Morgan, et al. v. Trustmark Nat'l Bank
| Docket Number: | 2011-CA-01264-COA | |
| Court of Appeals: |
Opinion Link Opinion Date: 10-09-2012 Opinion Author: Irving, P.J. Holding: Affirmed |
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| Additional Case Information: |
Topic: Contract - Offer - Affirmative defenses - Fraudulent misrepresentation - Fiduciary relationship - Counterclaim Judge(s) Concurring: Lee, C.J., Griffis, P.J., Barnes, Ishee, Roberts, Carlton, Maxwell, Russell and Fair, JJ. Procedural History: Summary Judgment Nature of the Case: CIVIL - CONTRACT |
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| Trial Court: |
Date of Trial Judgment: 07-29-2011 Appealed from: Madison County Circuit Court Judge: William E. Chapman, III Disposition: SUMMARY JUDGMENT GRANTED IN FAVOR OF APPELLEE Case Number: CI-2010-0056 |
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| Party Name: | Attorney Name: | Brief(s) Available: | ||
| Appellant: | Joe E. Morgan, Jr., J. Frank Pucylowski, and Thomas M. Harkins |
DONALD A. MCGRAW JR.
JAMES R. MOZINGO
WILLIAM M. SIMPSON II
JOHN S. MCDAVID |
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| Appellee: | Trustmark National Bank | PATRICK F. MCALLISTER | ||
Synopsis provided by:  If you are interested in subscribing to the weekly synopses of all Mississippi Supreme Court and Court of Appeals hand downs please contact Tammy Upton in the MLI Press office. |
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| Topic: | Contract - Offer - Affirmative defenses - Fraudulent misrepresentation - Fiduciary relationship - Counterclaim |
| Summary of the Facts: | Joe Morgan Jr., J. Frank Pucylowski, Thomas Harkins, and Mark Doiron (collectively, the “Guarantors”) formed Old Fifty One LLC as a commercial real estate development company. In early 2007, the Guarantors identified a piece of property that they wanted to acquire and develop into a commercial shopping center. Harkins and Dorion emailed Carl Sandberg, Trustmark’s Vice President of Residential Construction/Real Estate, to inquire about obtaining a land-purchase loan and a construction loan to purchase and develop the property. Sandberg emailed Dorion and advised Dorion that he and Zach Nordan, another Trustmark loan officer, were considering presenting Old 51’s loan request to Trustmark’s loan committee for approval. Sandberg’s email briefly addressed possible interest rates for the loans, a proposed loan-to-value ratio for the construction loan, and the requirement that the Guarantors fully guarantee the loan. Before preparing a construction-loan proposal, Nordan requested that the Guarantors provide him with an exact-cost breakdown for the proposed development, including exact square footage, tenant build-out, interest-carrying costs, and land pay-down costs. However, the Guarantors could not provide the information for the construction-loan proposal so they decided to pursue a land-purchase loan instead. Nordan presented Old 51’s loan proposal to Trustmark’s loan committee which approved the requested land-purchase loan for $2.3 million, but conditioned approval on a fifteen percent equity investment as collateral, an eighty-five percent loan-to-value ratio, a six-month loan term, and a deed of trust on the property. Additionally, each guarantor would have to sign a guaranty agreement, with each guarantor taking personal responsibility for full repayment of the loan. The Guarantors agreed to the loan committee’s terms, executed a promissory note, and signed full guaranties. The Guarantors also submitted a $345,000 irrevocable letter of credit as Old 51’s equity investment. Trustmark disbursed the land loan to Old 51 in June 2007, and Old 51 purchased the property. Nordan continued to work with the Guarantors to develop a construction-loan proposal to submit to Trustmark’s loan committee. Nordan requested that the Guarantors provide him with an itemization of construction costs and a copy of three signed leases from the development’s tenants. Trustmark repeatedly renewed the land-purchase loan in order to give the Guarantors more time to provide the requested information. In May 2008, Nordan prepared a second LPM for Old 51 which requested a construction loan for over four million dollars and provided that each guarantor would only be responsible for repaying up to fifty percent of the loan and offered a ten percent equity investment as collateral. Trustmark’s loan committee approved the loan. Nordan issued a commitment letter to Old 51 and the Guarantors detailing the terms of the loan. The Guarantors were required to sign and return the commitment letter by June 16, 2008. The letter also stated that the loan committee required that