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Whitney Bank v. Pullum-Cecilio, LLC

United States District Court, S.D. Alabama, Southern Division

June 15, 2015

WHITNEY BANK, a Mississippi state chartered bank, Plaintiffs,
PULLUM-CECILIO, LLC., et al., Defendants.


CALLIE V. S. GRANADE, District Judge.

This matter is before the Court on the motion for summary judgment filed by Plaintiff, Whitney Bank ("Whitney Bank") (Doc. 13), as well as Defendants' response in opposition thereto (Doc. 16), and Whitney Bank's supplemental response (Doc. 20). For the reasons stated below, the motion for summary judgment is GRANTED. Also before the Court is Whitney Bank's motion for reasonable attorneys' fees (Doc. 13), for the reasons stated below, that motion is GRANTED, in part, and DENIED, in part.


This case arises from an unpaid promissory note and a financial institution's attempts to collect the debt from both the borrower and its guarantors. Plaintiff Whitney Bank brought this action against defendants, Pullum-Cecilio, LLC., ("Pullum-Cecilio"), Bart R. Pullum ("B. Pullum"), Rebecca A. Pullum ("R. Pullum"), Shan Cecilio ("S. Cecilio") and the now deceased, Frank Cecilio ("F. Cecilio"), alleging state-law causes of action for breach of contract regarding their repayment obligations under a Renewal Promissory Note ("the Note"). Federal jurisdiction was properly predicated on 28 U.S.C. § 1332, as the Complaint sufficiently alleged complete diversity of citizenship between Whitney Bank and each defendant, and that the amount in controversy exceeds the $75, 000 jurisdictional threshold.

On April 28, 2015, Pullum-Cecilio filed for voluntary Chapter 11 bankruptcy in the United States Bankruptcy Court for the Northern District of Florida, Pensacola Division, as Case No. 15-30477 (Doc. 21), which automatically stayed this case as to Pullum-Cecilio. (Doc. 22). Furthermore, during the planning meeting on March 30, 2015, parties advised the Court of the death of Frank Cecilio. (Doc. 15). Whitney Bank's motion for summary judgment only involves S. Cecilio, R. Pullum and B. Pullum, (the "Defendants"). (Doc. 13).


On November 20, 2013, Defendant Pullum-Cecilio executed and delivered to Hancock Bank, (now known as "Whitney Bank"), a Renewal Promissory Note in the principal amount of $864, 679.68 (Buntin aff., Doc. 13-2, Exh. A, ¶ 1). The Renewal Note specified that interest would accrue at eight percent per annum on the outstanding principal balance due. Monthly payments of $9370.00 would commence on December 15, 2013. (Id. at ¶ 3). The Renewal Note required all unpaid principal, interest and expenses outstanding to be paid in full as of December 14, 2014.[1] (Id.) Interest accrued on the Renewal Note at eight percent (8%) per annum on the outstanding principal balance due. (Id. at ¶ 4). In case of default, "interest shall accrue and Maker will pay interest at the rate of eighteen (18%) percent per annum on the outstanding principal balance due." (Id.).

The Renewal Note was secured by collateral, including mortgages on multiple pieces of real estate in Santa Rosa County, Florida. (Id. at ¶ 2). The Renewal Note stated that the Maker, Pullum-Cecilio, waived "demand, presentment, protects, notice of non-payment, notice of protest and any and all lack of diligence or delay in collection or the filing of suit hereon which may occur." (Id. at ¶ 9.1). The Renewal Notice also contained a costs of collection provision, which stated in the event of default, threatened event of default, or the Renewal Promissory Note "is collected in whole or in part through legal proceedings of any nature, " then, "added to the unpaid principal balance hereof all costs of collection, including, but not limited to, reasonable attorneys' fees" (Id. at ¶ 10). The Renewal Note's choice of law provision provided that the governing law, venue and jurisdiction is Alabama. (Id. at ¶ 14).

The record also establishes that Rebecca Pullum and Shan Cecilio signed Guaranties on November 18, 2013 backing Pullum-Cecilio's Renewal Note. (Buntin aff., Doc. 13-2, Exhs. D-E). On November 20, 2013, Bart R. Pullum also signed a Guaranty Agreement guaranteeing Pullum-Cecilio's Renewal Note. (Buntin aff., Doc. 13-2, Exh. C) Each Guaranty Agreement had an identical provision that stated:

Guarantor hereby absolutely and unconditionally guarantees to Lender the due, regular and punctual payment of the Obligations, including, without limitation, any sum or sums of money now owed to Lender in connection with the Renewal Promissory Note and Mortgage referred therein...

