY: You may not refuse to make a loan to me under this line of credit unless one of the following occurs:... e. UPON PRESENTMENT OF IRREVOCABLE COMMERCIAL LETTER OF CREDIT ISSUED TO GATEWAY ALABAMA PROPERTIES, INC. "PROMISSORY NOTE: I will repay any advances made according to this line of credit agreement as set out in the promissory note, I signed on 12/01/2003.... The note sets out the terms relating to maturity, interest rate, repayment and advances. If indicated in the promissory note, the advances will be made as follows: UPON PRESENTMENT OF IRREVOCABLE COMMERCIAL LETTER OF CREDIT ISSUED TO GATEWAY ALABAMA PROPERTIES, INC.

"RELATED DOCUMENTS: I have signed the following documents in connection with this line of credit and note(s) entered into in accordance with this line of credit: security agreement dated 12/01/2003; guaranty dated 12/01/2003.

"MISCELLANEOUS: This line of credit may not be changed except by a written agreement signed by you and me. The law of the state in which you [BOA] are located will govern this agreement. Any term ... contrary to applicable law will not be effective, unless the law permits you and me to agree to such a variation."

(Capitalization in original; emphasis added.)

In addition to the note and the line-of-credit agreement, Diamond and Evans each provided a "guaranty" document personally guaranteeing the full and prompt payment when due of debts and obligations described in the identical guaranty documents executed by Diamond and Evans on December 1, 2003. The guaranty documents identify PBC as the borrower and BOA as the lender. They state that "the Undersigned guarantees to Lender the payment and performance of the debt, liability or obligation of Borrower to...

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