PARKER, Justice.
Richard A. Diamond appeals and Bank of Alabama ("BOA") cross-appeals, both seeking relief from a judgment of the Jefferson Circuit Court awarding BOA $200,000 on a promissory note and awarding BOA $132,601.67 in attorney fees in an action brought by BOA against Diamond and others. Diamond disputes the trial court's holding that Diamond must reimburse BOA for payments BOA made pursuant to a letter of credit. BOA challenges the trial court's failure to award BOA interest as part of its judgment
Diamond was a director of HQ Birmingham, Inc., the name by which PBC was formerly known, and Evans was its president. When the name was changed to PBC,
Effective April 7, 2003, HQ Birmingham, Inc., entered into a lease agreement with Gateway Alabama Properties, Inc., pursuant to which HQ Birmingham acquired 19,984 square feet of rentable space in suite no. 400, One Chase Corporate Center, in Birmingham. HQ Birmingham divided and sublet the office space to small businesses and provided other services to the sublessees. The lease with Gateway was executed by Evans as then president of HQ Birmingham. It required no rental payments for the first nine months, and HQ Birmingham was to provide a standby letter of credit for Gateway's benefit to secure HQ Birmingham's obligations and the rental payments when due.
On December 1, 2003, BOA, on application by "Premier Business Centers, Inc. f/k/a HQ Birmingham, Inc.," issued a $200,000 standby letter of credit for the benefit of Gateway Alabama Properties, Inc. In its commitment letter, BOA advised Diamond, who was negotiating the terms of the letter of credit on behalf of PBC, that BOA required collateral in the form of a blanket lien on furniture, fixtures, and equipment and joint and personal guaranties by Diamond and Evans. The commitment letter also provided that the letter of credit was to be in the amount of $200,000 until August 1, 2004, and in the amount of $120,000 from August 1, 2004, through August 1, 2005. The irrevocable letter of credit actually issued by BOA, however, was in the amount only of $200,000. It reads, in pertinent part, as follows:
In association with the letter of credit, PBC executed a promissory note to BOA agreeing to pay up to $200,000 conditioned on future advances "upon presentment of irrevocable commercial letter of credit issued to Gateway Alabama Properties, Inc." Other provisions of the note require the payment of "interest on the outstanding principal balance," the payment of monthly accrued-interest payments "beginning 01/01/2004," and the payment of principal "at maturity on 08/01/2004 if called upon." The note contains the following "ADDITIONAL TERMS":
(Capitalization in original.)
Page 2 of the note contains additional conditions that are incorporated by virtue of the following statement in bold print located on page 1 immediately above the signature block: "SIGNATURES: I AGREE TO THE TERMS OF THIS NOTE (INCLUDING THOSE ON PAGE 2)." (Capitalization in original.) Among the terms on page 2 is one that states that "interest accrues on the principal remaining unpaid from time to time, until paid in full. If I receive the principal in more than one advance, each advance will start to earn interest only when I receive the advance." Another relevant provision is titled "OBLIGATIONS INDEPENDENT" and states, in part:
The note was signed by "Premier Business Centers, Inc., Richard A. Diamond, President."
Diamond, as then president of PBC, also executed a line-of-credit agreement on behalf of PBC. That agreement identifies only PBC as the borrower, stating that
(Capitalization in original; emphasis added.)
In addition to the note and the line-of-credit agreement, Diamond and Evans each provided a "guaranty" document personally guaranteeing the full and prompt payment when due of debts and obligations described in the identical guaranty documents executed by Diamond and Evans on December 1, 2003. The guaranty documents identify PBC as the borrower and BOA as the lender. They state that "the Undersigned guarantees to Lender the payment and performance of the debt, liability or obligation of Borrower to Lender evidenced or arising out of the following: $200,000 promissory note securing letter of credit, of even date."
Effective December 31, 2003, Denise Evans purchased Diamond's share of PBC by formal agreement. Diamond then resigned as president and as a member of the board of directors of PBC. Diamond's wife, Shelley, who was also a member of the board of directors, resigned her position as part of the same agreement. Diamond's guaranty to BOA, by its terms, was revocable by the guarantor, provided that there was no "indebtedness existing or committed for at the time of the actual receipt of such notice [of revocation] by the Lender." Diamond, however, has presented no evidence indicating that he had revoked his guaranty.
PBC, Diamond, and Evans argued that because the line-of-credit agreement and the guaranties had expired on August 1, 2004, BOA was not entitled to reimbursement for the payments it had made to Gateway under the letter of credit. The parties moved for a summary judgment, and on December 27, 2005, the trial court granted, in part, BOA's summary-judgment motion and awarded BOA, from PBC under its promissory note and from Diamond and Evans on their guaranties, $200,000. The trial court also found that BOA had not supported its intentional-misrepresentation claim against Diamond in count 3 and that Alabama law did not support the "negligent failure to read and understand" claim BOA asserted as count 4 of the amended complaint. The trial court then dismissed those claims with prejudice.