Buntin aff. Doc. 13-2 Exhs. C at ¶ 1; D at ¶ 1; and E at ¶ 1. Each Guaranty Agreement provided, "Guarantor agrees that Lender shall not be required to pursue or foreclose the Mortgage before making a claim or asserting a cause of action against Guarantor under this Agreement." (See Buntin aff. Doc. 13-2 Exhs. C at ¶4; D at ¶4; and E at ¶4). Additionally, the Guaranties agreed to pay "reasonable attorneys' fees arising from" the agreement. (Id. at ¶19). The Guaranties are likewise governed by Alabama law. (Id. at ¶15).


By the terms of the Renewal Note, Pullum-Cecilio was to repay the $864, 679.68 in principal plus any accrued interest to Whitney Bank on December 14, 2014. (Buntin aff., Doc. 13-2, Exh. A at 1). However, Pullum-Cecilio failed to repay the principal and interest on that date. (Buntin aff. at 3). The omission constituted default under the Renewal Note. ( Id., Exh. A at 2 (listing as an even of default "in the payment of interest or accrued late charges thereon as and when the same become due and payable in accordance with the terms")). The Renewal Note provided that such a default triggered accrual of interest at the 18% per annum default rate (per diem amount of $411.91) on the outstanding principal balance. (Id. at 1-2). Plaintiff further claims attorneys' fees and costs incurred in collecting money owed pursuant to the Renewal Note, in the amount of $5, 874.84 billed hours, plus an additional $797.50 of unbilled time. Plaintiffs' attorney further contends "that 15% of the outstanding balance as of December 29, 2014, or $126, 202.88, is a fair, reasonable and necessary attorneys' fee to collect this outstanding indebtedness, reduce it to judgment and enforce the judgment." (Christian aff., Doc. 13-3, at 4).

Pullum-Cecilio's default on the Renewal Note implicates the Guarantors and their respective agreements to "absolutely and unconditionally" guaranteed payment to Whitney Bank of all obligations owed by Pullum-Cecilio (specifically, promissory notes, interest, fees, attorneys' fees, and costs of collection). Whitney Bank also made an uncontested showing that none of the individual defendants made payments to Pullum-Cecilio's indebtedness to Whitney Bank under the Renewal Note. (Buntin aff. at 3-4).


The Court may grant summary judgment "if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." FED. R. CIV. P. 56(a). The substantive law applicable to the case determines what is material. Lofton v. Sec'y of Dep't of Children & Family Servs., 358 F.3d 804, 809 (11th Cir. 2004), cert. den., 534 U.S. 1081 (2005). If the nonmoving party fails to make "a sufficient showing on an essential element of her case with respect to which she has the burden of proof, " the moving party is entitled to summary judgment. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986).

In evaluating the movant's arguments, the court must view all evidence and resolve all doubts in the light most favorable to the nonmovant. Burton v. City of Belle Glade, 178 F.3d 1175, 1187 (11th Cir. 1999). "If reasonable minds might differ on the inferences arising from undisputed facts, then [the court] should deny summary judgment." Hinesville Bank v. Pony Express Courier Corp., 868 F.2d 1532, 1535 (11th Cir. 1989) (citation omitted). The basic issue before the court then is "whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251-52 (1986). The mere existence of any factual dispute will not automatically necessitate denial of a motion for summary judgment; rather, only factual disputes that are material preclude entry of summary judgment. Lofton, 358 F.3d at 809.


a. Governing law

As an initial matter it is important to note the controlling law in this case. This case is before the Court due to diversity jurisdiction and the Court must apply the laws of the state in which the federal court sits. See Manuel v. Convergys Corp., 430 F.3d 1132, 1139 (11th Cir. 2005) (citing Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496 (1941)). Alabama courts follow the traditional conflict-of-law principles of lex loci contractus and lex loci delicti. Lifestar Response of Ala., Inc. v. Admiral Ins. Co., 17 So.3d 200, 213 (Ala. 2009). In Alabama, the laws of the state where the contract was made govern contract claims, unless the contracting parties chose a particular state's laws to govern their agreement. Cherry, Bekaert & Holland v. Brown, 582 So.2d 502, 506 (Ala. 1991). In this action, the contracts were made in Alabama and the parties chose the State of Alabama (Buntin aff. Exhs. A at ¶ 14; C at ¶ 15; D at ¶ 15; E at ¶15.). Therefore, the laws of the State of Alabama apply.

