Reeves Cedarhurst Development Corp. v. First American Federal Sav. and Loan Ass'n

• Decision Date: 30 October 1992
• Citation: 607 So.2d 180
• Parties: REEVES CEDARHURST DEVELOPMENT CORPORATION v. FIRST AMERICAN FEDERAL SAVINGS AND LOAN ASSOCIATION. 1910848.
• Court: Alabama Supreme Court

Page 180

607 So.2d 180

REEVES CEDARHURST DEVELOPMENT CORPORATION v. FIRST AMERICAN FEDERAL SAVINGS AND LOAN ASSOCIATION.

1910848.

Supreme Court of Alabama.

Oct. 30, 1992.

George M. Beason, Jr. of Martinson, Beason & Hooper, P.C., Huntsville, for appellant.

John D. Snodgrass and Daniel M. Wilson of Balch & Bingham, Huntsville, and M. Stanford Blanton, Birmingham, for appellee.

HORNSBY, Chief Justice.

The plaintiff, Reeves Cedarhurst Development Corporation ("RCDC"), appeals from a summary judgment in favor of the defendant, First American Federal Savings and Loan Association ("First American"). We affirm.

On June 27, 1989, RCDC borrowed $790,000 from First American to use in constructing condominium units. In connection with the loan, RCDC executed a one-year promissory note providing for quarterly interest payments. The note contained a default provision stating that if RCDC failed to timely pay the interest then, the entire debt would, at the option of First American, become due and payable. As security for the loan, RCDC mortgaged real estate upon which it was building condominiums--lots located at 56, 57, 58, 59, 60, and 61 Revere Way, in Huntsville, Alabama.

RCDC proceeded to build condominiums on each of these lots. Before the events giving rise to this action, RCDC had sold two of the condominiums. Although RCDC's promissory note did not contain a provision for partial releases of the mortgaged property, First American agreed to a partial release on each of these sales. Each release was conditioned upon RCDC's contribution of all its sales proceeds, after closing costs, to First American to be applied against the principal and accrued interest on RCDC's note.

RCDC did not repay the loan when it matured on June 27, 1990. As of November 1, 1990, the loan had a principal balance of $501,650.00. On November 1, 1990, RCDC contracted to sell a third condominium, at 57 Revere Way, to Mr. and Mrs. Hattox, closing to be held on November 16, 1990.

On November 6, 1990, the chairman of First American, Morris Anderson, sent a letter notifying RCDC that First American would release its lien against 57 Revere Way for $170,702.01. On November 13, 1990, the chairman of RCDC, George Ragsdale, sent a letter to First American proposing a release price of $148,339.01. Ragsdale's letter also stated that "any excess proceeds from the sale, [could] be applied against the principal of the loan, provided that the amount of such excess funds [could] be drawn by RCDC in the future against the loan for costs incurred in the remaining units sold." Ragsdale acknowledged in this letter that RCDC's note was in default. For this reason, he conditioned RCDC's delivery of a closing statement for the sale of 57 Revere Way on First American's agreement to accept RCDC's proposed release price of $148,339.01 and to extend the maturity date of RCDC's note to June 27, 1991. First American rejected RCDC's proposed release price in a letter from Anderson dated November 15, 1990. Nonetheless, Anderson agreed to extend the maturity date on RCDC's note to June 27, 1991, regardless of whether 57 Revere Way sold, as long as RCDC paid the accrued interest on the note and Ragsdale executed renewal documents "the next time he [was] in Huntsville and it [was] convenient for him to do so."

Notwithstanding First American's letter rejecting RCDC's proposed release price, on November 16, 1990, First American executed a release of 57 Revere Way for $148,339.01. First American also deposited the excess proceeds from the sale, $24,002.93, in RCDC's construction account as proposed by RCDC in its letter of November 13, 1990. Also on November 16, 1990, Anderson sent Ragsdale a letter stating that, prior to renewing RCDC's note, First American would need a corporate resolution authorizing Ragsdale to borrow on behalf of RCDC and a copy of RCDC's current financial statement. Ragsdale never supplied these documents or executed the renewal documents necessary to extend the maturity date on the note. Further, on December 31, 1990, RCDC failed to make a quarterly interest payment.

On January 9, 1991, Anderson sent a letter to Ragsdale notifying him that RCDC's note was past due and notifying him that First American would foreclose on the remaining Revere Way lots if the note was not paid in 30 days. Ragsdale did not respond to this letter. On April 5, 1991, First American foreclosed on the property.

RCDC filed this action on April 8, 1991, alleging breach of contract, fraud, and wrongful foreclosure. First American filed a motion for summary judgment. The trial court granted the motion and RCDC appealed.

"In reviewing the disposition of a motion for summary judgment, we utilize the same standard as the trial court in determining whether the evidence before [it] made out a genuine issue of material fact" and whether the movant was "entitled to a judgment as a matter of law." Bussey v. John Deere Co., 531 So.2d 860, 862 (Ala.1988) (citing Chiniche v. Smith, 374 So.2d 872 (Ala.1979)); Rule 56(c) Ala.R.Civ.P. When the movant has carried the burden of making a prima facie showing, by admissible evidence, that there is no genuine issue of material fact, the party opposing the summary judgment motion then has the burden of presenting substantial evidence creating 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. "Substantial 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); Ogle v. Long, 551 So.2d 914, 915 (Ala.1989). Our review is further subject to the caveat that this Court must review the record in a light most favorable to the nonmovant, resolving all reasonable doubts against the movant. Hanners v. Balfour Guthrie, Inc., 564 So.2d 412, 413 (Ala.1990); Wilson v. Brown, 496 So.2d 756, 758 (Ala.1986); Harrell v. Reynolds Metals Co., 495 So.2d 1381, 1383 (Ala.1986).

I. Breach of Contract

RCDC argues that the summary judgment for First American was improper as to its breach of contract claim because, it says, the evidence indicated that the parties had a binding agreement to extend the maturity date on RCDC's note to June 27, 1991. In Ferlesie v. Cook, 201 Ala. 571, 78 So. 915 (1918), this Court held that a plaintiff could not recover in a breach of contract action where "it was distinctly understood that the contract was not to become effective unless" another executed it and the other had not done so. Ferlesie, 201 Ala. at 572, 78 So. at 916. Anderson's letter dated November 15, 1990, clearly stated that Ragsdale's execution of renewal documents and RCDC's payment of accrued interest were conditions precedent to the formation of a contract to extend the maturity date on RCDC's note. Anderson's letter dated November 16, 1990, indicated that, also as a condition precedent to the renewal of RCDC's note, Ragsdale needed to provide a copy of a corporate resolution authorizing him to borrow on behalf of the corporation and a copy of RCDC's current financial statement. RCDC does not dispute the fact that Ragsdale never executed the renewal documents, or provided copies of the corporate resolution or the financial statement. RCDC also does not dispute the fact that it failed to make an interest payment on December 31. Accordingly, we conclude that First American's summary judgment was proper as to RCDC's breach of contract claim.

II. Wrongful Foreclosure

RCDC argues that the summary judgment for First American was improper as to its claim alleging wrongful foreclosure. A mortgagor has a wrongful foreclosure action whenever a mortgagee uses the power of sale given under a mortgage for a purpose other than to secure the debt owed by the mortgagor. Johnson v. Shirley, 539 So.2d 165, 168 (Ala.1989); Paint Rock Properties v....