Sterling Bank v. Herrod et al

Filing 36

OPINION. Signed by Honorable Judge Myron H. Thompson on 2/19/16. (djy, )

IN THE DISTRICT COURT OF THE UNITED STATES FOR THE
MIDDLE DISTRICT OF ALABAMA, NORTHERN DIVISION
STERLING BANK, a Division )
of Synovus Bank, a Georgia )
banking corporation,
)
)
Plaintiff,
)
)
v.
)
)
JOSEPH L. HERROD, an
)
individual, BROBST
)
MEDICAL, INC., an Alabama )
corporation, and
)
CHANDLER & ALECIA, INC.,
)
an Alabama corporation,
)
)
Defendants.
)

CIVIL ACTION NO.
2:15cv540-MHT
(WO)

OPINION
This

is

the

first

of

two

opinions.

Plaintiff

Sterling Bank, a division of Synovus Bank, filed this
lawsuit

against

defendants

Joseph

L.

Herrod,

Brobst

Medical, Inc., and Chandler & Alecia, Inc., bringing
multiple state-law claims arising from the defendants’
alleged breach of agreements to guarantee payment of
various debts of two medical practices.

Jurisdiction

is proper pursuant to 28 U.S.C. § 1332 (diversity).
This lawsuit is now before the court on Sterling Bank’s

motion for summary judgment against defendant Herrod.
For the reasons below, the motion will be granted.

I. LEGAL STANDARD
“A party may move for summary judgment, identifying
each claim or defense--or the part of each claim or
defense--on

which

summary

judgment

is

sought.

The

court shall grant summary judgment if the movant shows
that there is no genuine dispute as to any material
fact and the movant is entitled to judgment as a matter
of law.”

Fed. R. Civ. P. 56(a).

The court must view

the admissible evidence in the light most favorable to
the non-moving party and draw all reasonable inferences
in favor of that party.

Matsushita Elec. Indus. Co. v.

Zenith Radio Corp., 475 U.S. 574, 587 (1986).

II. BACKGROUND
The facts, taken in the light most favorable to
Herrod, are as follows.

The claims against him stem

from agreements he entered to guarantee the debts of

2

two

entities:

PriMed

Physicians,

Inc.

and

Central

Alabama Primary Care Specialists, LLLP.
In

2012,

agreement
obtained

PriMed

with
a

executed

Sterling

loan

from

a
and,

Bank
the

Visa
in

bank

in

credit-card
early

the

2015,

amount

of

$ 838,900.00.
In 2014, Herrod executed a guaranty agreement by
which

he

“guarantee[d]

performance

of

each

to

and

Lender

every

the

debt,

payment

and

liability

and

obligation of every type and description which [PriMed]
may

now

or

at

any

time

hereafter

owe

to

Lender

. . . (whether such debt, liability or obligation now
exists or is hereafter created or incurred, and whether
it is or may be direct or indirect, due or to become
due,

absolute

or

contingent,

primary

or

secondary,

liquidated or unliquidated, or joint, several, or joint
and several . . .).”
at 11.

PriMed Guaranty (doc. no. 25-1)

The guaranty states that Herrod “will pay or

reimburse Lender for all costs and expenses (including
reasonable attorneys' fees and legal expenses) incurred
by Lender in connection with the protection, defense or
3

enforcement

of

this

guaranty

in

any

further

provides

interest.”
In

That

Herrod

is

It

liable

for

“accrued

Id.

2014,

Sterling

that

or

Id. at 12.

bankruptcy or insolvency proceedings.”

litigation

Central

Bank

same

Alabama

in

face

the

year,

Herrod

obtained

amount

executed

of
a

a

loan

from

$ 1,250,000.00.

guaranty

for

the

debts of Central Alabama, in which he “guarantee[d] to
Lender the payment and performance of each and every
debt,

liability

description
hereafter

and

which

owe

to

obligation

Borrower

may

Lender.”

(doc. no. 25-2) at 7.

of
now

Central

every

type

and

or

any

time

at

Alabama

Guaranty

The guaranty also requires him

to pay accrued interest and to “pay or reimburse Lender
for

all

costs

and

expenses

(including

reasonable

attorneys’ fees and legal expenses) incurred by Lender
in

connection

enforcement

of

with
this

the

protection,

guaranty

in

any

bankruptcy or insolvency proceedings.”
PriMed
credit-card

has

failed

debt

and

to

remit

note,
4

full

which

defense

or

litigation

or

Id. at 7-8.
payment
are

of

past

its
due.

