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
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