Bagley v. Cash (CONSENT)
MEMORANDUM OPINION AND ORDER directing as follows: (1) That Bagley Trust's 16 motion for summary judgment is due to GRANTED; (2) Judgment is due to be entered in favor of the plaintiff and against the defendant on its breach of contract claim, and damages awarded to the plaintiff consistent with the Guaranty Agreement; the court will enter final judgment after the matter of damages, interest and expenses is resolved; it is ORDERED that on or before January 28, 2013, counsel for the partie s are DIRECTED to meet and confer, either in person or telephonically, to attempt to reach an agreement on the amount owed to the Trust, including principal, unpaid interest and expenses; if an agreement cannot be reached, the parties are DIRECTED to submit briefs containing calculations for damages, interest and expenses due on or before February 4, 2013; finally, it is ORDERED that the pretrial conference presently set for February 5, 2013 and trial set for March 13, 2013 be and are hereby CONTINUED GENERALLY. Signed by Honorable Judge Charles S. Coody on 1/14/13. (Furnished to Calendar/WS) (Attachments: # 1 Civil Appeals Checklist)(scn, )
IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF ALABAMA
JAMES W. BAGLEY, TRUSTEE
OF THE BAGLEY FAMILY
PETER L. CASH,
CIVIL ACT. NO. 1:12cv620-CSC
MEMORANDUM OPINION and ORDER
This case involves a dispute between plaintiff James W. Bagley (“Bagley”), the
Trustee of the Bagley Family Revocable Trust (“the Trust”), and defendant Peter L. Cash
(“Cash”). Bagley filed this breach of contract claim against Cash to secure monies Bagley
asserts Cash owes the Trust under the terms of a Guaranty Agreement. Cash makes no
counterclaims in this action. The court has jurisdiction of this case pursuant to its diversity
jurisdiction. See 28 U.S.C. § 1332. The parties have consented to a United States Magistrate
Judge conducting all proceedings in this case and ordering the entry of final judgment,
pursuant to 28 U.S.C. § 636(c)(1) and M.D. Ala. LR 73.1.
This matter is now pending before the court on Bagley’s motion for summary
judgment filed on December 3, 2012. See Doc. # 16. Cash has filed a response. See Doc.
# 18. Upon consideration of the motion, pleadings, response and evidentiary material filed
in support of and in opposition to the motion, the court concludes the plaintiff’s motion for
summary judgment is due to be granted.
II. STANDARD OF REVIEW
“Summary judgment is appropriate ‘if the pleadings, depositions, answers to
interrogatories, and admissions on file, together with the affidavits, if any, show there is no
genuine [dispute]1 as to any material fact and that the moving party is entitled to judgment
as a matter of law.’” Greenberg v. BellSouth Telecomm., Inc., 498 F.3d 1258, 1263 (11th
Cir. 2007) (per curiam) (citation omitted); FED.R.CIV.P. 56(c) (Summary judgment “should
be rendered if the pleadings, the discovery and disclosure materials on file, and any affidavits
show that there is no genuine [dispute] as to any material fact and that the movant is entitled
to judgment as a matter of law.”). The party moving for summary judgment “always bears
the initial responsibility of informing the district court of the basis for its motion, and
identifying those portions of the [record, including pleadings, discovery materials and
affidavits], which it believes demonstrate the absence of a genuine [dispute] of material fact.”
Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). The movant may meet this burden by
presenting evidence which would be admissible at trial indicating there is no dispute of
material fact or by showing that the nonmoving party has failed to present evidence in
support of some element of its case on which it bears the ultimate burden of proof. Id. at
Once the movant meets his evidentiary burden and demonstrates the absence of a
Effective December 1, 2010, the language of Rule 56(a) was amended. The word “dispute”
replaced the word “issue” to “better reflect the focus of a summary-judgment determination.” FED.R.CIV.P.
56(a), Advisory Committee Notes, 2010 Amendments.
genuine dispute of material fact, the burden shifts to the non-moving party to establish, with
appropriate evidence beyond the pleadings, that a genuine dispute material to his case exists.
Clark v. Coats & Clark, Inc., 929 F.2d 604, 608 (11th Cir. 1991); Celotex, 477 U.S. at 324;
FED.R.CIV.P. 56(e)(2) (“When a motion for summary judgment is properly made and
supported, an opposing party may not rely merely on allegations or denials in its own
pleading; rather, its response must ... set out specific facts showing a genuine [dispute] for
trial.”). A genuine dispute of material fact exists when the nonmoving party produces
evidence that would allow a reasonable fact-finder to return a verdict in its favor.
