Stonegate Bank, Banking Corp. v. TD Bank, N.A.

• Decision Date: 06 January 2015
• Docket Number: No. 13-14000,13-14000
• Parties: STONEGATE BANK, a Florida banking corporation, Plaintiff-Appellant, v. TD BANK, N.A., Defendant-Appellee.
• Court: U.S. Court of Appeals — Eleventh Circuit

STONEGATE BANK, a Florida banking corporation, Plaintiff-Appellant, v. TD BANK, N.A., Defendant-Appellee.

No. 13-14000

UNITED STATES COURT OF APPEALS FOR THE ELEVENTH CIRCUIT

January 6, 2015

[DO NOT PUBLISH]

D.C. Docket No. 0:12-cv-61521-WPD

Appeal from the United States District Court for the Southern District of Florida

Before ED CARNES, Chief Judge, and RESTANI,^* Judge, and ROBRENO,^** District Judge.

ROBRENO, District Judge:

This appeal arises out of a dispute over the meaning of certain provisions within a multi-bank loan Participation Agreement ("Agreement"). Plaintiff-Appellant Stonegate Bank ("Stonegate") owned a 10.7142% participating interest in a construction loan that defaulted in 2011. Defendant-Appellee TD Bank, N.A. ("TD Bank") owned a 28.5714% interest and was also the lead bank in the deal. Upon default, participating banks representing 86.61% of the loan interest voted to sell the loan back to the borrower at a substantial discount. In spite of this supermajority in favor of the sale, Stonegate voted in the minority against it. Stonegate subsequently brought this diversity suit against TD Bank, claiming breach of contract and willful misconduct under the Agreement. In reviewing these claims, the district court found that, although the Agreement provisions at issue were ambiguous, that ambiguity could be resolved by applying Georgia's statutory rules of contract construction. The district court granted summary judgment in favor of TD Bank and Stonegate appealed.

I.

A.

On March 26, 2008, Integrity Bank (Stonegate's predecessor-in-interest) andFairfield Financial Services, Inc. (TD Bank's predecessor-in-interest) entered into the Participation Agreement. Under it, Fairfield, as originating/lead bank, sold to Integrity an undivided, participating 10.7142% interest in a $26,925,557.21 construction loan made to Chaven Investments, LLC ("Chaven"). Chaven borrowed this sum in order to finance the purchase of the Palm Cove Marina in Jacksonville, Florida. In time, and via its predecessor-in-interest, TD Bank acquired a 28.5714% interest in the loan and assumed the mantle of lead bank. At the time of the events relevant to this appeal, a total of thirteen banks owned participation interests in the loan, each bank having executed a separate participation agreement that differed from the others only with respect to the percentage of its participating interest.

On September 12, 2011, after twice receiving extensions on the loan's maturity date, Chaven defaulted. On October 27, 2011, all of the participating banks authorized TD Bank to negotiate a loan sale with Chaven. These negotiations culminated on December 6, 2011, when Chaven sent TD Bank a "best and final" offer to purchase the loan for $9 million. By December 15, 2011, banks representing 86.61% of the loan's total participating interests had voted to approve the sale. However, Stonegate and one other bank voted against it. TD Bank proceeded over these objections and the sale was finalized on December 21, 2011.

On December 29, 2011, TD Bank wired Stonegate $962,659.39, or that portion of the sale proceeds relating to Stonegate's participating interest. Stonegate accepted the payment, which was not conditioned on any acknowledgements or relinquishments of any rights by Stonegate.

Stonegate subsequently brought this diversity suit under Georgia law, claiming breach of contract and willful misconduct by TD Bank under the Agreement. After finding the Agreement plainly ambiguous, the district court applied Georgia's "specific over general" rule of contract interpretation and ruled in TD Bank's favor. Stonegate then appealed to this Court.

B.

Following are sections from the parties' Agreement relevant to this appeal:

8. Obligations of Originating Bank.

Originating Bank shall, until Participating Bank's Participation Interest in the Loan has been repaid in full: (i) hold the original promissory notes and, to the extent actually received by Originating Bank, all other documents evidencing or providing security for the Loan or containing agreements in respect to the sale or repayment of the Loan (hereinafter referred to collectively as the "Loan Documents") for the benefit of itself and Participating Bank . . . .

. . . .

16. Administration of Loan.

(a)

Originating Bank shall, until all amounts payable with respect to Participating Bank's Participation Interest have been paid in full: (i) hold the Note(s) and all other documents evidencing the Loan,guaranteeing or providing security for the Loan or containing agreements with respect to the sale or repayment of the Loan (collectively, the "Loan Documents") for the benefit of Participating Bank and Originating Bank . . . .

