Gaddy v. SE Property Holdings, LLC

218 So. 3d 315
CourtSupreme Court of Alabama
DecidedMay 27, 2016
Docket1140578, 1140722
StatusPublished
Cited by3 cases

This text of 218 So. 3d 315 (Gaddy v. SE Property Holdings, LLC) is published on Counsel Stack Legal Research, covering Supreme Court of Alabama primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Gaddy v. SE Property Holdings, LLC, 218 So. 3d 315 (Ala. 2016).

Opinions

BOLIN, Justice.

On May 4, 2005, Water’s Edge, LLC (“Water’s Edge”), was formed for the purpose of purchasing and developing real estate. When Water’s Edge was formed, Scott Raley was the sole member and manager. In June 2005, Raley resigned as a member of Water’s Edge, and new members were added, including Dewey Miller (10%); Gerald Lawhorn (10%); Terry Mullins (5%); Irma E. Cook (5%); Stanley Minkinow (10%); Medino, LLC (10%); Robert G. Mayes, Sr. (10%); Parks, LLC (10%); Gulf Shores Marina, LLC (10%); Fort Morgan Investors II, LLC (10%); and Capp ‘N Monk. Investments, LLC (10%). Raley continued to serve as one of the managers of Water’s Edge. All the newly admitted individual members, along with the managers of the limited liability companies that were members of Water’s Edge, signed an amendment to Water’s Edge’s operating agreement, reflecting these changes. .

On June 2, 2005, Water’s Edge purchased lots 62-69 of “Re-Subdivision A” located in Baldwin County and commonly referred to as Gulf Shores Yacht Club and Marina (hereinafter “the property”). Fairfield Financial Services, Inc. (“Fair-field”), loaned Water’s Edge $12.8 million of-the $13 million needed to purchase the property. In October 2006, Water’s Edge redeemed the membership interests held by Mayes and Capp ‘N Monk Investments, LLC, and those interests were sold to new members, McRhee Hugghins and Paul Spina, respectively. In March 2007, Water’s Edge redeemed the membership interest of Medino, LLC, and simultaneously sold the interest to Donnie Tucker.

[317]*317In 2006, Fairfield notified Water’s Edge that it would not renew Water’s Edge’s loan. ■ By this time, there were- four managers of Water’s Edge: Raley, Billy Parks, Wayne Burnett, and Jeffrey M. Boyd. The members of Water’s Edge authorized the managers to seek new financing. In December 2006, Vision Bank agreed to lpan Water’s Edge $14.6 million. Vision. Bank later merged with SE Property Holdings, LLC (hereinafter referred to as “SEPH”). The debt was structured as two loans—one for $10 million and one for $4.5 million. SEPH entered into a participation loan with Park National Bank, which funded 100% of the $14.5 million in loans to Water’s Edge. SEPH serviced the loans and evaluated construction draws on the loans, among other things.

Certain of the members of Water’s Edge signed agreements guaranteeing all of Water’s Edge’s debt to SEPH. For purposes of these appeals, those members or those having membership interests in Water’s Edge by virtue of their ownership of corporate members and who agreed to guarantee the debt included Jerry Gaddy, Earl George, Kent Rector, Richard Harrell, David Harrell, Stewart Harrell, Terry Mullins, Gerald Lawhorn, Dewey Miller, and David Thomas (hereinafter collectively referred to as “the guarantors”).1 Each of the guarantors signed two agreements. One of the agreements was a “continuing limited guaranty agreement” related to the $4,5 million loan. The agreement signed by the guarantor provided that the guarantor was “jointly and severally, unconditionally and absolutely” guaranteeing certain sums under the, loan. The agreement further provided that, notwithstanding anything to the contrary, the guarantor was limited to a specific amount, which varied with each guarantor. The second agreement related to the $10 million loan. That agreement was a “continuing unlimited guaranty agreement” and provided that the guarantor was “jointly and severally, unconditionally and absolutely” guaranteeing the sums under the loan. The second agreement was not limited in amount.

In 2008, the managers of Water’s Edge, with the approval of the members, asked to borrow an additional $3.5 million from SEPH. SEPH agreed to loan Water’s Edge $2,5 million. In May 2008, the guarantors each signed an acknowledgment and ratification and consented to amend the unlimited guaranty relating to the $10 million loan to include a guaranty of the $2.5 million loan. At this point, Water’s Edge had $17 million in loans from SEPH.

In October 2008, SEPH notified Water’s Edge that the loans were in default. In March 2009, SEPH renewed its participation loan with Park National Bank regarding the loans to Water’s Edge. In June 2010, SEPH sent the guarantors a notice of default and a demand for payment.

On October 11, 2010, SEPH sued Water’s Edge and 28 individuals, including the guarantors, based on the -promissory notes and guaranty agreements. Individu[318]*318al guarantors Gaddy, George, and the Har-rells filed counterclaims against SEPH. They also filed third-party complaints against certain employees of SEPH: Daniel Sizemore, chief executive officer; Darrell Melton, business-development officer; Andrew Braswell, executive vice president; and Tracy Rippy, credit analyst. They alleged that SEPH and its officers were part of a scheme with developer Scott Raley to solicit investments in the property using false information and sought damages and rescission of the guaranty agreements.

Individual guarantor Kent Rector filed a counterclaim against SEPH. Rector also filed a third-party complaint against certain fictitiously defendants. Rector later amended his third-party complaint to name Melton as a third-party defendant. Miller and Mullins filed a counterclaim against SEPH. Miller and Mullins also filed third-party complaints against certain fictitiously named defendants and later amended their complaints to include only Melton. Thomas filed a counterclaim against SEPH but filed no third-party claims. Lawhorn filed a counterclaim and a third-party complaint against fictitiously named defendants.

Gaddy and George named Park and bank officers Sizemore, Braswell, Melton, and Rippy as third-party defendants. They alleged the officers had arranged for them to sign the guaranties in return for fraudulently overvalued interests in Water’s Edge.

The trial began on November 3, 2014. At the close of SEPH’s case, the defendants filed a motion for a judgment as a matter of law (“JML”) pursuant to Rule 50, Ala. R. Civ. P. SEPH also filed a motion for a JML. At the close of all the evidence, the guarantors and the other defendants renewed them motions, as did SEPH.

The trial court did not submit the case to the jury but, instead, discharged the jury on November 17, 2014. On November 25, 2014, the trial court entered an order granting SEPH’s motion for a JML. The trial court found the guarantors and the other defendants jointly and severally liable in the amount of $10,879,588.68 based on the continuing unlimited guaranty agreements. The trial court found each of them individually liable for differing amounts totaling $5,632,746.35 based on the continuing limited guaranty agreements they had signed. The trial court’s order did not account for settlements entered into during the trial, nor did the order reference three defendants who had filed petitions in bankruptcy during the course of the litigation.

On December 17, 2014, the trial court entered an order taking into account the settlements and finding the guarantors and the other defendants jointly and severally liable for $9,084,076.14 based on the continuing unlimited guaranty agreements. The trial court found each of them individually liable for differing amounts totaling $2,297,431 based on the continuing limited guaranty agreements they had signed. The December 17, 2014, order did not expressly refer to the three defendants who had filed petitions in bankruptcy but stated that “[a]ll other claims not herein or otherwise disposed of are dismissed with prejudice.”

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Bluebook (online)
218 So. 3d 315, Counsel Stack Legal Research, https://law.counselstack.com/opinion/gaddy-v-se-property-holdings-llc-ala-2016.