After hearing arguments regarding BOA's application for over $200,000 in attorney fees, the trial court issued an order on March 24, 2005, awarding BOA $132,601.57 in attorney fees. It added that amount to the $200,000 of principal indebtedness and entered judgment in favor of BOA for $332,601.67 against PBC, Diamond, and Evans, "which defendants shall be jointly and severally obligated for this judgment." Because cross-claims asserted by Diamond against Evans and PBC and by Evans and PBC against Diamond remained pending,
"In reviewing a summary judgment, an appellate court looks at the same factors that the trial court considered in ruling on the motion .... [O]n appeal a summary judgment carries no presumption of correctness." Hornsby v. Sessions, 703 So.2d 932, 938 (Ala.1997).
Ex parte General Motors Corp., 769 So.2d 903, 906 (Ala.1999) (citations omitted). "Our review is further subject to the caveat that this Court must review the record in a light most favorable to the nonmovant and must resolve all reasonable doubts against the movant." Hobson v. American Cast Iron Pipe Co., 690 So.2d 341, 344 (Ala.1997).
Diamond argues that because the loan documents executed in support of the letter of credit had expired before BOA made the payments to Gateway under the letter of credit, the trial court erred when it enforced the documents against him. He next argues that the trial court erred when it disallowed parol evidence regarding negotiations that occurred after the execution of the loan documents and not prior to, or contemporaneously with, the signing of the loan documents.
There are four loan documents: the line-of-credit agreement, the promissory note, the personal guaranties, and a security agreement.
The line-of-credit agreement obligated BOA to loan money to PBC by honoring its irrevocable letter of credit to Gateway.
Diamond's brief, at 25-28 (emphasis in original).
BOA argues that the loan was not made after the loan documents expired on August 1, 2004, but was actually made on December 1, 2003, when the promissory note was signed and the letter of credit issued. "The loan was made and the debt owed by [PBC] before August 1, 2004." BOA's brief, at 31. BOA cites as authority for this argument SouthTrust Bank of Alabama, N.A. v. Webb-Stiles Co., 931 So.2d 706, 710-11 (Ala.2005) ("A standby letter of credit is essentially equivalent to a loan being made by the issuing bank to
Citing Citronelle Unit Operators Committee v. AmSouth Bank, N.A., 536 So.2d 1387, 1390 (Ala.1988), BOA argues that the issuer of a letter of credit is at risk from the date the letter of credit is issued to the date the letter of credit is returned to it. In Citronelle, this Court confirmed the applicant's liability for fees associated with an open letter of credit during the life of the letter. It is undisputed that the issuer of a standby letter of credit is at risk from the date of issuance of the letter. That, however, is not the question posed here. The question here is not whether BOA was at risk during the life of the letter of credit it issued, but whether BOA sufficiently obtained indemnity for the payments it made pursuant to the letter of credit after the stated expiration of the line-of-credit agreement between BOA and PBC.
Diamond's entire argument is based on the premise that the loan documents had expired before BOA paid Gateway any moneys under the letter of credit and that, although BOA was obligated to pay, it had not secured indemnification by PBC or by Diamond and Evans, as guarantors, beyond August 1, 2004, the expiration date of the loan documents. We therefore examine the loan documents in the same manner as did the trial court to test whether there was substantial evidence supporting Diamond's denial of liability, i.e., evidence of "such weight and quality that fair-minded persons in the exercise of impartial judgment can reasonably infer the existence of the fact sought to be proved." West v. Founders Life Assurance Co. of Florida, 547 So.2d 870, 871 (Ala.1989).
The letter of credit, by its terms, was to be automatically extended for one year beyond its original August 1, 2004, expiration date and each subsequent expiration date unless BOA notified Gateway in writing and by secure delivery that it intended not to renew the letter of credit.
In the personal guaranty he signed, Diamond stated that he
The life of the personal guaranty, by its own terms, is extended to the extent the promissory note is extended.
The promissory note, signed by PBC, on its face states that it was supported by unlimited personal guaranty agreements executed by Diamond and Evans. On page 2, under the heading "OBLIGATIONS INDEPENDENT," there are two sentences relevant to this issue. The first reads: "Any extension of new credit to any of us, or renewal of this note by all or less than all of us will not release me from my duty to pay it." The other reads: "I agree that you may at your option extend this note or the debt represented by this note, or any portion of the note or debt, from time to time without limit or notice and for any term without affecting my liability for payment of the note."
The line-of-credit agreement defines the conditions under which BOA was authorized to make loans to PBC, the borrower under that agreement. The line-of-credit agreement reads, in pertinent part:
(Capitalization in original.) The line-of-credit agreement lists a "security agreement dated 12/01/2003" and a "guaranty dated 12/01/2003," but nowhere does it purport to incorporate the terms of those documents into the line-of-credit agreement. It requires a mutually signed writing to change the terms of the agreement, and there is no provision in the document for an extension of the term of the agreement. The line-of-credit agreement, by its terms, did expire on August 1, 2004.
