Appeal from St. Clair Circuit Court. (CV-91-32). Robert Austin, Trial Judge.
Released for Publication April 25, 1995.
Kennedy, Almon, Shores, Houston, and Cook, JJ., concur.
The opinion of the court was delivered by: Kennedy
The plaintiffs, William Jack Sexton and Marsha C. Sexton sued St. Clair Federal Savings Bank ("St. Clair"), alleging breach of contract and breach of fiduciary duty. The Sextons appeal from a partial summary judgment 1) in favor of St. Clair on the Sextons' fiduciary relationship claim and 2) holding that the Sextons could not recover certain damages on their breach of contract claim. *fn1
This case arose out of an loan agreement between the Sextons and St. Clair, through which the Sextons borrowed approximately $160,000 from St. Clair to build a residence. The loan was secured by a construction mortgage. The loan agreement provided that St. Clair was to disburse the loan proceeds in increments approximating the stage of construction of the residence.
Several weeks after construction had started, St. Clair notified the Sextons that the stage of construction did not justify the amount of proceeds that had been drawn by the Sextons' builder. St. Clair advised the Sextons that, given the situation, it would not permit any more draws on the loan proceeds at that time. According to the Sextons, they learned that all but $17,000 of the loan proceeds had been disbursed by St. Clair and that approximately $93,000 of the monies disbursed had not been used by their builder on the construction of the residence.
The Sextons were unable to complete the construction, and they ceased making the required payments on the construction loan. St. Clair sued, seeking an order of foreclosure, the sale of the uncompleted residence to satisfy the indebtedness on the loan, and any deficiency that might exist after the sale. The Sextons counterclaimed, alleging that St. Clair had failed to monitor construction and to disburse the loan proceeds in proportion to the stage of construction consistent with the loan agreement. They alleged that St. Clair had thereby breached the loan agreement and had breached a fiduciary duty to them. In addition to punitive damages, the Sextons sought compensatory damages for what they claimed were their "direct, consequential, and incidental losses, including an amount for their mental anguish, emotional suffering, annoyance [and] inconvenience," and they sought to recover purported lost profits from their sale of investment property. They alleged that they sold that investment in an effort to raise money to complete the construction.
St. Clair moved for a partial summary judgment on the Sextons' counterclaims. As indicated, that motion was granted by the trial court. On appeal, the Sextons argue: 1) that the trial court erred in determining that mental anguish-type damages were not recoverable on their contract claim; they say this case falls within an exception to the general rule prohibiting such damages; 2) that the "fiduciary relationship" claim was not properly before the trial court for adjudication and that, in any event, they produced legally adequate evidence to preclude a summary judgment for the defendant on that claim, and; 3) that the trial court erred in holding that the Sextons could not recover the lost profits they claimed resulted from the sale of investment property to raise money to complete the construction.
As to the first issue raised by the Sextons -- whether they can recover mental anguish-type damages -- the trial court stated that in limited circumstances damages for mental anguish can properly be awarded on a breach of contract claim. The trial court correctly stated:
"Damages cannot be received for mental anguish arising from a breach of contract. There are exceptions to that general rule and they are as follows:
"'Where the contractual duty or obligation is so coupled with matters of mental concern or solicitude, or with the feelings of the party to whom the duty is owed, that a breach of that duty will necessarily or reasonably result in mental anguish or suffering, it is just that damages therefor be taken into consideration and awarded....
"'Another exception is where the breach of the contract is tortious, or attended with personal injury, damages for mental anguish may be awarded.'"
C. R. 211, quoting B & M Homes, Inc. v. Hogan, 376 So. 2d 667, 671 (Ala. 1979) (as B & M Homes quoted earlier cases). The court added: "'The ground on which the right to recover such damages is denied, is that they are too remote, were not within the contemplation of the parties, and that the breach of the contract is not such as will naturally cause mental anguish.'" C. R. 211, quoting Stead v. Blue Cross-Blue Shield of Alabama, 346 So. 2d 1140, 1143 (Ala. 1977). The court concluded that, based on undisputed material facts, as a matter of law "the case ... does not fall into those narrow exceptions permitting the recovery [of damages] for mental anguish and suffering. ...