the project be pre-leased, with three one-year leases in place prior to the August 1, 2008 closing date. Although the Guarantors never signed the commitment letter, the Guarantors continued to tell Nordan that they intended to go forward with the project. In April 2009, Harkins informed Nordan that Old 51 had decided to downscale the project. Harkins requested that Nordan propose a loan based on the downscaled project, which Nordan did. In the 2009 LPM, Old 51 requested a $950,000 construction loan. The loan committee approved the construction loan, but requested updated, personal financial statements from Doiron and Morgan, an equity injection of $200,000, and cross-collateralization of the land and construction loans. Before a commitment letter was completed, Harkins informed Nordan that the Guarantors would not sign a loan commitment because Old 51 had decided to sell the property. Shortly after the land loan matured, Harkins requested a loan renewal in order to give Old 51 more time to sell the property. Although the loan was already in default at this time, Trustmark approved the renewal. However, it conditioned its approval on Harkins and Morgan submitting updated, personal financial statements. When Harkins and Morgan refused to provide Trustmark with the requested documentation, Trustmark denied the renewal request. Trustmark filed suit against Old 51 and the Guarantors to collect the balance on the defaulted land loan. The Guarantors answered the complaint and alleged breach of contract, fraudulent inducement/misrepresentation, and breach of fiduciary duty as affirmative defenses. Additionally, Morgan filed a breach-of-contract counterclaim against Trustmark and asserted that he was a third-party beneficiary to a construction-loan contract between Old 51 and Trustmark. Trustmark filed a motion for summary judgment on both claims, which the circuit court granted. The Guarantors appeal. |
| Summary of Opinion Analysis: | Issue 1: Contract The Guarantors argue that Trustmark and Old 51 entered into a contract to make a land-purchase loan and a construction loan, which Trustmark breached by not making the construction loan. An offer must be so definite in its terms, or require such definite terms in the acceptance, that the promises and performances to be rendered by each party are reasonably certain. In order to have a contract based on multiple documents, the documents must be communicated between the parties. In this case, it is undisputed that the Guarantors never saw the 2007 LPM prior to signing the promissory note or the commercial guaranties. Thus, it could not constitute an offer or be part of an offer from Trustmark. Additionally, Sandberg’s email was too indefinite in its terms to constitute a contract to lend money. Issue 2: Affirmative defenses The Guarantors argue that their affirmative defenses preclude summary judgment, i.e., that because they were fraudulently induced into signing the guaranty agreements and because Trustmark breached its fiduciary duties, they are not obligated to repay the loan. However, the Guarantors failed to show that they were fraudulently induced into signing the guaranty agreements. The only evidence they produced was Sandberg’s email. Even if Sandberg’s email could be interpreted as a promise that Trustmark would make a construction loan to Old 51, that promise cannot form the basis of a fraudulent misrepresentation claim. The promise to lend money in the future will not support recovery under a fraudulent-misrepresentation claim. Also, the Guarantors presented no evidence of a fiduciary relationship with Trustmark. To determine whether a fiduciary relationship exists in a commercial transaction, courts consider whether the parties have shared goals in each other’s commercial activities, one of the parties places justifiable confidence or trust in the other party’s fidelity, and the trusted party exercises effective control over the other party. While the 2007 LPM revealed that Harkins and Pucylowski had commercial relationships with Trustmark prior to 2007, there is no evidence that those relationships exceed the bounds of the generally non-fiduciary debtor/creditor relationship. In addition, there is no evidence of any special dealings or arrangements with Trustmark that might otherwise suggest that a fiduciary relationship existed between the Guarantors and Trustmark. Issue 3: Counterclaim Morgan argues that the circuit court erred in granting summary judgment in favor of Trustmark on his breach-of-contract counterclaim. Since there was no contract between Trustmark and Old 51 for a construction loan, Morgan’s counterclaim also fails. |
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