Walker v. Bailey

• Decision Date: 15 November 1996
• Parties: James C. WALKER and Lloyd C. Hegenbarth v. Jimmy A. BAILEY. 2950960.
• Court: Alabama Court of Civil Appeals

Page 304

686 So.2d 304

James C. WALKER and Lloyd C. Hegenbarth v. Jimmy A. BAILEY.

2950960.

Court of Civil Appeals of Alabama.

Nov. 15, 1996.

William P. Powers III and William R. Justice, Columbiana, for Appellants.

James D. Turner of Turner & Turner, P.C., Tuscaloosa, for Appellee.

ROBERTSON, Presiding Judge.

On August 31, 1993, Red Diamond Food Service filed a complaint in the Shelby County Circuit Court against JJL Ventures, Inc., d/b/a Nick's Original Filet House, seeking to recover $7,565.84 on an open account, plus interest and costs. On December 8, 1993, Red Diamond filed an amended complaint, substituting $5,757.54 as the amount owed and adding Jimmy A. Bailey ¹ as a defendant. Red Diamond alleged that Bailey had personally guaranteed payment by JJL Ventures on the open account.

On February 18, 1994, Bailey filed a third-party complaint against Lloyd C. Hegenbarth and James C. Walker, alleging that they were the sole stockholders of JJL Ventures. Bailey also alleged that he, Hegenbarth, and Walker had entered into a settlement agreement on November 16, 1992, and that pursuant to that agreement, he had agreed to transfer his stock to JJL Ventures and Hegenbarth and Walker had agreed to indemnify him against any claims or suits against him arising from any liability of JJL Ventures. Bailey asserted that if he was liable to Red Diamond, then Hegenbarth and Walker were liable to him. Hegenbarth and Walker answered the complaint, asserting the affirmative defenses of waiver and negligence, and counterclaimed based on allegations of breach of contract and fraudulent suppression of material facts. On March 28, 1994, Bailey answered Hegenbarth and Walker's counterclaims, asserting the affirmative defenses of statute of limitations, Statute of Frauds, waiver, and abatement.

Hegenbarth and Walker filed a motion for summary judgment, which the trial court denied. Thereafter, Red Diamond filed a second amended complaint, seeking a reasonable attorney fee. Hegenbarth and Walker filed a motion, seeking a separate trial on Bailey's third-party claims; the trial court denied that motion.

The court held nonjury ore tenus proceedings on November 28, 1994, June 2, 1995, and December 21, 1995. It entered a judgment on February 23, 1996, stating, in pertinent part:

"1. [JJL Ventures] ... began operating its restaurant in Pelham, Alabama, in early 1992 and submitted a credit application to [Red Diamond] ... so that it could finance business merchandise on a credit basis. A Red Diamond sales person informed [Bailey], a principal of [JJL Ventures] who was employed as restaurant manager, that a written Individual Personal Guaranty agreement was required, that Red Diamond would accept his signature on the guaranty document initially, but that Red Diamond also required the additional signatures of [Hegenbarth] and [Walker], who were the remaining officers, directors, and stockholders of JJL Ventures, on a guaranty document.

"2. There is a dispute in the testimony about later conversations between [Bailey] and [Walker] and [Hegenbarth]. [Bailey] testified that he first discussed the matter with [Walker] and received [Walker's] permission, by telephone, to sign the guaranty document, and that he then did sign the document and that he mailed a copy to [Walker]. [Walker] denied any telephone conversation with [Bailey] concerning the guaranty document, denied he ever received a copy of the document through the mail, and testified that [Bailey]--on two separate occasions--came into his office with the guaranty document when [Hegenbarth] was present: that [Bailey] showed them the document and asked them to sign it as guarantors, but that they refused and returned the document to him. [Walker] further testified that he does not remember that the guaranty document had been signed by [Bailey] when he saw it, but he is not sure of his memory; his best recollection is that it was not signed. [Walker] and [Hegenbarth] both testified that [Walker] emphatically told [Bailey] that, if Red Diamond would not do business with [JJL Ventures] without the guaranty document being signed, then [JJL Ventures] would not do business with Red Diamond, but instead, would buy from some other entity.

"In any event, the original guaranty document signed by [Bailey] was delivered to Red Diamond, a credit relationship was established by and between JJL Ventures and Red Diamond, supplies were thereafter periodically furnished on credit to JJL Ventures, and JJL Ventures paid the credit billing from Red Diamond on a reasonably timely basis until [Bailey] resigned as a manager of JJL Ventures and left JJL Ventures in October/November 1992.

"3. When [Bailey] left [JJL Ventures], he, [Hegenbarth], and [Walker] executed a formal Settlement Agreement which had been negotiated through their attorneys. [Bailey] paid $5,000.00 for his release of his obligations to [Hegenbarth] and [Walker] and to [JJL Ventures], and represented to them, as part of said Settlement Agreement, as follows:

" '(3) REPRESENTATION AND WARRANTIES OF BAILEY: Bailey represents and warrants ... that he has disclosed to JJL [Ventures] and its shareholders all obligations which he has incurred for or on behalf of JJL [Ventures] and all obligations for which he is to be indemnified hereafter.';

[H]e simultaneously transferred his stock in JJL Ventures to JJL Ventures, and in exchange therefor, he received from JJL Ventures an indemnity agreement provision, as part of said Settlement Agreement, as follows:

" '(7) RELEASE FROM GUARANTY: JJL [Ventures] shall use its best efforts to obtain Bailey's release from liability with respect to any promissory note or other liability of JJL [Ventures] upon which Bailey has personal liability in any capacity. In the event that JJL [Ventures] is unable to obtain the release of Bailey from such liability JJL [Ventures] agrees to defend, indemnify and hold Bailey harmless from any claims or suits against him for any liability of JJL [Ventures], or as guarantor or co-maker of any JJL [Ventures] liability existing as of that date. Notwithstanding the language of this paragraph JJL [Ventures] shall not release, defend, or indemnify Bailey from any claims arising on account of Bailey's negligence, wantonness, or intentional conduct.'

"The written Settlement Agreement document does not list or identify any specific items of liability from which JJL [Ventures] would endeavor to obtain [Bailey's] release and from which JJL [Ventures] agreed to defend, indemnify, and hold him harmless, but it is undisputed that [Walker] and [Hegenbarth] knew that [JJL Ventures] continued to purchase supplies on credit from Red Diamond from the time the restaurant opened until after [Bailey] left the business.

"[Hegenbarth] and [Walker] endorsed their signatures to the said Settlement Agreement document under the following paragraph:

" 'These undersigned shareholders hereby personally guarantee the indemnity made by [JJL Ventures] in Paragraph (7) of this Settlement Agreement.'

"4. It is also undisputed that JJL Ventures did not owe any past due account to Red Diamond at the time when [Bailey] left JJL Ventures and that the account for which Red Diamond sues in this litigation in the amount of $7,757.54, plus interest and attorney's fees, is for items which were furnished by Red Diamond to JJL Ventures after [Bailey] left and that the account did not go into default until February 10, 1993.

"5. The Court FINDS the issues in favor of [Red Diamond] and against the defendants on [Red Diamond's] claim against said defendants, and judgment is entered in favor of [Red Diamond] against defendants [JJL Ventures] and [Bailey] for the sum of $7,757.54, plus a reasonable attorney's fee in the amount of $1,439.38, plus accrued interest, for a total sum of $13,599.32, with costs of Court accrued taxed to said defendants.

"6. The Court further FINDS the issues in favor of [Bailey] and against [Hegenbarth and Walker] on [Bailey's third-party claim] against [them], and judgment is entered in favor of [Bailey] again...