Further, PriMed is in default on its note with Sterling
Bank.

Under the terms of PriMed’s note, default is

established when the borrower “become[s] insolvent” or
when the debt comes due and is not paid.
(doc. no. 25-1) at 5.

PriMed Note

The note has come due, but

PriMed has not paid its obligations to Sterling Bank
under the note; also, PriMed has filed a Chapter 7
bankruptcy petition.

Thus, under the terms of its note

with Sterling Bank, PriMed is in default.
Under the terms of its note with Sterling Bank,
Central Alabama is in default because its debts have
come

due

and

it

has

not

paid

its

obligations

to

Sterling Bank and, also, because it has petitioned for
Chapter 7 bankruptcy and is insolvent.
Note (doc. no. 25-2) at 3.

Central Alabama

Under the terms of its

note, Central Alabama is in default of its obligation
to Sterling Bank.
Herrod has not paid Sterling Bank the money owed by
PriMed or Central Alabama, and the debts have not been
otherwise paid.

5

III. ANALYSIS
Sterling Bank moved for summary judgment against
Herrod on November 17, 2015, on its claims that he has
breached the guaranty agreements.

The court directed

Herrod, who is pro se, to respond to the motion by
December 16, 2015.

In that order, the court explained

the requirements for responses to motions for summary
judgment under Federal Rule of Civil Procedure 56 and
warned

that,

“Failure

to

follow

the

requirements

of

Rule 56 and this order regarding the proper way to
oppose a motion for summary judgment may result in the
court granting the motion and entering final judgment
in favor of the moving party without there being a
trial.”
respond.
judgment,

Order (doc. no. 33) at 4.
Nevertheless,
the

court

on

must

a

Herrod did not

motion

determine

for

whether

summary
Sterling

Bank has shown that it is entitled to judgment as a
matter of law.

See Fed. R. Civ. P. 56.

A federal court sitting in diversity must apply the
choice-of-law

rules

of

the

jurisdiction

in

which

it

sits. See, e.g., Manuel v. Convergys Corp., 430 F.3d
6

1132, 1139 (11th Cir. 2005); Boardman Petroleum, Inc.
v. Federated Mut. Ins. Co., 135 F.3d 750, 752 (11th
Cir.

1998).

Thus,

choice-of-law rules.

this

court

must

apply

Alabama

“Alabama follows the principle of

‘lex loci contractus,’ which states that a contract is
governed by the laws of the state where it is made
except where the parties have legally contracted with
reference to the laws of another jurisdiction.

Alabama

law has long recognized the right of parties to an
agreement to choose a particular state's laws to govern
an agreement.”

Cherry, Bekaert & Holland v. Brown, 582

So. 2d 502, 506 (Ala. 1991) (citations omitted).
Both guaranty agreements contain a provision that
the agreement “shall be governed by the laws of the
State where the Lender is located.”

PriMed Guaranty

(doc. no. 25-1) at 14; Central Alabama Guaranty (doc.
no. 25-2) at 10.

Sterling Bank and Synovus Bank are

located in Georgia, see First Amended Complaint (doc.
no. 6) at 1, so Georgia breach-of-contract law applies.
“The elements for a breach of contract claim in
Georgia

are

the

(1)

breach
7

and

the

(2)

resultant

damages (3) to the party who has the right to complain
about the contract being broken.”

Norton v. Budget

Rent A Car Sys., Inc., 705 S.E.2d 305, 306 (Ct. App.
Ga. 2010) (citation omitted).
shows
duly

that

the

executed

promissory
by

the

“Where . . . the record

notes

debtors

and

and

guarantees

that

they

were

are

in

default, a prima facie right to judgment as a matter of
law [i]s established, and the burden shift[s] to [the
debtor or guarantor] to produce or point to evidence in
the record which establishe[s] an affirmative defense.”
Secured Realty Inv. v. Bank of N. Georgia, 725 S.E.2d
336, 338 (Ct. App. Ga. 2012).
As
Sterling

described
Bank

in

has

executed

agreements

PriMed’s

note

Alabama’s note.

and

the

background

submitted
with

evidence

Sterling

credit-card

section

Bank

agreement

that
to

above,
Herrod

guarantee

and

Central

The evidence also establishes a breach

of the agreements because PriMed’s credit card is past
due, both Primed and Central Alabama are in default on
their notes, and Herrod has not paid off their debts.