Under Alabama law, loan documents are governed under contract law. See Penick v. Most Worshipful Prince Hall Grand Lodge F & A M of Alabama, Inc., 46 So.3d 416, 428 (Ala. 2010) (construing terms of a mortgage, notes and modification agreement). In that regard, "[i]f the terms within a contract are plain and unambiguous, the construction of the contract and its legal effect become questions of law for the court and, when appropriate, may be decided by a summary judgment." Diamond v. Bank of Alabama, 43 So.3d 552, 563 (Ala. 2009) (construing terms of a promissory note, guaranty, line of credit and letter of credit and finding documents underlying loan transaction were not ambiguous) (citations omitted). See Peppertree Apartments, Ltd. v. Peppertree Apartments, 631 So.2d 873, 878 (Ala.1993) ("The intention of the parties controls when a court construes the terms of a promissory note, and that intention is to be derived from the provisions of the contract, if the language is plain and unambiguous."). In this case the Defendants do not argue that the terms of the Renewal Promissory Note are ambiguous. Furthermore, when Pullum-Cecilio defaulted on the Renewal Note, the individual Guarantors became liable.

In order to prevail on its breach of guaranty agreement claim, Whitney Bank must establish the (1) existence of each of the individual guaranties, (2) default on the underlying Note by Pullum-Cecilio, and (3) nonpayment by the guarantors. See Branch Banking and Trust Co. v. Broaderip, 2011 WL 3511774, 3 (S.D. Ala. Aug. 11, 2011) ("Every 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.") quoting Delro Industries, Inc. v. Evans, 514 So.2d 976, 979 (Ala. 1987); see also, Vision Bank v. Algernon Land Co., LLC, 2011 WL 1380062, *7-8 (S.D. Ala. Apr. 12, 2011); Sharer v. Bend Millwork Sys., Inc., 600 So.2d 223, 225-26 (Ala. 1992).

The guaranty at issue is a continuing guaranty. Generally, an additional element of notice of Pullum-Cecilio's default to the guarantor(s) must also be proven. However, here the guarantors, B. Pullum, R. Pullum and S. Cecilio, waived "[p]resentment, protest, demand, and notice of protest and demand of any collateral, and of the exercise of possessory remedies or foreclosure on any and all collateral received by Lender." (Buntin aff. Exhs. C, D, and E at ¶6). In that regard, "[t]he language of the guaranty is controlling in determining whether the holder of the guaranty is under a duty to notify the guarantor of a default by the principal, and notice need not be given when the terms of the guaranty expressly dispense with the need for it." Wells Fargo Bank v. Richard D. Horne, LLC, 2010 WL 5376341, *3 at n.1 (S.D. Ala. Dec. 27, 2010); see also RBC Bank v. CMI Electronics, Inc., 2010 WL 2719096, *2 (M.D. Ala. Jul. 8, 2010) ("[i]n the case of a continuing guaranty, it is also necessary to prove that the guarantor received notice of the debtor's default, unless that right has been waived by the terms of the guaranty contract."). Therefore, due to the clear waiver by each guarantor, Whitney Bank did not need to provide notice of the default.

Moreover, when a contract is "one of absolute guaranty, " as in this case, "the failure of the principal to pay the debt within the time provided in the principal contract fixed the liability of the guarantors, without regard to the question of the principal's solvency or insolvency, and the plaintiff was under no duty to the guarantors to pursue its remedy against the principal as a prerequisite to its right to recover against the guarantors." Ehl v. J.R. Watkins Medical Co., 112 So. 426, 426 (Ala. 1927); In re Southern Cinemas, Inc., 256 B.R. 520, 527 (Bkrtcy. M.D. Fla. 2000) (holding under Alabama law that "[i]n order to be entitled to enforce the obligation of the contract of guaranty, the creditor must show that the guaranteed debt or obligation is due.").

As detailed above, the record reveals that Pullum-Cecilio executed a Renewal Promissory Note with Whitney Bank. The Guarantors, B. Pullum, R. Pullum, and S. Cecilio, absolutely and unconditionally guaranteed the payment of indebtedness owed by Pullum-Cecilio under the Renewal Note. When Pullum-Cecilio defaulted, these Guarantors became liable to Whitney Bank. There is ...

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