Vision Bank v. Garrett Investments, LLC et al
MEMORANDUM AND OPINION:On or before March 12, 2012, the partiesshall confer and jointly inform the Court whether a court-ordered accounting and inspection ofthis Defendants books and records will be necessary. A final judgment will be entered after theresolution of the accounting claim.. Signed by Senior Judge Charles R. Butler, Jr on 2/27/2012. (adk)
IN THE UNITED STATES DISTRICT COURT FOR THE
SOUTHERN DISTRICT OF ALABAMA
VISION BANK, a Florida Banking
CIVIL ACTION NO. 11-00169-CB-B
GARRETT INVESTMENTS, LLC,
JOHN B. FOLEY IV and LAUREN FOLEY,
OPINION and ORDER
This matter is before the Court on a motion for summary judgment filed by the Plaintiff,
Vision Bank (Doc. 32). Defendants have filed a response to the motion (Doc. 36), and Plaintiff
has filed a reply brief (Doc. 37). After considering all issues raised in light of the undisputed
facts and the applicable law, the Court finds that the motion is due to be granted as to all issues
except the applicable post-judgment interest rate.
Defendants John B. Foley IV and Lauren Foley are the sole members of defendant
Garrett Investments, LLC, a limited liability corporation. On October 29, 2009, the Foleys,
acting on behalf of Garrett Investments signed a renewal Multipurpose Note and Security
Agreement (“the Note”) in favor of Vision Bank in the principal amount of $1,299,675.00,
secured by two parcels of real property located in Baldwin County, Alabama. The Note is a
form contract, with the applicable provisions checked. One of those checked provision states:
“Single Advance: I have received all of this principal sum. No additional advances will be made
under the note.” (Note, Doc. 1-1.) By its terms, the Note is due on demand or, if no demand,
then it “is payable in 13 payments of all accrued interest monthly beginning November 29, 2009,
plus a final payment consisting of the full amount of principal, all accrued interest, charges and
fees remaining due and payable on December 29, 2010.” (Id.) The Note gives the Bank the
right to accelerate the maturity of the Note if the borrower defaults. Among the listed events of
the default is “fail[ure] to make a required payment when due.” (Id.) The Note also contains a
provisions regarding post-maturity interest, which states:
Interest will accrue after maturity on the unpaid
balance of this note on the same basis as interest accrues prior to maturity unless a
specific post maturity rate is agreed to in the next sentence.
(Id.) The next sentence is checked and states that “interest will accrue at the rate of 18.00 % per
year on the balance of this note not paid at maturity, including maturity by acceleration.” (Id.)
Finally, in the event of default, the Note permits the Bank to recover reasonable costs and
attorney’s fees incurred in attempting to collect the debt. (Id.)
On the same date the Note was executed, both John Foley and Lauren Foley signed
separate Unlimited Continuing Guaranty Agreements (“the Guaranty Agreements”) as additional
security for the Note. In these Guaranty Agreements, each of the Foleys “unconditionally
guaranteed the prompt and full payment and performance of [Garret Investments’] present and
future, joint and/or several, direct or indirect, absolute and contingent, express and implied
indebtedness, liabilities, obligations and covenants…” (Guaranty Agreements, Docs. 1-2, 1-3 ¶
Garrett Investments defaulted on the Note when it failed to make a monthly payment due
October 31, 2010 and also by failing to pay the Note at maturity on December 29, 2010. On
February 28, 2011, the Bank demanded payment of all indebtedness from the Defendants. The
amount of outstanding principal is $1,302,164.33, with prejudgment interest accruing at the rate
of 18% per annum or $651.08 per diem. In connection with its efforts to collect on the Note, the
Bank has incurred attorney’s fees in the amount of $13,542.00, and costs and expenses in the
amount of $810.95.
On April 7, 2011, Vision Bank filed this action1 asserting separate breach of contract
claims against each Defendant as well as a claim for accounting against all Defendants.