Greenberg, 498 F.3d at 1263.
To survive the plaintiff’s properly supported motion for summary judgment, the
defendant is required to produce “sufficient [favorable] evidence” “that a reasonable jury
could return a verdict for the nonmoving party.” Anderson v. Liberty Lobby, Inc., 477 U.S.
242, 248-49 (1986). “If the evidence [on which the nonmoving party relies] is merely
colorable . . . or is not significantly probative . . . summary judgment may be granted.” Id.
at 249-250. “A mere ‘scintilla’ of evidence supporting the opposing party’s position will not
suffice; there must be enough of a showing that the [trier of fact] could reasonably find for
that party.” Walker v. Darby, 911 F.2d 1573, 1576-1577 (11th Cir. 1990) quoting Anderson,
supra. Conclusory allegations based on subjective beliefs are likewise insufficient to create
a genuine dispute of material fact and, therefore, do not suffice to oppose a motion for
summary judgment. Waddell v. Valley Forge Dental Assocs., Inc., 276 F.3d 1275, 1279 (11th
Cir. 2001). Hence, when a nonmoving party fails to set forth specific facts supported by
appropriate evidence sufficient to establish the existence of an element essential to its case
and on which the nonmovant will bear the burden of proof at trial, summary judgment is due
to be granted in favor of the moving party. Celotex, 477 U.S. at 322 (“[F]ailure of proof
concerning an essential element of the nonmoving party’s case necessarily renders all other
For summary judgment purposes, only disputes involving material facts are relevant.
United States v. One Piece of Real Prop. Located at 5800 SW 74th Ave., Miami, Fla., 363
F.3d 1099, 1101 (11th Cir. 2004). What is material is determined by the substantive law
applicable to the case. Anderson, 477 U.S. at 248; Lofton v. Sec’y of Dep’t of Children &
Family Servs., 358 F.3d 804, 809 (11th Cir. 2004) (“Only factual disputes that are material
under the substantive law governing the case will preclude entry of summary judgment.”).
“The mere existence of some factual dispute will not defeat summary judgment unless that
factual dispute is material to an issue affecting the outcome of the case.” McCormick v. City
of Fort Lauderdale, 333 F.3d 1234, 1243 (11th Cir. 2003) (citation omitted). To demonstrate
a genuine dispute of material fact, the party opposing summary judgment “must do more than
simply show that there is some metaphysical doubt as to the material facts. . . . Where the
record taken as a whole could not lead a rational trier of fact to find for the nonmoving party,
there is no ‘genuine [dispute] for trial.’” Matsushita Elec. Indus. Co, Ltd., v. Zenith Radio
Corp., 475 U.S. 574, 587 (1986). In cases where the evidence before the court which is
admissible on its face or which can be reduced to admissible form indicates that there is no
genuine dispute of material fact and that the party moving for summary judgment is entitled
to it as a matter of law, summary judgment is proper. Celotex, 477 U.S. at 323-324
(summary judgment appropriate where pleadings, evidentiary materials and affidavits before
the court show there is no genuine dispute as to a requisite material fact); Waddell, 276 F.3d
at 1279 (to establish a genuine dispute of material fact, the nonmoving party must produce
evidence such that a reasonable trier of fact could return a verdict in his favor).
However, if there is a conflict in the evidence, “the evidence of the non-movant is to
be believed, and all justifiable inferences are to be drawn in his favor.” Anderson, 477 U.S.
at 255; Ruiz de Molina v. Merritt & Furman Ins. Agency, 207 F.3d 1351, 1356 (11th Cir.
2000). With these principles of law in mind, the court will determine now whether summary
judgment is appropriate and should be granted.
In 2007, James Bagley, on behalf of the Trust, entered into a series of business
ventures with Cash, none of which turned out as the principals envisioned. One such venture
involved the sale of stock in MA Manufacturing Company, Inc. (“MA Manufacturing”) in
March 2007. Cash was the sole stockholder of MA Manufacturing.
On March 28, 2007, Bagley Trust purchased from Cash fifty one percent (51%) of the
outstanding stock in MA Manufacturing pursuant to a Stock Transfer Agreement. In
conjunction with the stock sale, the Trust loaned MA Manufacturing fifteen million dollars
($15,000,000). As it’s president, Cash signed the promissory note on behalf of MA
Manufacturing. (Doc. # 16, Ex. 1). The promissory note specified interest on the note in the
amount of 7.5% per annum. (Id).