BOA argues that,
BOA's brief, at 33. As discussed earlier in this opinion, this argument is not supported by Citronelle, supra, the case cited by BOA in support of its argument, and it is contrary to the plain language of the loan documents drafted and executed by BOA. The line-of-credit agreement states not that "you have loaned me" or "as of this date you loan me" but that "[y]ou will make loans to me from time to time." The promissory note provides not that "you have loaned me" or "today you loan me" but that "the principal sum shown above [$200,000] is the maximum amount of principal that I can borrow under this note." It is obvious that on the date the loan documents were executed BOA merely assumed an obligation to make loans to PBC. It is equally obvious that no moneys were owed by PBC to BOA on August 1, 2004, as the result of draws against the letter of credit, because no draw against the letter was made until August 10, 2004.
Although the line-of-credit agreement expired on August 1, 2004, before BOA made its first payment to Gateway under the letter of credit, the promissory note and the guaranties could be extended without notice, and they are valid as to moneys paid out pursuant to the letter of credit whether or not loans were made under the line-of-credit agreement. The promissory note that requires PBC to repay any payments made under the letter of credit does not rely on the line-of-credit agreement. It merely documents PBC's agreement to pay BOA $200,000 for advances made on presentment of the letter of credit by Gateway. Even though no moneys were advanced under the line-of-credit agreement while that agreement was in effect, the promissory note and the
BOA's brief, at 36-37. The statute BOA references—§ 7-5-108(i)(1), Ala.Code 1975—reads as follows: "(i) An issuer that has honored a presentation as permitted or required by this article: (1) is entitled to be reimbursed by the applicant in immediately available funds not later than the date of its payment of funds." In its order entering a partial summary judgment in response to BOA's motion, the trial court stated: "[T]he Court regards the note, the guaranties, the line of credit agreement and the Letter of Credit as part of one transaction. To the extent reasonably possible, these instruments are to be interpreted and construed together to ascertain the parties' intention." The trial court agreed with the holding in Citronelle, however, that a letter of credit stands as a distinct and independent instrument as a contract between the issuer and the beneficiary, and that the obligation of the issuer of a letter of credit is independent of the beneficiary's relationship with the issuer's customer. The trial court then said: "In this case, however, the other instruments establish crucial ties with the letter of credit." We agree.
Southern Energy Homes, Inc. v. AmSouth Bank of Alabama, 709 So.2d 1180, 1185 (Ala.1998)(emphasis added). The commitment in question here is the applicant-bank relationship. It is separate and distinct from the two other relationships. This distinction is evidenced by the fact that "`[a] Beneficiary [under a letter of credit] can in no case avail himself of the contractual relationships existing between the banks or between the Applicant and the Issuing Bank.'" 709 So.2d at 1185 (quoting Art. 3, UCP, 1993 Revision, International Chamber of Commerce, Pub. No. 500).
In its order, the trial court discussed the August 1, 2004, expiration date and the provisions for the extension of the letter of credit, the promissory note, and the guaranties. The trial court did not discuss the line-of-credit agreement, which, Diamond argues, is the only document under which a loan to PBC could be made. As noted, that document expired on August 1, 2004, and by its terms, it could be extended only by a writing signed by both parties. On its face, in words drafted by BOA, the line-of-credit agreement states that "[BOA] will make loans to [PBC] from time to time until ... 08/01/2004. Although the line of credit expires on that date, [PBC] will remain obligated to perform [its] duties under this agreement so long as [PBC] owe[s] money advanced according to the terms of this agreement" and that PBC "will repay any
"If 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. Dill v. Blakeney, 568 So.2d 774 (Ala.1990)." McDonald v. U.S. Die Casting & Dev. Co., 585 So.2d 853, 855 (Ala. 1991). No party has asserted that the loan documents underlying the transaction to which BOA, Diamond, and PBC are parties are ambiguous. The trial court did not find the documents to be ambiguous. In the promissory note, PBC agreed to pay BOA $200,000 for payments made upon the presentation of the letter of credit. Diamond guaranteed the repayment of money paid out under the "$200,000 promissory note securing [the] letter of credit of even date." Accordingly, the trial court did not err in entering a summary judgment for BOA, and that judgment is affirmed.
BOA presents three issues in its cross-appeal.
The next issue BOA presents on cross-appeal is "did the trial court err in failing to award [BOA] interest on the debt as provided by the note?" BOA's brief, at 6.
The promissory note includes that following provision related to interest:
(Capitalization in original.)
The trial court did not address BOA's request that interest be awarded. Because BOA clearly has a right to interest under the note, we find that the trial court erred in not addressing the issue, and the case is remanded for appropriate consideration of that issue.
The trial court did not err in enforcing the loan documents against Diamond. The trial court did err, however, in not addressing the issue of interest due BOA under the terms of the promissory note. Accordingly, we affirm the judgment of the trial court in case no. 1051033, and in case no. 1051034 we remand the case to the trial court for appropriate proceedings in regard to an award of interest to BOA.
1051033—AFFIRMED.
1051034—AFFIRMED IN PART AND REMANDED.
COBB, C.J., and LYONS, WOODALL, STUART, SMITH, BOLIN, MURDOCK, and SHAW, JJ., concur.
Diamond's brief, at 28-29.