In its motion, Vision Bank seeks summary judgment on two matters. First, it asserts that
it has satisfied each of the elements necessary to recover on its breach of contract claims. In
response, Defendants argue the Bank has failed to establish one of the essential elements of its
breach of contract claim, i.e., that it performed under the contract. Second, the Bank also seeks a
declaration regarding the post-judgment interest rate that would apply to any recovery in this
action. The Bank argues that the statutory interest rate normally applicable to judgments has
been superseded by contract. The Defendants disagree.
Summary Judgment Standard
Summary judgment should be granted only if "there is no issue as to any material fact
and the moving party is entitled to a judgment as a matter of law." Fed. R. Civ. P. 56(c). The
party seeking summary judgment bears "the initial burden to show the district court, by reference
to materials on file, that there are no genuine issues of material fact that should be decided at
trial." Clark v. Coats & Clark, Inc., 929 F.2d 604, 608 (11th Cir. 1991). Once the moving party
has satisfied his responsibility, the burden shifts to the nonmoving party to show the existence of
a genuine issue of material fact. Id. Where the moving party has the burden of proof at trial,
that party also has a greater burden on summary judgment. In that case:
The complaint invokes the Court’s diversity jurisdiction under 28 U.S.C. § 1332. It alleges
an amount in controversy greater than $75,000, that the Bank is Florida banking institution with its
principal place of business in Florida and that the Defendants are Alabama citizens.
[The] moving party must show affirmatively the absence of a genuine issue of
material fact: it must support its motion with credible evidence ... that would
entitle it to a directed verdict if not controverted at trial. In other words, the
moving party must show that, on all the essential elements of its case on which it
bears the burden of proof at trial, no reasonable jury could find for the nonmoving party. If the moving party makes such an affirmative showing, it is
entitled to summary judgment unless the non-moving party, in response, come[s]
forward with significant, probative evidence demonstrating the existence of a
triable issue of fact.
United States v. Four Parcels of Real Property, 941 F.2d 1428, 1438 (11th Cir. 1991) (citations
and internal quotation marks omitted; emphasis in original).
Breach of Contract
In support of its motion for summary judgment, Vision Bank has presented signed copies
of the Note and Guaranty Agreements. The Bank has also presented an affidavit from Karen
Harmon, Senior Vice-President for Operations, attesting that the Note is in default, that demand
has been made and also setting forth the outstanding balance. Defendants argue that the Bank’s
claim fails on summary judgment because it has failed to present affirmative evidence of
performance, an essential element of a breach of contract claim. Specifically, Defendants assert
that “Vision Bank has failed to sufficiently establish that it fully performed its obligations under
the alleged contract . . or that Vision Bank actually loaned the money to Garrett.” Def.’s Br.,
Doc. 36, 2. In the context of a promissory note, the Alabama Supreme Court has held that
evidence similar to that presented by Vision Bank is sufficient. See Griffin v. American Bank,
628 So. 2d 540, 543 n. 4 (Ala. 1993) (copy of promissory note along with affidavit from bank
officer sufficient to support summary judgment). Furthermore, the following statement from
Note itself provides evidence of the Bank’s performance:
Single Advance: I have received all of this principal sum. No additional
advances will be made.
Note, Doc. 1-1. This acknowledgement by Garrett Investments that it had received the principal
sum (the amount of which is set forth elsewhere in the Note) proves the Bank’s performance. As
far as the Court can determine, Vision Bank had no other obligations under the contract. Thus,
evidence establishing the existence of the promissory note, Garrett Investments’ default on that
note and the amount owed is sufficient to establish a breach of contract claim against Garrett
Vision Bank’s claims against the guarantors, John Foley and Lauren Foley, are
uncontested. To obtain recovery from the guarantors, the Bank must prove: (1) “the existence of
the guaranty contract,” (2) “default on the underlying contract by the debtor,” and (3)
“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) (citation omitted). Those elements
having been met, Vision Bank is entitled to summary judgment on its breach of contract claims
against the guarantors.