Cash also signed a guaranty agreement in which he guaranteed MA Manufacturing’s
indebtedness to the Trust. (Id. at Ex. 2). In pertinent part, Cash guaranteed MA’s loan from
the Trust as follows:
The term “Guaranteed Indebtedness,” as used herein, consists of that certain
promissory note in the original principal amount of $15,000,000 dated of even
date herewith, executed and delivered by MA and payable to the order of
Creditor, and any renewal or extension of the principal amount of such note,
and accrued but unpaid interest thereon of the aforementioned promissory
note, and all expenses of collection incurred by Creditor attempting to collect
upon the promissory note, if any, including without limitation, reasonable
attorneys’ fees, provided, however, that the Guarantor’s liability shall be
limited to forty nine percent (49%) of any such amounts.
(Id. at Ex. 2, ¶ 1) (emphasis in original).
As the Guarantor, Cash further agreed that his
obligations under the terms of this guaranty shall not be released, diminished,
impaired, reduced or affected by the occurrence of any one or more of the
following events: (a) the taking or accepting of any other security or guaranty
for any or all of the Guaranteed Indebtedness; (b) any release, surrender,
exchange, subordination, or loss of any security at any time in connection with
any or all of the Guaranteed Indebtedness; (c) any partial release of the liability
of Guarantor . . .; (d) the death, insolvency, bankruptcy, disability, or lack of
corporate power of Guarantor, . . . whether now existing or hereafter
occurring; . . .
(Id. at Ex. 2, ¶ 4).
Finally, the Guaranty Agreement specifically states that it is for the benefit of the
Creditor only. (Id. at ¶ 5) (emphasis added).
Cash asserts that in 2008, “a dispute arose between [him] and Mr. Bagley and Mr.
Bagley voted and issued himself more stock in a deliberate maneuver to dilute [Cash’s]
ownership in the company.”2 (Doc. # 18-1, Declaration Peter Cash, at 2, ¶ 6). According to
Cash, the guaranty agreement was based on his percentage of ownership in the company. (Id.
at ¶ 10). Thus, while Cash does not dispute that he signed the Guaranty Agreement or that
he owes some amount under the agreement, he disputes that he owes 49% of the loan.
Rather, he contends he should only be required to pay 0.49% of the debt which equates to the
percentage of his current ownership in MA Manufacturing.
To establish a breach of contract claim under Alabama law, Bagley must establish the
(1) the existence of a valid contract binding the parties in the action, (2) his
own performance under the contract, (3) the defendant’s nonperformance, and
Employees’ Benefit Assoc. v. Grissett, 732 So. 2d 968, 975 (Ala. 1998) quoting Southern
Med. Health Sys., Inc. v. Vaughn, 669 So. 2d 98, 99 (Ala. 1995). There is no dispute that the
Guaranty Agreement constitutes a valid contract and that the Trust performed under the
Cash’s description of his difficulties with Bagley is generous. During the period of time when
Bagley and Cash were engaged in business ventures together, Cash was engaged in a business of his own.
Beginning in October 2005 and continuing until July 2008, Cash operated a “check kiting” scheme to defraud
two banks, by engaging in fraudulent activities to obtain loans using the businesses in which he was involved
with Bagley. See United States v. Cash, Crim. No. 1:10cr185-WKW (M.D. Ala.) (Doc. # 1, Information;
Doc. # 8, Plea Agreement). This is not the first action Bagley has pursued to recoup monies invested with
Cash. See Mobile Attic, Inc. v. Cash, et al, 1:09cv24-MHT-CSC (M.D. Ala., 2012).
contract by loaning MA Manufacturing $15,000,000. Cash does not dispute that he has
failed to perform his obligation under the Guaranty Agreement. Rather, he argues that
because his ownership interest in MA Manufacturing has been reduced from 49% to .49%,
“his percentage of the debt should also be readjusted,...” (Doc. #18, Def’s Resp. at 4). In
response to the motion for summary judgment, Cash “consents to a judgment against him
being issued based on his percentage of ownership in the company under the guaranty
agreement, i.e., .49%.” (Id. at 5).
“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....”