(b)

Without the prior written consent of the holders of 75% or more of the outstanding interest in the Loan, Originating Bank shall not: (i) make or consent to any modification, amendment, or termination of any of the material terms or conditions of the Loan Documents (without limiting the foregoing, a "material" term includes the interest rate, the specific collateral pledged, guaranties made, scheduled term and maturity date, required covenants, and like provisions), (ii) make or consent to any release of any guarantor or release modification, substitution or exchange of any of the Collateral given as security for the Loan, (iii) accelerate the maturity date of the Loan; make or consent to any extension or renewal of the Loan; or (iv) commence any foreclosure or other legal action or proceeding for the collection of the Loan.

. . . .

(e)

Upon becoming actually aware of a default by Borrower(s) under any of the Loan Documents or with respect to the Collateral, or any event which, with the giving of notice or passage of time or both, would constitute a default thereunder, Originating Bank immediately shall notify Participating Bank of such default or event, and Originating Bank and Participating Bank shall thereafter attempt to mutually agree upon a course of action within sixty (60) business days. If, within sixty (60) business days a mutually agreeable course of action can not be decided by the holders of 50% or more of the outstanding interest in the Loan, Originating Bank shall (i) accelerate the maturity of the Loan, (ii) demand payment of the loan, and (iii) take appropriate action to collect the Loan.

. . . .

18. Amendment and Modification.

No amendment, change [sic] modification or termination of this Agreement shall be valid or binding upon the parties hereto unless such amendment, change, modification or termination shall be in writing and signed by both parties.

Participation Agmt. ¶¶ 8, 16, 18.

II.

We review¹ the district court's summary judgment decision de novo, applying the same legal standards as below, which includes "constru[ing] the facts and draw[ing] all reasonable inferences in favor of the non-moving party." Bradley v. Franklin Collection Serv., Inc., 739 F.3d 606, 608 (11th Cir. 2014). "Summary judgment is appropriate where there are no genuine issues of material fact and the movant is entitled to judgment as a matter of law." Strickland v. Norfolk S. Ry. Co., 692 F.3d 1151, 1154 (11th Cir. 2012). A court must not engage in "[c]redibility determinations, the weighing of the evidence, and the drawing of legitimate inferences" when deciding a motion for summary judgment. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986). We may, however, "affirm the district court's judgment 'on any ground that finds support in the record.'" Strickland, 692 F.3d at 1154 (quoting Lucas v. W.W. Grainger, Inc., 257 F.3d 1249, 1256 (11th Cir. 2001)).

III.

Stonegate claims the district court erred in three successive ways: (1) it incorrectly held the Agreement to be ambiguous; (2) even if the Agreement were ambiguous, the court failed to properly apply Georgia's rules of contract construction; and (3) even if the court did apply the rules correctly, it failed to consider parol evidence and draw all reasonable inferences in favor of Stonegate. Based on our analysis below, we need only reach the first two arguments.

A.

Under Georgia law,²

[t]he construction of contracts involves three steps. At least initially, construction is a matter of law for the court. First, the trial court must decide whether the language is clear and unambiguous. If it is, the court simply enforces the contract according to its clear terms; the contract alone is looked to for its meaning. Next, if the contract is ambiguous in some respect, the court must apply the rules of contract construction to resolve the ambiguity. Finally, if the ambiguity remains after applying the rules of construction, the issue of what the ambiguous language means and what the parties intended must be resolved by a jury.

City of Baldwin v. Woodard & Curran, Inc., 743 S.E.2d 381, 389 (Ga. 2013) (alteration in original) (quoting Record Town, Inc. v. Sugarloaf Mills Ltd. P'ship of Ga., 687 S.E.2d 640, 642 (Ga. Ct. App. 2009)). "The existence or nonexistence of an ambiguity is a question of law for the court. If the court determines that an ambiguity exists, however, a jury question does not automatically arise, but ratherthe court must first attempt to resolve the ambiguity . . . ." Simpson v. Infinity Select Ins. Co., 605 S.E.2d 39, 42 (Ga. Ct. App. 2004) (citation omitted).

Language is ambiguous if it admits more than one reasonable interpretation. See Hammer Corp. v. Wade, 628 S.E.2d 638, 641 (Ga. Ct. App. 2006) ("[L]anguage is unambiguous if it is capable of only one reasonable interpretation." (alteration in original) (quoting Caswell v. Anderson, 527 S.E.2d 582, 584 (Ga. Ct. App. 2000))); St. Charles Foods, Inc. v. Am.'s Favorite Chicken Co., 198 F.3d 815, 820 (11th Cir. 1999) ("A contract term is ambiguous if it is reasonably susceptible of more than one interpretation." (quoting Int'l Bhd. of Boilermakers v. Local Lodge D111, 858 F.2d 1559, 1561 (11th Cir. 1988))).

B.

When analyzing a disputed contract under the first step of Georgia's contract...