Wells Fargo Bank, N.A. v. Tom Roberts Construction Co., Inc. et al

Filing 55

MEMORANDUM OPINION as more fully set out. Signed by Magistrate Judge Harwell G Davis, III on 02/12/15. (SPT )

FILED
2015 Feb-12 PM 03:37
U.S. DISTRICT COURT
N.D. OF ALABAMA

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF ALABAMA
EASTERN DIVISION

WELLS FARGO BANK, N.A.,
Plaintiff
vs.
TOM ROBERTS CONSTRUCTION
CO., INC., et al.,

Defendants

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) Case No. 1:13-cv-01566-HGD
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MEMORANDUM OPINION
This matter is before the undersigned U.S. Magistrate Judge based on the
consent of the parties pursuant to 28 U.S.C. § 636(c). See Doc. 54. Plaintiff, Wells
Fargo Bank, N.A. (Wells Fargo), has filed a motion to strike the jury demand of
defendants, Tom Roberts Construction Company, Inc. (TRCC) and Thomas Scott
Roberts, III. (Doc. 23). Wells Fargo also has filed a motion for summary judgment.
(Doc. 35). Defendants have had the opportunity to respond to each of these motions
and they are now ready for disposition.

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SUMMARY JUDGMENT STANDARD
“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). Plaintiff, as the party seeking summary
judgment, bears the initial responsibility of informing the district court of the basis
for its motion, and identifying those portions of the pleadings, depositions, answers
to interrogatories, and admissions on file, together with the affidavits, if any, which
it believes demonstrates the absence of a genuine issue of material fact. Clark v.
Coats & Clark, Inc., 929 F.2d 604, 608 (11th Cir. 1991) (quoting Celotex Corp. v.
Catrett, 477 U.S. 317, 323 (1986)). A genuine issue of material fact is shown when
the non-moving parties produce evidence so that a reasonable factfinder could return
a verdict in their favor. Greenberg v. BellSouth Telecomms., Inc., 498 F.3d 1258,
1263 (11th Cir. 2007). If the non-moving parties fail to make a sufficient showing
on an essential element of their case with respect to which they have the burden of
proof, the moving party is entitled to summary judgment. Celotex, 477 U.S. at 323.
In reviewing whether the non-moving parties have met their burden, the court must
stop short of weighing the evidence and making credibility determinations of the truth
of the matter; the evidence of the non-movants is to be believed, and all justifiable
inferences are to be drawn in their favor. Tipton v. Bergrohr GMBH-Siegen, 965 F.2d
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994, 998-99 (11th Cir. 1992) (internal citations and quotations omitted). However,
speculation or conjecture cannot create a genuine issue of material fact. Cordoba v.
Dillard’s, Inc., 419 F.3d 1169, 1181 (11th Cir. 2005). A “mere scintilla of evidence”
in support of the non-moving party also cannot overcome a motion for summary
judgment. Young v. City of Palm Bay, 358 F.3d 859, 860 (11th Cir. 2004).
BACKGROUND INFORMATION
The material facts giving rise to this suit are not in dispute. Wells Fargo is the
successor-by-merger to Wachovia Bank, N.A. (Wachovia), and the owner and holder
of all loan documents described and referenced in the complaint by Wells Fargo. The
Court took judicial notice of both the merger between Wells Fargo and Wachovia and
its legal effect. (See Doc. 46). The Court took notice that Wachovia merged with
Wells Fargo, as reflected in the Certificate of Merger and letter from the Comptroller
of the Currency attached as Exhibit A to plaintiff’s request. (See Docs. 45, Ex. A &
46). The Court further took notice that, as a result of the merger between Wells Fargo
and Wachovia, Wells Fargo assumed all of the rights and obligations of Wachovia.
(Doc. 46 at 3). Furthermore, under Alabama law, “all rights, immunities, and
franchises of the merged entities, of a public as well as a private nature, and all debts
and obligations due the merged entities, are taken and deemed to be transferred and
vested in the surviving or resulting entity without the necessity of any deed or other
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instrument of conveyance to the surviving or resulting entity . . . .” Ala. Code
§ 10A-1-8.02(i)(2). Thus, there is no genuine issue of material fact as to Wells
Fargo’s entitlement to enforce the loans made by Wachovia in this case. SE Prop.
Holdings, LLC v. Sandy Creek II, LLC, 954 F.Supp.2d 1322, 1348 (S.D.Ala. 2013).
On or about May 1, 2006, Wells Fargo1 made a loan, characterized as a line of
credit, to TRCC in the amount of $250,000.00 (the “Loan”). The Loan is evidenced
by a Promissory Note (the “Note”) dated May 1, 2006, made by TRCC and signed by
Mr. Roberts, payable to Wachovia (now Wells Fargo) in the amount of $250,000.00.
(See Doc. 35 at Ex. 1). The Note is a demand note and payable in full, including all
principal and accrued interest, upon demand. (See id.).
In connection with this loan, Mr. Roberts executed an Unconditional Guaranty
(Guaranty Agreement) dated May 1, 2006, in favor of Wells Fargo. (Id. at Ex. 3).
Under the terms of the Guaranty Agreement, Mr. Roberts guaranteed the payment and
performance of all of TRCC’s obligations under the Loan. (Id.). That document also
states that default events include, among others, “failure of timely payment or
performance of the Guaranteed Obligations or a default under any Loan Document.”

