Eagerton v. Vision Bank, 1101045.

• Decision Date: 29 June 2012
• Docket Number: 1101045.
• Citation: 99 So.3d 299
• Parties: Fred G. EAGERTON and Nancy Eagerton v. VISION BANK.
• Court: Alabama Supreme Court

99 So.3d 299

Fred G. EAGERTON and Nancy Eagerton

v.VISION BANK.

1101045.

Supreme Court of Alabama.

April 6, 2012.

Rehearing Denied June 29, 2012.

Joshua P. Myrick of Stankoski, L.L.P., Fairhope; and J. Doyle Fuller and Susan G. Copeland of Fuller & Copeland, Montgomery, for appellants.

Jonathan M. Lieb of McDowell Knight Roedder & Sledge, L.L.C., Mobile, for appellee.

BOLIN, Justice.

Fred G. Eagerton and Nancy Eagerton appeal from a summary judgment in favor of Vision Bank (“the bank”) in the bank's action seeking enforcement of the Eagertons' obligations under certain guaranty contracts. We reverse and remand.

I. Facts and Procedural History

Dotson 10s, LLC, is an Alabama limited liability company organized to operate the Rock Creek Tennis Club located at 142 Clubhouse Drive in Fairhope. John W. Dotson, Jr., and Elizabeth E. Dotson (hereinafter sometimes collectively referred to as “the Dotsons”) are the sole members of Dotson 10s.

On December 9, 2007, Dotson 10s executed a “Multipurpose Note and Security Agreement” with the bank in the amount of $550,677.53 (hereinafter referred to as “the original loan”); the maturity date of the original loan was December 9, 2010. In conjunction with the original loan, the bank obtained unlimited personal guaranties from both John W. Dotson, Jr., and Elizabeth E. Dotson. The bank also obtained limited personal guaranties from both Fred G. Eagerton and Nancy Eagerton; the Eagertons are Elizabeth Dotson's parents.¹ The original loan was secured by a mortgage on the real property located at 142 Clubhouse Drive (hereinafter referred to as “the first mortgage”).²

On December 11, 2008, Dotson 10s executed a subsequent “Multipurpose Note and Security Agreement” with the bank in the amount of $222,513.56 (hereinafter referred to as “the second loan”); this loan is identified by the bank as loan number 302669.³ The second loan was guaranteed solely by the Dotsons; the Eagertons neither were parties to the transaction involving the second loan, nor did they execute personal guaranties for the repayment of the second loan. The second loan was secured by what is titled a “2nd Real Estate Mortgage” on the same real property located at 142 Clubhouse Drive (hereinafter referred to as “the second mortgage”).

In April 2009, the bank declared the original loan and the second loan in default and accelerated the balances due under both loans; Dotson 10s failed to pay the balances. The bank filed a breach-of-contract action in the Baldwin Circuit Court against Dotson 10s, as the primary obligor of the original loan and the second loan; the Dotsons, as personal guarantors of the original loan and the second loan; and the Eagertons, as personal guarantors of the original loan.

On May 28, 2009, Dotson 10s filed a petition for reorganization under Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the Southern District of Alabama (“the bankruptcy court”). On August 25, 2009, Dotson 10s filed with the bankruptcy court its proposed Chapter 11 plan of reorganization, which provided, in part, that the original loan and the second loan would be combined (hereinafter referred to as “the consolidated loan”) and paid in full. The proposed plan states, in pertinent part:

“This class consists of the Allowed Secured Claim of Vision Bank, which claim is secured by 6.5 acre parcel where the clubhouse, tennis courts and swimming pool exist. The two notes comprising this claim and totaling approximately $823,411 will be combined and paid at 6% in equal monthly installments of $5,900 beginning 30 days after confirmation. The notes will be paid in full within 240 months.... Vision Bank will retain its lien on the subject property until the debt is paid in full.”

(Emphasis added.)

On December 1, 2009, the bankruptcy court conducted a confirmation hearing regarding the proposed reorganization plan; the Dotsons and certain bank representatives were present at that hearing. Before the hearing, the bank representatives negotiated additional terms that were favorable to the bank. On December 10, 2009, the bankruptcy court entered an order confirming the plan of reorganization, as amended. The order states, in pertinent part:

“(2) The secured claim of Vision Bank is determined to be $795,908.84 as of December 1, 2009; (3) [Dotson 10s] shall pay the secured claim to Vision Bank in equal monthly payments of $6,172.64 per month beginning January 1, 2010. Interest is calculated at 7% per annum. The debt to Vision Bank shall mature and become fully due and payable on January 1, 2012; (4) [Dotson 10s] shall have no grace period. If any payment is not paid on or before the due date, the automatic stay shall terminate and Vision Bank is authorized to immediately foreclose its mortgage without further order of this Court....” ⁴

(Emphasis added.) The bank thereafter assigned a new loan number to the consolidated loan.