8

Further, Sterling Bank has established the amount
of damages by affidavit.
David

Hammond,

Synovus,”
attests:

of

a

“Senior

which

“As

of

Regarding the PriMed note,
Special

Sterling

November

6,

Assets

Bank

is

2015,

Officer
a

each

for

division,
of

the

guarantors was obligated to Sterling Bank regarding the
PriMed Note in the principal amount of $ 783,295.96,
plus accrued interest of $ 17,835.38, and late fees of
$ 500.00,
further

for

a

obligated

total
to

of

$ 801,631.34.

Sterling

Bank

for

They
per

are
diem

interest going forward from November 7, 2015 in the
amount of $ 92.47 per day, plus attorneys' fees and
costs.”

Hammond Affidavit (doc. no. 25-2), at 12, 15.

As to the PriMed credit-card agreement, Hammond states:
“As of November 5, 2015, each of the guarantors was
obligated to Sterling Bank regarding the PriMed Credit
Card Agreement in the amount of $ 5,457.49. They are
further obligated to Sterling Bank for attorneys' fees
and costs.”

Id. at 16.

Finally, as to the Central

Alabama note, Hammond states:

“[A]s of November 6,

2015, Joseph L. Herrod was obligated to Sterling Bank
9

in

the

principal

amount

of

not

less

than

$ 1,162,192.06, plus accrued interest of $ 16,679.72,
and

late

fees

$ 1,180,371.78.

of

$ 1,500.00,

for

a

total

of

He was further obligated to Sterling

Bank for per diem interest going forward from November
7, 2015[,] in the amount of $ 137.85, plus reasonable
attorneys' fees and costs.”
Also

submitted

in

Id., at 17.

support

of

the

motion

is

an

affidavit from Rodney E. Nolen, an Alabama attorney who
primarily

practices

in

the

areas

of

commercial

collections and commercial litigation and has been a
“Certified
years.

Creditor

Rights

Specialist”

for

over

Nolen Affidavit (doc. no. 25-4) at 8.

20

Nolen

sets forth that Herrod’s guarantor agreements require
him

to

expenses

“pay

or

reimburse

(including

Lender

reasonable

for

all

costs

and

attorneys'

fees

and

legal expenses) incurred by Lender in connection with
the protection, defense or enforcement of this guaranty
in

any

litigation

proceedings.”
criteria

set

Id.
forth

or
at
in

bankruptcy

or

9-10.

After

Johnson

v.

10

insolvency

reviewing

Georgia

the

Highway

Express,

Inc.,

attests

that,

collection

488

F.2d

“Based

of

714

(5th

upon

Cir.

[his]

delinquent

1974),

Nolen

experience

commercial

in

loans

and

debts, . . . attorneys' fees of $ 40,081.57, which is
equal

to

5 %

of

the

$ 801,631.34

debt

owed

on

the

PriMed Note (as guaranteed by the Defendants herein),
[and] attorneys' fees of $ 272.87, which is equal to
5 % of the $ 5,457.49 debt owed on the PriMed Credit
Card

Agreement,

and

attorneys'

fees

of

$ 59,018.59,

which is equal to 5 % of the $ 1,180,371.78 debt owed
on

the

Central

Alabama

Note,

reasonable in this matter.”

[are]

appropriate

and

Id. at 13-14.

Having submitted evidence sufficient to show breach
of

Herrod’s

guaranty

agreements

and

the

amount

of

damages stemming from those breaches, Sterling Bank has
established that it is entitled to judgment as a matter
of

law.

Herrod

has

failed

to

respond

in

any

way.

Having reviewed the record, the court sees no basis for
an affirmative defense.

Accordingly, the motion for

summary judgment will be granted.

11

An appropriate judgment will be entered.
DONE, this the 19th day of February, 2016.
/s/ Myron H. Thompson____
UNITED STATES DISTRICT JUDGE