Hospitality Group LLC et al v. Branch Banking and Trust Company

Filing 25

ORDER AND MEMORANDUM OPINION: As further set out in MO/Order, the court GRANTS 18 , BB&T's motion for summary judgment on Counter Defendants' Verified Complaint and DISMISSES with prejudice all claims asserted against BB&T. Evidentiary Hearing set for 10/9/2012 at 4:30 PM in Federal Courthouse, Huntsville, AL before Judge Abdul K Kallon to address judgment amount and attorneys' fees. Signed by Judge Abdul K Kallon on 08/21/12. (CVA)

FILED
2012 Aug-21 AM 09:54
U.S. DISTRICT COURT
N.D. OF ALABAMA

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ALABAMA
NORTHEASTERN DIVISION
HOSPITALITY GROUP LLC
and ROGER D. STANMORE,
Plaintiffs / Counter Defendants,
vs.
BRANCH BANKING AND
TRUST COMPANY,
Defendant / Counter Claimant.

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Civil Action Number
5:11-cv-4235-AKK

ORDER AND MEMORANDUM OPINION
Before the court is Defendant / Counter Claimant Branch Banking and Trust
Company’s (“BB&T”) motion for summary judgment on its claims against
Plaintiffs / Counter Defendants Hospitality Group LLC (“Hospitality Group”) and
Roger D. Stanmore (“Dr. Stanmore”) (collectively “Counter Defendants”) and for
summary judgment on Counter Defendants’ claims against BB&T. Doc. 18. For
the reasons stated herein, the motion is GRANTED as it relates to Counter
Defendants’ claims against BB&T and Counter Defendants’ liability for breach of
contract. Counter Defendants’ response to BB&T’s motion only substantively
addresses the amount owed to BB&T, accordingly, to allow the parties to finish
discovery on this issue, the court SETS an evidentiary hearing at 4:30 P.M. on
October 9, 2012, at the United States Courthouse in Huntsville, Alabama, to

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resolve the judgment amount in favor of BB&T.1
Analysis
I.

Historical and Procedural Background
Hospitality Group, an Alabama limited liability company, see doc. 1-1, at 3,

entered into a Promissory Note (the “Note”) with Colonial Bank on October 24,
2007, whereby Colonial Bank loaned Hospitality Group $8,575,683.00 (the
“Loan”), doc. 18-1, at 2-3; doc. 5-2. Additionally, on October 24, 2007, Dr.
Stanmore executed a Guaranty Agreement whereby he guaranteed all payment and
performance of Hospitality Group’s obligations to Colonial Bank (the
“Guaranty”). Doc. 18-1, at 3; doc. 5-3. The parties further secured the Loan by
executing and recording a Mortgage and Security Agreement given by Hospitality
Group in favor of Colonial Bank with the Office of the Judge of Probate of
Madison County, Alabama as instrument No. 2007102500747890 (the
“Mortgage”). Doc. 18-1, at 3; doc. 5-4.
Counter Defendants defaulted on the Note and Guaranty, and, on June 30,
2009, Colonial Bank and Counter Defendants entered into a Forbearance
Agreement (“First Forbearance Agreement”). Doc. 18-1, at 4; doc. 5-5. The
forbearance period of this initial agreement ended on December 31, 2009. Id.
From December 2009 to March 2011, Counter Defendants made no payments,

1

The court will also address attorney’s fees at this hearing. See doc. 18, at 17.
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and, due to these defaults, BB&T2 and Counter Defendants executed another
forbearance agreement on March 22, 2011 (“Second Forbearance Agreement”).
Doc. 18-1, at 5; doc. 5-6. Counter Defendants breached the terms of the Second
Forbearance Agreement, and, accordingly, BB&T elected to accelerate the
outstanding amount owed such that all amounts owed by Counter Defendants
became immediately due and payable. Doc. 18-7, at 2-3. Moreover, interest
began accruing at the default interest rate. Id. at 3. BB&T notified Counter
Defendants of this acceleration on September 23, 2011, doc. 5-8, and, as Counter
Defendants remained in default, on November 23, 2011, BB&T noticed its
intention to foreclose on the Mortgage, id. at 4.
On December 15, 2011, Counter Defendants filed a “Verified Petition for
Declaratory Judgment, Temporary Restraining Order and Permanent Injunction
and Complaint for Damages” against BB&T in the Circuit Court of Madison
County, Alabama (“Counter Defendants’ Complaint”). Doc. 1-1, at 2. The
Counter Defendants’ Complaint sought (1) a temporary restraining order
preventing BB&T from foreclosing on December 16, 2011; (2) a declaratory
judgment requiring BB&T to provide a “detailed accounting of all transactions
covered by the parties[’] Forbearance Agreement” and stating that the pending
foreclosure is invalid; and (3) judgment on Counter Defendants’ breach of

