Appeal from Jefferson Circuit Court. (CV-90-1795). H. Stuart Leach, TRIAL JUDGE.
Rehearing Denied February 17, 1995. Released for Publication June 25, 1995.
Almon, Shores, Kennedy, Ingram, and Cook, JJ., concur. Houston, J., concurs in the result.
Joe Brown Duckworth and eight other investors, hereinafter "the Tuscaloosa Group," appeal from a judgment based on a directed verdict against their claims alleging breach of contract and fraud against National Bank of Commerce and others. The issue is whether the plaintiffs presented sufficient evidence of fraud by the Bank to survive the directed verdict motion. *fn1
The evidence, viewed in a light most favorable to the plaintiffs, indicates the following. Jim Davenport, a real estate developer, approached the Tuscaloosa Group in an effort to raise money for a real estate development project, the Buckhead subdivision in Vestavia Hills, Alabama. In March 1989, Davenport convinced the Tuscaloosa group to advance him $175,000. In consideration for this investment, Davenport offered to give the Tuscaloosa Group a promissory note for $225,000. The Tuscaloosa Group wanted some security in return for the investment. Duckworth agreed to a proposal that pledged five lots in the subdivision as security for the investment. This agreement was arranged as an option to purchase the five lots if Davenport defaulted on the promissory note. The Tuscaloosa Group demanded that Davenport obtain the consent of National Bank of Commerce, the holder of a first mortgage on the Buckhead subdivision property.
After the Tuscaloosa Group had met with Davenport to discuss the transaction, Davenport approached Duckworth, the designated spokesperson for the Tuscaloosa Group, with a document entitled "AGREEMENT." The document acknowledged the $175,000 investment made by the Tuscaloosa Group. The Agreement identified the $175,000 as a down payment on the five lots in the Buckhead subdivision. The Agreement further provided for the Tuscaloosa Group to pay an additional $175,000 and receive title to the five lots. Among other representations, Davenport assured Duckworth that the Bank knew all of the facts about the transaction and had consented to the transaction.
The Agreement, dated March 31, 1989, was signed by Davenport individually and in his capacity as president of Buckhead, Inc., a corporation owned by Davenport. At the bottom of the document was the heading "CONSENT," below which was a sentence reading: "National Bank of Commerce hereby consents to the terms and conditions of the Agreement between Buckhead, Inc., and Purchasers set forth herein." This paragraph was ostensibly signed by David Farr as vice president of National Bank of Commerce. However, in reality Farr's signature had been forged by Davenport's secretary at Davenport's direction.
After receiving this Agreement, the Tuscaloosa Group advanced Davenport the $175,000. After advancing the money to Davenport, Duckworth sent a letter, dated April 18, 1989, to Farr at National Bank of Commerce, thanking him for his assistance in the transaction. The letter from Duckworth included an executed copy of the Agreement but did not contain a copy of the $225,000 promissory note. Farr immediately noticed that his purported signature had been placed on the document and knew that the writing was not his signature. Farr did not notify Duckworth, or any member of the Tuscaloosa Group, about the forged signature, despite the fact that the letterhead on which the letter was written contained both Duckworth's telephone number and his address.
Farr asked Davenport about the document shortly after he received it in April 1989. Davenport told Farr that the Tuscaloosa Group wanted the Bank's consent to the arrangement and that he did not think that Farr would mind. Farr told Davenport that if Davenport would get the original document back then he would attempt to get the Bank's proper signature. Davenport did not get the document to Farr.
On July 26, 1989, National Bank of Commerce lent Davenport an additional $200,000 on the Buckhead subdivision development. National Bank of Commerce obtained an agreement from the holder of the second mortgage on the Buckhead property to subordinate the second mortgage to National Bank of Commerce lien securing the additional $200,000 loan. National Bank of Commerce, however, did not notify the Tuscaloosa Group of this additional lien against the Buckhead development, even though the Bank knew the Tuscaloosa Group expected to obtain clear title to the five lots.
No further action was taken with respect to the Agreement until approximately December 1989, when Farr's superiors at the Bank asked him if the signature on the document was his. Farr told them that the signature was not his and that he had never seen the document before. Approximately a year and a half later, Farr admitted to his superiors that he had seen the document in April 1989.
Davenport spent the $175,000 and subsequently defaulted on the promissory note, which was due either on December 31, 1989, or when the five lots were sold. The Tuscaloosa Group received no money from Davenport, and it was unable to obtain releases for the five lots.
Davenport's business collapsed in late 1989, and he eventually filed a bankruptcy petition.
The Tuscaloosa Group sued National Bank of Commerce, Farr, Davenport, and his wholly owned corporation, Buckhead, Inc., *fn2 alleging breach of contract and fraud, based on the Bank's failure to honor the Agreement by conveying title upon payment of an additional $175,000 and based on its failure to notify the Group that the signature was fraudulent as soon as Farr, the Bank's agent, became aware of the forged signature in April 1989. The fraud count alleged suppression and conspiracy. The cause proceeded to trial against the Bank and Farr, and the circuit court granted a motion for a directed verdict at the close of the plaintiffs' evidence, stating that the document ...