The Defendants have sprinkled their summary judgment response with a few nonresponsive arguments that require only minimal attention. First, they argue that there are
disputes as to the value of the property used as security for the Note. That fact has nothing to do
with Defendants’ liability on the Note. Second, they point out that Vision Bank has not
exercised its right to foreclose on the property. While Vision Bank does have the right to
foreclose, foreclosure is not a condition precedent to recovery. See Note ¶ 13, Doc. 1-1 (setting
out Bank’s rights under security agreement in event of default). Finally, Defendants aver that
they have a buyer for the property at issue and request that the Court withhold judgment to allow
time for the sale to take place. That is a matter for settlement negotiations, not a defense to
Post-Judgment Interest Rate
Post-judgment interest in a civil case is determined by 28 U.S.C. § 1961(a) which
provides that the rate of interest “shall be calculated from the date of the entry of the judgment [ ]
at a rate equal to the weekly average 1-year constant maturity Treasury [bill] . . . for the calendar
week preceding the date of the judgment.” Id.; See also G.M. Brod & Co., Inc. v. U.S. Home
Corp., 759 F.2d 1526, 1542 (11th Cir. 1985) (holding that § 1961 applies in diversity cases).
Vision Bank contends that a different rate applies in this instance—the 18% default interest rate
specified in the Note. The issue is actually twofold: (1) Can the parties override the statutory
rate by agreement? (2) If so, does the contract in this case demonstrate such an agreement?
Although the Eleventh Circuit has never addressed the issue, the consensus among courts
that have is that parties may agree to a different post-judgment interest rate. See, e.g., FCS
Advisors, Inc. v. Fair Finance Co., Inc., 605 F.3d 144, 148-49 (2nd Cir. 2010); In re Riebesell,
586 F.3d 782, 794 (10th Cir. 2009); Cent. States, Se. & Sw. Areas Pension Fund v. Bomar Nat'l,
Inc., 253 F.3d 1011, 1020 (7th Cir. 2001); In re Lift & Equip. Serv., Inc., 816 F.2d 1013, 1018
(5th Cir. 1987); Carolina Pizza Huts, Inc. v. Woodward, 67 F.3d 294 (4th Cir. 1995)
(unpublished table decision). However, “federal law requires ‘language expressing an intent that
a particular interest rate apply to judgments or judgment debts' to be ‘clear, unambiguous and
unequivocal.’” Jack Henry & Associates, Inc. v. BSC, Inc., 753 F.Supp.2d 665, 670 (quoting
FCS Advisors, 605 F.3d at 148). This requirement arises from the principal that the debt is
extinguished upon entry of judgment and a new debt, a judgment debt, is created. Id. “The
parties must explicitly state that they are agreeing to a postjudgment interest rate.” Id.
The Note in this case does not contain the type of “clear, unambiguous and unequivocal
language” necessary to circumvent the statutory interest rate. Here, the parties merely agreed
that “interest will accrue at the rate of 18.00% per year on the balance of this note if not paid at
maturity, including maturity by acceleration.” The Bank argues that “post-maturity” includes all
times after the entry of judgment. Similar arguments have been uniformly rejected. See, e.g., In
re Riebesell, 586 F.3d at 794 (contract’s default interest rate provision not sufficient to override
statutory rate); Westinghouse Credit Corp. v. D’Urso, 371 F.3d 96, 102 (2nd Cir. 2004)
(contractual agreement adding 15% interest rate to arbitration award from “date payment was
due” did not override statutory rate); Jack Henry, 753 F.Supp.2d at 670-72 (interest rate
applicable to past due amounts insufficient). Because the Note does not contain an express
provision for a post-judgment interest rate, Vision Bank is entitled to post-judgment interest only
to the extent provided by § 1961(a).
For the reasons set forth above, the Court finds that the Plaintiff is entitled to summary
judgment on its breach of contract claims. It is not, however, entitled to summary judgment on
its claim regarding the post-judgment interest rate. On or before March 12, 2012, the parties
shall confer and jointly inform the Court whether a court-ordered accounting and inspection of
this Defendant’s books and records will be necessary. A final judgment will be entered after the
resolution of the accounting claim.
DONE and ORDERED this the 27th day of February, 2012.
s/Charles R. Butler, Jr.
Senior United States District Judge
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