Eagerton v. Vision Bank, 99 So. 2d 299, 204 (Ala. 2012) quoting Government St. Lumber Co.
v. AmSouth Bank, 553 So.2d 68, 75 (Ala.1989)
The terms of the guaranty agreement Cash’s position do not support Cash’s position.
The agreement defines the “Guaranteed Indebtedness” as the $15,000,000 promissory note
loaned to MA Manufacturing, unpaid interest on the note, and “all expenses of collection”
incurred by the Trust. (Doc. # 16, Ex. 2 at ¶ 1). The agreement specifically limits Cash’s
guarantee to forty nine (49) percent of “any such amounts” referring to the $15,000,000
promissory note, unpaid interest and expenses of collection. (Id.) “[W]hen a contract is
clearly stated and expresses the intent of the parties, it will be so applied.” Birmingham Trust
Nat’l Bank v. Midfield Park, Inc., 325 So. 2d 133, 134 (Ala. 1976) quoting Franklin Life Ins.
Co. v. Brantley, 165 So. 834, 835 (Ala. 1936).
In opposition to summary judgment, Cash asserts that “[t]he Guaranty Agreement
clearly shows liability at the time being limited to percentage of ownership.” (Def’s Res. to
Pl’s Mot. for Summ. J., at 5). He is simply wrong. The agreement clearly states that Cash
guaranteed the “Guaranteed Indebtedness.” The agreement in no way limits Cash’s guaranty
to the percentage of his stock or ownership in MA Manufacturing.3 His guarantee is tied to
the indebtedness on the $15,000,000 loan; it is not limited to a percentage of his ownership
in MA Manufacturing. The agreement very specifically limits Cash’s liability to forty nine
percent (49%) of the “Guaranteed Indebtedness” which includes the original $15,000,000
promissory note, any accrued but unpaid interest, and all expenses of collection. (Doc. # 16,
Ex. 1 at 1, ¶ 1.). Accordingly, the court concludes that the guaranty agreement executed by
Cash is clear and unambiguous. See McCollough v. Regions Bank, 955 So. 2d 405, 411 (Ala.
Cash complains about the manner in which Bagley operated MA Manufacturing. Cash suggests
that by the issuance of additional stock, Bagley deliberately diluted Cash’s ownership. Consequently, Cash,
argues that it would not be “equitable” to make him pay 49% of the debt when he only owns .49% of the
company. Cash has not brought a counterclaim, and the court cannot, and will not, read one into the case
at this juncture. See generally, Gilmour v. Gates, McDonald & Co., 382 F.3d 1312, 1315 (11th Cir. 2004).
(a party “may not amend [its] complaint through argument in a brief opposing summary judgment.”)
2006) (holding guaranty contract not ambiguous regarding indebtedness). Because the
language of the guaranty agreement is unambiguous, “the contract’s construction and legal
effect become a question of law for the court, and when appropriate may be decided by
summary judgment.” Colonial Bank of Ala. v. Coker, 482 So. 2d 286, 291 (Ala. 1985)
It is undisputed that Bagley Trust loaned MA Manufacturing $15,00,000. It is also
undisputed that MA Manufacturing defaulted on the loan. It is undisputed that none of the
$15,000,000 loan has been repaid. Consequently, as guarantor of MA Manufacturing’s loan,
Cash is obligated to pay the Trust up to forty nine percent (49%) of the existing “Guaranteed
Indebtedness” which includes the unpaid principal, accrued but unpaid interest and collection
For the reasons as stated, the court concludes as follows:
That Bagley Trust’s motion for summary judgment is due to GRANTED.
Judgment is due to be entered in favor of the plaintiff and against the
defendant on its breach of contract claim, and damages awarded to the plaintiff consistent
with the Guaranty Agreement.
The court will enter final judgment after the matter of damages, interest and expenses
is resolved. Accordingly, it is
ORDERED that on or before January 28, 2013, counsel for the parties are
DIRECTED to meet and confer, either in person or telephonically, to attempt to reach an
agreement on the amount owed to the Trust, including principal, unpaid interest and
expenses. If an agreement cannot be reached, the parties are DIRECTED to submit briefs
containing calculations for damages, interest and expenses due on or before February 4,
2013. Finally, it is
ORDERED that the pretrial conference presently set for February 5, 2013 and trial
set for March 13, 2013 be and are hereby CONTINUED GENERALLY.
Done this 14th day of January, 2013.
/s/Charles S. Coody
CHARLES S. COODY
UNITED STATES MAGISTRATE JUDGE
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