2

On August 14, 2009, the FDIC, as appointed Receiver for Colonial Bank, entered into a
purchase and assumption agreement with BB&T pursuant to which, inter alia, BB&T purchased
the Note and Guaranty. Doc. 18-1, at 4.
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contract, breach of fiduciary relationship, negligence, and wantonness claims. Id.
at 7. The Circuit Court of Madison County, Alabama granted the temporary
restraining order on December 15, 2011. Id. at 19-20. On December 16, 2011,
BB&T properly removed the action to this court and filed a Counterclaim
(“BB&T’s Counterclaim”) against Counter Defendants as well as its responsive
pleading to the Counter Defendants’ Complaint. Doc. 2. BB&T’s Counterclaim
alleged breach of contract claims against both Counter Defendants and an unjust
enrichment claim against Hospitality Group. Id. at 8-13.
BB&T also moved to dissolve the state court’s temporary restraining order,
doc. 5, and this court held an evidentiary hearing on December 22, 2011 regarding
the temporary restraining order and Counter Defendants’ motion for a preliminary
injunction. On December 27, 2011, the court granted BB&T’s motion and denied
Counter Defendants’ motion for a preliminary injunction because Counter
Defendants failed to establish the necessary elements for such relief. Doc. 6.
On February 17, 2012, Hospitality Group filed a suggestion of bankruptcy
but also notified the court that BB&T sought relief from the automatic stay in the
bankruptcy proceedings. Doc. 11. Subsequently, BB&T presented this court with
an Order from the United States Bankruptcy Court for the Northern
District of Alabama, case no. 12-80142-JAC11, providing that “the
automatic stay is hereby modified and terminated solely to permit the
Movant [BB&T] to pursue and defend to a final judgment all claims,
whether currently asserted or hereafter pled, in the matter of
Hospitality Group, LLC and Roger Stanmore vs. BB&T, et. al.,
pending in the United States District Court for the Northern District
of Alabama . . . case number 11-04235 . . .[and] that the District Court
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Litigation, including any discovery associated therewith, may proceed
to a final judgment with respect to the claims and defenses pled in the
District Court Litigation in accordance with this Order.”
Doc. 16 (quoting doc. 13-1, at 1-2) (alterations in original). Accordingly, on
March 13, 2012, the court entered a scheduling order with a discovery deadline of
October 8, 2012 and a dispositive motions deadline of December 1, 2012. Doc.
17. Nonetheless, two days later, on March 15, 2012, BB&T moved for summary
judgment in favor of its claims against Counter Defendants and summary
judgment against Counter Defendants’ claims. Doc. 18. This motion is fully
briefed, docs. 21, 22, and ripe for review.
II.

BB&T’s Counterclaim for Breach of Contract Regarding the Note and
Guaranty
Federal Rule of Civil Procedure 56(a) provides that “[t]he court shall grant

