Jernigan Auto Parts, Inc. v. Commercial State Bank

• Court: Georgia Court of Appeals
• Writing for the Court: BEASLEY; McMURRAY, P.J., and SOGNIER
• Citation: Jernigan Auto Parts, Inc. v. Commercial State Bank, 367 S.E.2d 250, 186 Ga.App. 267 (Ga. App. 1988)
• Decision Date: 08 March 1988
• Docket Number: Nos. 75708,75709,s. 75708
• Parties: JERNIGAN AUTO PARTS, INC. et al. v. COMMERCIAL STATE BANK. CUMMINGS et al. v. COMMERCIAL STATE BANK.

Page 250

367 S.E.2d 250

186 Ga.App. 267

JERNIGAN AUTO PARTS, INC. et al. v. COMMERCIAL STATE BANK.

CUMMINGS et al. v. COMMERCIAL STATE BANK.

Nos. 75708, 75709.

Court of Appeals of Georgia.

March 8, 1988.

Ronnie Joe Lane, Donalsonville, for appellants.

Julian Webb, Donalsonville, for appellee.

BEASLEY, Judge.

These companion appeals are from the grants of summary judgment to Commercial State Bank in its suits for the collection of unpaid balances on four promissory notes and enforcement of a personal guaranty.

Case No. 75708

In September 1981, Steve Jernigan, individually and d/b/a Jernigan Auto Parts, Inc., purchased an auto parts business. The terms of the purchase were payment of $80,000 to Commercial State Bank for the credit of the sellers, a note for $10,000 to the guarantor for the debt of the sellers to the bank, and payment of all other debts of the seller relating to the business except the sellers' debt to the bank.

About a year after the purchase, Jernigan applied to the bank for an $180,000 loan, offering collateral and personal endorsements by himself and his wife on the note from the corporation, Jernigan Auto Parts, Inc., plus a personal guaranty on the note by Jernigan's father-in-law, John J. Cummings, Jr. The loan was made and the borrowers disbursed the proceeds.

The terms of repayment of the $180,000 note were 180 monthly payments of $2,600 each, principal and interest. Beginning in January, 1985 until October, 1985 the note was periodically delinquent. On July 30, 1986, Cummings made a payment of $14,646.38 reducing the balance on the note to $140,946.91. On August 1, 1986, the bank took another note for a loan of $9,513.22.

The Jernigans sold the auto parts business and then in September made payments to reduce the indebtedness on the $180,000 note to $93,660.55 and on the $9,513.22 note to $9,357.09. The borrowers defaulted on the notes and the bank filed suit against the principal auto parts business, the Jernigans individually as the endorsers and Cummings as the guarantor on the first note to collect the unpaid balances plus interest and attorney fees.

The defendants responded to the suit and lodged a counterclaim asserting that the notes and the guaranty were obtained by the bank's fraud and misrepresentation. They alleged that the bank, through its corporate officer Penn, convinced the Jernigans to sell their gas station and purchase the auto parts business which the bank had foreclosed upon, that Penn represented that the business was a good one, that the Jernigans should buy it, that any financing needed could be arranged, and that Penn convinced them to pay all the debts owed to the bank by the prior owners including one to a "favored depositor" of the bank. They further alleged that Penn had control of the books, bank statements, and daily deposits of the business, knew the financial condition of the business and deliberately withheld that information from them. They also claimed that Penn promised Cummings that the bank needed his guarantee only to get the loan approved, that the guaranty would be cancelled after two years, that Cummings' guaranty was needed in order to release Penn from liability on prior notes connected with the business, and that the bank deliberately concealed the full scope of its actions and conduct from them until Steve Jernigan obtained knowledge of the "fraud and scheme" by looking through the bank's file.

