LSREF2 Baron, LLC v. Wyndfield Properties, LLC et al
OPINION. Signed by Honorable Judge Myron H. Thompson on 12/6/13. (djy, )
IN THE DISTRICT COURT OF THE UNITED STATES FOR THE
MIDDLE DISTRICT OF ALABAMA, NORTHERN DIVISION
LSREF2 BARON, LLC,
WYNDFIELD PROPERTIES, LLC, )
RODNEY A. DECKER, and DAVID )
CIVIL ACTION NO.
Plaintiff LSREF2 Baron, LLC seeks to collect on two
promissory notes made by defendant Wyndfield Properties,
LLC and personally guarantied by defendants Rodney A.
invoked pursuant to 28 U.S.C. § 1332 (diversity).
In a previous summary-judgment opinion, the court
found that Wyndfield had defaulted on the notes and that
Decker and Earnest were personally liable for the debt.
LSREF2 Baron, LLC v. Wyndfield Properties, LLC, 2013 WL
5930546 (M.D. Ala. Nov. 5, 2013) (Thompson, J.).
there is one remaining question.
Although it was clear
that Wyndfield was in default on the notes at the time of
summary judgment, there was room for genuine dispute as to
when the default occurred.
By the terms of the notes,
Therefore, the court could not determine the
exact amount that Wyndfield owed at the summary-judgment
During a telephone conference on November 26, 2013,
the parties all agreed to forgo a non-jury trial on this
remaining question and submitted it to the court on the
written record to resolve any disputed facts.
agreement with Regions Bank.
One note was for $ 300,000,
acceleration clause which allowed the bank to accelerate
payments if Wyndfield defaulted.
The other note is for
The holder of this second note could collect
only if the company defaulted on the $ 300,000 note.
notes authorized interest at a rate of 2 % which would
begin accruing upon acceleration of the $ 300,000 note.
The promissory notes have two identical provisions
that limit modification.
First, the notes state that, “No
modification amendment or waiver of any provisions of this
Note shall be effective unless in writing and signed by a
duly-authorized officer of the Holder.” Promissory Notes
(Doc. Nos. 42-1, 42-2) at 3.
Second, the notes provide
supplemented in any manner except by a written agreement
executed by both the Borrower and the Holder.”
Note (Doc. No. 42-1) at 4; Promissory Note (Doc. No. 42-2)
Wyndfield paid its installments on the $ 300,000 note
on time for about six months, until bank representative
Smith called Decker on September 1, 2011.
After the call,
Smith wrote Decker and Earnest the following email:
“As I mentioned during our phone
conversation a moment ago, I have
learned that your deficiency notes and
the previously foreclosed upon lots of
Wyndfield were transferred to a 3rd
party in late July or early August
without my knowledge. With that said,
the funds that you recently deposited to
your checking account ending in 8339
should be redirected to the new holder
of the notes. We have not processed any
debits against the account. I am not
certain who your notes were sold to, but
correspondence by now to inform you of
the transfer and where your future
payments should be remitted.
need anything else from me, please feel
free to give me a call or reply.
“Robert L. Smith, Jr.
Commercial Special Assets Department”
Smith Email (Doc. No. 42-6).
LSREF2, the plaintiff in this case, was the company
that purchased Wyndfield’s debt. However, the debt was not
actually assigned until June 2012.
Wyndfield, Decker, and
Earnest did not learn that LSREF2 owned Wyndfield’s debt
representative called to tell Decker that LSREF2 was filing
a lawsuit to collect on Wyndfield’s debt.
not made any payment since Smith’s email.
LSREF2 claims that Wyndfield defaulted when it stopped
making payments, immediately after the Smith conversation
However, in its summary-judgment opinion, the
modification of the $ 300,000 note, such that Wyndfield
should not have made further monthly payments to Regions
Instead, Wyndfield would be required to redirect
each month’s payments to the new holder of the note, as
soon as the holder contacted Wyndfield at which point the
company could learn where the payments could be remitted.
There was not, in fact, any new holder of the note until
June 2012, and the new holder, LSREF2, did not contact
Wyndfield until October 2012.
Therefore, if the Smith
email indicated a modification of the terms of the note,
Wyndfield could not
have sent the back monthly payments
until after October 2012.
Therefore, Wyndfield would have
on the $ 300,000 note only when it failed to
direct all of the monthly payments which had accrued to
LSREF2 by November 1, 2013.