summary judgment if the movant shows that there is no genuine issue as to any
material fact and the movant is entitled to judgment as a matter of law.” See also
Gerling Global Reinsurance Corp. of Am. v. Gallagher, 267 F.3d 1228, 1233
(11th Cir. 2001). When the party bearing the burden of proof at trial moves for
summary judgment, “‘his showing must be sufficient for the court to hold that no
reasonable trier of fact could find other than for the moving party.’” Mitchell v.
Globe Life and Accident Ins. Co., 548 F. Supp. 2d 1385, 1392 (N.D. Ga. 2007)
(quoting Calderone v. United States, 799 F.2d 154, 259 (6th Cir. 1986)). In other
words, “[w]here the movant also bears the burden of proof on the claims at trial, it
must do more than put the issue into genuine doubt; indeed, [it] must remove
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genuine doubt from the issue altogether.” Id. at 1392-93 (citations and quotation
marks omitted, alteration in original).
As it relates to Hospitality Group’s breach of the Note, “Alabama law
provides that the proffer of a copy of the note and affidavit testimony as to the
amounts due under the note, as well as the defendant’s failure to make the required
payments, is sufficient to establish a plaintiff’s case to recover a note.” Wells
Fargo Bank, N.A. v. Vergos, No. 11-00439-CB-N, 2012 WL 206169, at *2 (S.D.
Ala. Jan. 24, 2012) (citing Griffin v. Am. Bank, 628 So. 2d 540, 543 (Ala. 1993)
(affirming bank’s summary judgment motion where bank presented affidavit
testimony of its president and a copy of the promissory note)). Similarly, for the
Guaranty, “‘[e]very suit on a guaranty agreement requires proof of the existence of
the guaranty contract, default on the underlying contract by the debtor, and
nonpayment of the amount due from the guarantor under the terms of the
guaranty.’” Sharer v. Bend Millwork Sys., Inc., 600 So. 2d 223, 225-26 (Ala.
1992) (quoting Delro Indus., Inc. v. Evans, 514 So. 2d 976, 979 (Ala. 1987)).
Thus, “‘[a] guarantor is bound only to the extent and in the manner stated in the
contract of guaranty.’” Pate v. Merch. Nat’l Bank of Mobile, 428 So. 2d 37, 39
(Ala. 1983) (quoting Furst v. Shows, 110 So. 299, 302 (Ala. 1926)).
In support of summary judgment on the Note and Guaranty, BB&T provides
copies of the Note and Guaranty, see docs. 5-2, 5-3, as well as affidavit testimony
from Douglas F. Elliott and Richard Deriso, BB&T Vice Presidents, regarding
defaults on payment, see docs. 18-1, 18-7. In response, Counter Defendants
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provide no evidence but summarily “dispute[] the defaults alleged by BB&T in
this matter and where the responsibility for any defaults may lie.” Doc. 21, at 3.
However, the primary substance of Counter Defendants’ argument focuses
on the amount due to BB&T, rather than actually disputing the existence of
default. See generally doc. 21. Counter Defendants concede the existence of the
Note and Guaranty, but state that “it is unclear at this point, with discovery not
being initiated by either party, exact[ly] what BB&T is rightfully owed as a result
of its acquiring Colonial’s assets.” Id. at 2-3. Counter Defendants also concede
the execution of the Second Forbearance Agreement but dispute “that BB&T has
acted in good faith since the signing of the Forbearance, and thus is the reason
Counter[] Defendants asked for an accounting in its original Complaint.” Id. at 3.
While Counter Defendants request an accounting, they fail to dispute Douglas F.
Elliott’s affidavit testimony that Counter Defendants defaulted on the Note and
Guaranty. See doc. 18-1. Indeed, this acceptance of default is further evidenced
by the next paragraph in Counter Defendants’ response to summary judgment—
“At the December 22, 2011 hearing before this Court both parties established
different values that were due and owing at the time of the hearing and the reasons
for the amount being owed at the time. An accounting of the loan disbursements,
loan payments and the amounts received by BB&T is necessary in order to resolve
the differences between the parties.” Doc. 21, at 3. Perhaps most importantly, in
the Second Forbearance Agreement Counter Defendants explicitly admit default
under the Note and Guaranty. See doc. 5-6. Put simply, there is no dispute that
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Counter Defendants defaulted; rather, the dispute exists as to the amount due and
owing to BB&T. The aforementioned hearing and Counter Defendants’ ability to
engage in discovery will provide this requested accounting.
Outside of challenging the amount at issue under the Note and Guaranty,
Counter Defendants also allege that BB&T failed to comply with the Second
Forbearance Agreement’s terms, thereby causing Counter Defendants to default on
this Agreement. Doc. 21, at 7-8. More specifically, as partial grounds for default
under the Second Forbearance Agreement, BB&T accuses Counter Defendants of
failing to execute Additional Mortgages; however, Counter Defendants allege that
BB&T failed to “perform, or employ an agent to perform, all reasonable and
necessary tasks associated with the preparation, drafting, and recording of the
Additional Mortgages” as required by the Second Forbearance Agreement. Id. at
8. The court disagrees that this warrants denying summary judgment. First, there
is no dispute that Counter Defendants defaulted under the “Repayment Terms” of
the Second Forbearance Agreement. See doc. 5-6, at 4; doc. 18-7, at 2. Thus,
based on this default, the Forbearance Agreement terminated automatically
regardless of the “Additional Mortgages.” See doc. 5-6, at 3-4.
Second, Counter Defendants’ assertion is simply inconsistent with the plain
language of the Forbearance Agreement. The Agreement states in relevant part
that “as a condition to Lender [BB&T] entering into this Agreement, Obligors
[Counter Defendants] shall provide to Lender . . . additional security for the Loan
in the form of the Additional Mortgages. The form and content of each such
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Additional Mortgage shall be subject to Lender’s sole discretion . . . . If Obligors
fail to deliver the Additional Mortgages to Lender before the expiration of the
Additional Mortgages Deadline, such failure shall be deemed an event of default
hereunder . . . . Lender agrees to perform, or employ an agent to perform, all
reasonable and necessary tasks associated with the preparation, drafting, and
recording of the Additional Mortgages.” Id. at 4-5. Thus, while the Agreement
certainly obliges BB&T to aid in preparing these Additional Mortgages, the
language fails to support Counter Defendants’ assertion that BB&T is required to
submit Additional Mortgages to Counter Defendants. See doc. 21, at 8. Thus,
absent evidence that BB&T affirmatively refused to participate in preparing and
recording Additional Mortgages—evidence Counter Defendants would currently
possess—BB&T is due summary judgment.
In sum, there is no dispute that Counter Defendants breached their
respective contracts with BB&T. As such, BB&T’s summary judgment motion is
GRANTED, and BB&T is entitled to judgments as a matter of law against
Counter Defendants. However, Counter Defendants raise legitimate concerns
about the judgment amount, and the court will resolve this dispute at the scheduled
hearing.
III.