The bank moved for summary judgment submitting, inter alia, the affidavit of its president, Hanna, which in lengthy detail outlined the execution and terms of the notes and the guaranty and the Jernigans' business transactions relative to the notes. The affidavit acknowledged defendants' allegations of fraud and misrepresentation and stated that the tax return for the first year's operation of the auto parts business showed it to be a "going concern with assets of $176,974.00 as of September 25, 1981, the approximate date of acquisition by the Jernigans, $163,864.28 as of December 31, 1981 after Jernigan had had the business for a little more than three months, and the income and expenses for the first eight months show a gross profit of $60,000.00"; that though defendants contended that Penn convinced them to sell their gasoline station and purchase the auto parts business, the Jernigans continued to operate the service station for approximately two months after they bought the auto parts business; that there was no promise to Cummings that his guaranty would be cancelled after two years; that there was no such two-year limitation in the guaranty, which was clear and unambiguous; and that there was nothing in the bank's records to indicate an oral variation from the written contract.

The affidavit further stated that the August 1, 1986 note was made for the purpose of renewing and paying a part of the principal of two previous notes of Jernigan Auto Parts, Inc., that this second note was made and signed more than two years after Penn's connection with the bank and almost ten months after Jernigan's alleged discovery of the fraud, and that the Jernigans made one payment of $300 on the note on September 16, 1986.

The bank also submitted Penn's affidavit. It stated that he had no connection with the bank since May 10, 1984; that he recalled Jernigan's application to the bank for the $180,000 loan, the collateral that was offered; that Jernigan said that his father-in-law, Cummings, would guaranty the loan or endorse the note; that Cummings himself came to talk to Penn about the loan, said he would guarantee payment, and signed a guaranty agreement; and that at no time did he tell Cummings that his guaranty would be for only two years. It further stated that the loan was approved by the bank's loan committee; that the loan papers were freely and voluntarily signed by the Jernigans and Cummings without any persuasion on the part of anyone; that he concealed no facts from the Jernigans; that the Jernigans were in control of the books of the corporation; that Mrs. Jernigan wrote and signed all checks for the corporation; that at the time of his resignation from the bank, payments on the note were current; that Jernigan's sale of the service station was an act of his own, two months or more after going into the auto parts business; that insofar as he knew, the sale had nothing to do with Jernigan's entry into another business; that when the Jernigans sought the $180,000 loan in September 1982, they had operated the auto parts business for about a year, either knew or were presumed to know what they were doing, and that there was "no concealment of any facts by anyone. They had them."

In opposition to the motion was Steve Jernigan's affidavit which tracked the allegations of Penn's misrepresentation and fraud contained in the answer and counterclaim.

The trial court granted summary judgment to the bank against all defendants for the unpaid principal on the notes, past and future interest, attorney fees, and costs.

Defendants contend that there remain questions of fact, citing general principles of summary judgment law. They do not show just what material facts remain in dispute. They simply state that Hanna's affidavit is a mere recital of the complaint, answer and counterclaim along with Hanna's opinions as to their significance in this case and argue that opinion evidence alone is not sufficient to authorize the grant of summary judgment. They further argue that Penn's affidavit directly addresses and opposes the facts set out in the pleadings and affidavit of Steve Jernigan and therefore goes only to the weight of the evidence.

It is undisputed that the note and guaranty were executed, that the funds were received, and that there were unpaid balances on the note, the amounts of which are also not in dispute. Unless the evidence on summary judgment raised a genuine issue of material fact as to fraud on the part of Penn in regard to execution of the notes and the guaranty such as would render the notes voidable, the bank was entitled to judgment as a matter of law.

1. Although bank president Hanna's affidavit included many of the allegations in the pleadings, it also included Hanna's statement that he was familiar with the bank records relative to the notes and that he was personally acquainted with the borrowers. It thus was not deficient for the reasons urged. See Murphy v. First Nat. Bank, 182 Ga.App. 788, 789(6), 357 S.E.2d 266 (1987); see also Georgia Grain, etc., Co. v. First Ga. Bank, ...