In March 2010, Dotsons 10s defaulted under the bankruptcy plan, and the bankruptcy court entered an order dismissing the bankruptcy action. On May 12, 2010, the bank conducted a foreclosure sale of the real property pursuant to the bankruptcy court's order set out above.⁵ The bank purchased the real property for $600,000 and applied the proceeds entirely to the consolidated loan.

On July 15, 2010, the Baldwin Circuit Court (hereinafter referred to as “the trial court”), in response to a motion for a summary judgment filed by the bank, entered a partial summary judgment in favor of the bank against Dotson 10s but denied the motion as to the Eagertons. The bank, thereafter, filed another motion for a “final partial summary judgment” against the Eagertons, arguing that the Eagertons were responsible under their guaranty contracts for the deficiency remaining on the consolidated loan after allocation of the foreclosure proceeds to that loan. Specifically, the bank argued that because the original loan represented 71.07% of the consolidated loan, the Eagertons should be liable for 71.07% of the balance remaining on the consolidated loan after application of the foreclosure proceeds, as well as 100% of the interest, attorney fees, etc. The Eagertons moved for a summary judgment as well, arguing as a defense a material alteration of their guaranty contracts. On May 24, 2011, the trial court, apparently relying on the bank's pro rata theory, entered a partial summary judgment in favor of the bank and against the Eagertons in the amount of $208,906.40. The trial court certified its judgment as final pursuant to Rule 54(b), Ala. R. Civ. P., specifically reserving jurisdiction to determine at a later date the appropriate amount of attorney fees and costs owed to the bank, if any, relating to its collection efforts. ⁶ The Eagertons appeal.⁷

II. Standard of Review and Applicable Law

“ ‘This Court's review of a summary judgment is de novo. Williams v. State Farm Mut. Auto. Ins. Co., 886 So.2d 72, 74 (Ala.2003). We apply the same standard of review as the trial court applied. Specifically, we must determine whether the movant has made a prima facie showing that no genuine issue of material fact exists and that the movant is entitled to a judgment as a matter of law. Rule 56(c), Ala. R. Civ. P.; Blue Cross & Blue Shield of Alabama v. Hodurski, 899 So.2d 949, 952–53 (Ala.2004). In making such a determination, we must review the evidence in the light most favorable to the nonmovant. Wilson v. Brown, 496 So.2d 756, 758 (Ala.1986). Once the movant makes a prima facie showing that there is no genuine issue of material fact, the burden then shifts to the nonmovant to produce “substantial evidence” as to the existence of a genuine issue of material fact. Bass v. SouthTrust Bank of Baldwin County, 538 So.2d 794, 797–98 (Ala.1989); Ala.Code 1975, § 12–21–12.’ ”

McKerall v. Kaiser, 60 So.3d 288, 290 (Ala.2010) (quoting Dow v. Alabama Democratic Party, 897 So.2d 1035, 1038–39 (Ala.2004)).

“Rules governing the interpretation and construction of contracts are applicable in resolving a question as to the interpretation or construction of a guaranty contract. 38 Am.Jur.2d Guaranty, § 70 (1968); Pate v. Merchants Nat'l Bank, 428 So.2d 37 (Ala.1983); Colonial Bank of Alabama v. Coker, 482 So.2d 286 (Ala.1985). ‘[A] guarantor is bound only to the extent and in the manner stated in the contract of guaranty.’ Pate v. Merchants Nat'l Bank, supra, at 39 (quoting Furst v. Shows, 215 Ala. 133, 137, 110 So. 299, 302 (1926)). When the terms of a contract are unambiguous, it is the court's duty to analyze and determine the meaning of the contract, Pate v. Merchants Nat'l Bank, supra at 39;Birmingham Trust Nat'l Bank v. Midfield Park, Inc., 295 Ala. 136, 138, 325 So.2d 133, 134 (1976); and, when appropriate, those questions may be decided by summary judgment. Williams v. Bank of Oxford, 523 So.2d 367 (Ala.1988); Medley v. SouthTrust Bank, 500 So.2d 1075 (Ala.1986); Colonial Bank v. Coker, supra.... Absent fraud in the inducement, an absolute guaranty will be enforced according to its terms....”

Government St. Lumber Co. v. AmSouth Bank, 553 So.2d 68, 75 (Ala.1989).

III. The Guaranty Contracts

The guaranty contracts executed by the Eagertons are unambiguous, and they expressly provide that the Eagertons agreed to guarantee a very specific “indebtedness.” The pertinent parts of the guaranty contracts state:

“A. If this [box] is checked [as it was by the Eagertons], the Undersigned guarantees to Lender the payment and performance of the debt, liability or obligation of Borrower to Lender evidenced by or arising out of the following: Loan # 78476 and Loan # 67423 and any extensions, renewals or replacements thereof (hereinafter referred to as the ‘Indebtedness').⁸

“B. If this [box] is checked [as it was by the Dotsons], the Undersigned guarantees to Lender the payment and performance of each and every debt, liability and obligation of every type and description which Borrower may now or at any time hereafter owe to Lender ...