1

Although the line-of-credit agreement that is the basis of this suit was actually negotiated
between defendants and Wachovia Bank, because Wells Fargo is Wachovia’s successor-in-interest,
reference is generally made to Wells Fargo even when the undertaking may have actually involved
Wachovia Bank.
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(Id. at 3). According to the affidavit of André Taylor, Assistant Vice President and
Loan Recovery Unit Officer for Wells Fargo, the underlying loan is in default due to,
among other things, defendants’ failure to pay all the amounts of outstanding
principal and accrued interest when due under the terms of the note. (Doc. 35, Ex. A,
Taylor Aff., ¶ 10). This is verified by Wells Fargo bank records submitted by
plaintiff. (See Doc. 35 at Ex. 2).
By letter dated December 4, 2009, Wells Fargo informed defendants that the
Loan was in default and demanded immediate payment of principal and interest
owned under the Note. (Doc. 35, Ex. 4, First Demand Letter). By letter dated July 3,
2013, Wells Fargo again informed defendants that the Loan was in default and again
demanded immediate payment of all amounts due. (Id. at Ex. 5, Second Demand
Letter). According to André Taylor, defendants failed to tender the amounts due and
payable under the terms of the Loan. (Doc. 35, Ex. A, Taylor Aff., ¶ 13). As of
June 6, 2014, the outstanding indebtedness due under the Note was $295,828.67,
consisting of $248,498.42 in outstanding and unpaid principal, $45,039.96 in accrued
and unpaid interest, and late charges in the amount of $2,290.29. Interest accrues
under the Note at a per diem rate of $25.89. (Id., ¶ 14).
The terms of the Promissory Note state, in pertinent part, as follows:

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Borrower promises to pay to the order of Bank, in lawful
money of the United States of America, at its office
indicated above or wherever else Bank may specify, the
sum of Two Hundred Fifty Thousand and No/100
Dollars ($250,000.00) or such sum as may be advanced
and outstanding from time to time, with interest on the
unpaid principal balance at the rate and on the terms
provided in this Promissory Note (including all renewals,
extensions or modifications hereon, the “Note”).
(Doc. 35, Ex. 1, Promissory Note, at 1).
The Note sets the interest rate at the bank’s prime rate plus .5%. It further sets
a rate of interest, in the event of default, at the prime rate plus 3%. In addition, it
provides for payment of a late charge equal to 5% of each payment past due for 10
or more days and for the payment of reasonable attorneys’ fees and other collection
costs incurred to enforce or collect under the Note. (Id. at 1-2).
The Note further states:
DEMAND NOTE. This is a demand Note and all
Obligations hereunder shall become immediately due and
payable upon demand. In addition, the Obligations
hereunder shall automatically become immediately due and
payable if Borrower or any guarantor or endorser of this
Note commences or has commenced against it a
bankruptcy or insolvency proceeding.
REMEDIES. Upon the occurrence of a default in the
payment of the Obligations or a Default (as defined in the
other Loan Documents) under any other Loan Document,
Bank may at any time thereafter, take the following
actions: Bank Lien. Foreclose its security interest or lien
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against Borrower’s accounts without notice. Cumulative.
Exercise any rights and remedies as provided under the
Note and the other Loan Documents, or as provided by law
or equity.
(Id. at 3).
The Unconditional Guaranty states, in pertinent part, as follows:
To induce bank to make, extend or renew loans, advances,
credit or other financial accommodations to or for the
benefit of Borrower, which are and will be to the direct
interest and advantage of the Guarantor, and in
consideration of loans, advances, credit, or other financial
accommodations made, extended or renewed to or for the
benefit of Borrower, which are and will be to the direct
interest and advantage of the Guarantor, Guarantor hereby
absolutely, irrevocably and unconditionally guarantees to
Bank and its successors, assigns and affiliates the timely
payment and performance of all liabilities and obligations
of Borrower to Bank and its affiliates, including, but not
limited to, all obligations under any notes, loan
agreements, security agreements, letters of credit,
instruments, accounts receivable, contracts, drafts, leases,
chattel paper, indemnities, acceptances, repurchase
agreements, overdrafts, and Loan Documents, as defined
below, and all obligations of Borrower to Bank or any of
its affiliates under any swap agreement . . . however and
whenever incurred or evidenced, whether primary,
secondary, direct, indirect, absolute, contingent, due or to
become due, now existing or hereafter contracted or
acquired, and all modifications, extensions and renewals
thereof, (collectively, the “Guaranteed Obligations”).
(Doc. 35, Ex. 3, Unconditional Guaranty, at 1).