LSREF2 presents two reasons that the court should not
adopt its previous interpretation of the Smith email, which
would result in a judgment that Wyndfield defaulted on
November 1, 2012. First, LSREF2 argues that the email does
not modify the promissory notes because it was “a typical
acknowledgment of a business telephone call.” Pls. Trial
Br. (Doc. No. 48) at 8.
of the notes
Second, it argues that the text
bars the modification.
For the reasons
Therefore, the court finds that Wyndfield defaulted on its
debt on November 1, 2012 when it did not furnish the
accrued monthly payments to LSREF2.
approach to contract modification.
“Parties to a written
contract may by mutual consent without other consideration
... alter, modify or rescind the contract.” Cavalier Mfg.,
Inc. v. Clarke, 862 So. 2d 634, 640-41 (Ala. 2003)(quoting
Watson v. McGee, 348 So. 2d 461, 464 (Ala. 1977)).
discussed below, Alabama law or the text of the contract
can impose additional evidentiary or formality requirements
on modification, but the default rule is that only mutual
consent is required.
Such consent can occur during a
“business telephone call,” and the Smith email provides
evidence that it did in this instance.
The email confirms
that Smith told Decker that Wyndfield should not make
further payments to Regions Bank on the $ 300,000 note and
should instead redirect those payments to the new holder
of the notes once the holder identified itself.
subsequent actions indicate that he agreed to this change
in the terms of the notes.
Both parties agreed that
Wyndfield’s obligations under the notes should change.
This constitutes a modification of the notes.*
* It is not clear from LSREF2's trial brief whether
Second, LSREF2 points to a clause in the promissory
notes that states that, “This Note may not be modified,
amended or supplemented in any manner except by a written
agreement executed by both the Borrower and the Holder.”
PX A at 5; PX B at 4.
However, “nonwaiver clauses and
clauses that require modifications to be in writing can be
found to have been waived upon proper proof.” Retail
it also challenges the modification under the Alabama
Statute of Frauds, 1975 Ala. Code § 8-9-2.
governed by the Statute of Frauds must “meet the
requirements of the Statute of Frauds.” Kelmore, LLC v.
Alabama Dynamics, Inc., 20 So. 3d 783, 793 (Ala. 2009).
The Statute of Frauds does not require that the writing
supporting a contract or modification take any particular
form, only that it be “subscribed by the party to be
charged [or its agent].” § 8-9-2. “‘The primary purpose
of the Statute is evidentiary, to require reliable
evidence of the existence and terms of the contract and
to prevent enforcement through fraud or perjury of
contracts never in fact made.’” Fausak’s Tire Ctr., Inc.
V. Blanchard, 959 So. 2d 1132, 1139 (Ala. Civ. App. 2006)
(quoting Restatement (Second) of Contracts § 131 cmt. c).
“‘Generally speaking, the purpose with which a
memorandum is prepared is immaterial, and it will suffice
although it was not intended to evidence the contract or
to comply with the [S]tatute [of Frauds]. If there is a
memorandum, otherwise sufficient, it is not necessary
that it be signed by the party to be charged with the
intent to comply with the statute. His intention in this
respect is immaterial.’” Id (quoting 10 Richard A. Lord,
Williston on Contracts § 29:6 at 450-51). Smith’s email
needed no additional intent for it to be sufficient
evidence of mutual consent to a modification.
Developers of Alabama, LLC v. East Gadsden Golf Club, Inc.,
985 So.2d 924, 930 n.3.
Specifically, “an intention to
waive a right may be found where one’s course of conduct
indicates such an intention or is inconsistent with any
In this case, the restriction on
modifications would operate to Regions Bank’s interest, and
Wyndfield to stop making payments and actually refused to
accept further payments on the $ 300,000 note.
actions indicate an intention to modify the terms of the
note, waiving the formality requirements for modification.
Having found that the $ 300,000 promissory note was
modified, Wyndfield could not have defaulted immediately
after the Smith email.
The court finds that Wyndfield
defaulted on November 1, 2012.
From that conclusion, the
court will use LSREF2's interest calculations from its
trial brief, which the defendants agreed were accurate on
the November 26 telephone conference.
For a November 1,
2012 date of default, LSREF2 calculated a total amount due
of $ 336,215.04.
* * *
Accordingly, judgment will be granted in favor of
LSREF2 and against Wyndfield, Decker, and Earnest in the
amount of $ 336,215.04.
DONE, this the 6th day of December, 2013.
/s/ Myron H. Thompson
UNITED STATES DISTRICT JUDGE
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