Counter Defendants’ Complaint
BB&T also moves for summary judgment on Counter Defendants’ claims

for damages. Doc. 18, at 19. In the Verified Complaint, Counter Defendants
alleged claims against BB&T for breach of contract, breach of fiduciary
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relationship, negligence, and wantonness. Doc. 1-1. As grounds to support these
claims, Counter Defendants maintain that BB&T failed to timely process payments
made under the Second Forbearance Agreement and that BB&T failed to properly
accept payments made by Dr. Stanmore and certain affiliated companies on behalf
of Hospitality Group in November 2011. Id. at 4-5. BB&T contends that
summary judgment is warranted on these claims because it maintained no
obligation to accept payments after properly accelerating all amounts due under
the Note and Guaranty. Doc. 18, at 20. The court agrees based on the terms of the
Second Forbearance Agreement, doc. 5-6, and BB&T’s notice of acceleration to
Counter Defendants, doc. 5-8. Specifically, BB&T only forwent the exercise of its
rights and remedies under the Note and Guaranty until Counter Defendants failed
to comply with the terms of the Second Forbearance Agreement, see doc. 5-6, at 34, and it is undisputed that Counter Defendants defaulted under these terms, see
supra. See also doc. 5-2, at 4 (Note); doc. 5-3, at 6-7 (Guaranty).
Moreover, given that BB&T met its initial burden to support summary
judgment, Counter Defendants fail to “go beyond the pleadings” to establish a
“genuine issue for trial.” See Celotex Corp. v. Catrett, 477 U.S. 317, 324. Indeed,
Counter Defendants fail to respond at all to BB&T’s motion for summary
judgment as it relates to their claims against BB&T. See generally doc. 21.
BB&T aptly demonstrates no genuine issue for trial and entitlement to judgment
as a matter of law. Conversely, Counter Defendants produce no evidence
establishing BB&T’s liability for breach of contract, breach of fiduciary duty,
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negligence, or wantonness. See Walker v. Darby, 911 F.2d 1573, 1577 (11th Cir.
1990). Accordingly, the court GRANTS BB&T’s motion for summary judgment
on Counter Defendants’ Verified Complaint and DISMISSES with prejudice all
claims asserted against BB&T.

DONE the 21st day of August, 2012.

________________________________
ABDUL K. KALLON
UNITED STATES DISTRICT JUDGE

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