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The Guaranty Agreement also provides that default occurs, among other things,
if there is a “failure of timely payment or performance of the Guaranteed Obligations
or a default under any Loan Document.” (Id. at 3). The Guaranty Agreement also
requires the Guarantor to pay all of the bank’s reasonable expenses incurred to
enforce or collect any of the Guaranteed Obligations, including attorneys’ fees and
expenses. (Id. at 4). Both the Note and the Guaranty Agreement provide for the
waiver of jury trial. (Doc. 35, Ex. 1, Promissory Note, at 5; Ex. 3, Unconditional
Guaranty, at 8).
DISCUSSION
It is undisputed that the loan documents, including the Note, and Guaranty
Agreement provide for their interpretation pursuant to the laws of the State of
Alabama. (Doc. 35, Ex. 1, Promissory Note, at 4; Ex. 3, Guaranty Agreement, at 4).
There has been no claim by defendants that the law of Alabama is inapplicable to this
litigation. Therefore, the resolution of Wells Fargo’s claims is governed by Alabama
law.
The Note itself is an unconditional promise to pay all amounts due under its
terms. (See Doc. 35, Ex. 1, Promissory Note; see also Ala. Code § 7-3-106).
Furthermore, defendant Mr. Roberts admits that he signed the Note and the Guaranty
Agreement. (See Doc. 30-1, Roberts Aff.).
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According to the Alabama Supreme Court,
When the terms of a contract are clear and certain, it is the
duty of the court and not the jury to analyze and determine
the meaning of the contract. C. F. Halstead Contractor,
Inc. v. Dirt, Inc., 294 Ala. 644, 320 So.2d 657 (1975).
Moreover, if an instrument is unambiguous, its
construction and effect are questions of law which may be
decided by summary judgment. Warrior Drilling &
Engineering Co. v. King, 446 So.2d 31 (Ala. 1984);
Federal Land Bank of New Orleans v. Terra Resources,
Inc., 373 So.2d 314 (Ala. 1979).
Smith v. Citicorp Person-to-Person Fin. Ctrs, Inc., 477 So.2d 308, 310-11 (Ala.
1985). The Note and Guaranty Agreement in the present case are such instruments;
thus, there is no material issue of fact created by the clear terms of the contracts as to
the nature of the loan. The Note provides that it is payable on demand, which Wells
Fargo has accomplished on two separate occasions. Consequently, Wells Fargo is
entitled to summary judgment in the amount of the unpaid principal, plus accrued
interest through the date of judgment and reasonable attorneys’ fees and expenses.
Likewise, the Guaranty represents Mr. Roberts’ unconditional promise to
guarantee TRCC’s payment and complete performance under the Note. The evidence
clearly establishes that TRCC defaulted on its obligations under the Note and, as of
June 6, 2014, owed $295,828.67.

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Defendants’ claim that Wells Fargo has to prove that every single advance
under the line of credit to TRCC specifically benefitted Mr. Roberts is without merit.
A plain reading of the Guaranty Agreement reflects that this language merely affirms
that the grant of credit to TRCC is to Mr. Roberts’ direct interest and advantage.
Likewise, the fact that Mr. Taylor did not have direct knowledge of the loan at issue
or the merger documents is irrelevant. As an officer of the bank, he is entitled to rely
on Wells Fargo’s books and records in establishing the material facts in this case.
Mr. Roberts has breached his obligation under the Guaranty Agreement by failing to
tender the amount due to Wells Fargo under the Note. Therefore, Wells Fargo is
entitled to summary judgment as to its breach of guaranty claim against Mr. Roberts.
A separate order will be entered granting the motion for summary judgment with
regard to all claims.
The Court further finds that, under the terms of the Note and the Guaranty
Agreement, TRCC and Mr. Roberts are liable for reasonable attorney’s fees and costs
of collection. Plaintiff shall file its petition for attorney’s fees and costs within
fourteen (14) days from the date of entry of the Memorandum Opinion and Final
Judgment.

Defendants shall file any response thereto within seven (7) days

thereafter.

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Because the Court is granting plaintiff’s motion for summary judgment with
regard to all claims, its motion to strike defendants’ jury demand (Doc. 23) is moot.
DONE and ORDERED this 12th day of February, 2015.

HARWELL G. DAVIS, III
UNITED STATES MAGISTRATE JUDGE

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