81 So. 3d 1258
Ala.2011Background
- Capmark bank sued to foreclose on property serving as collateral for a construction-to-permanent loan to RGR, MB Park, and TTM MB Park (the LLCs).
- Loan was for $12,322,500 evidenced by promissory notes A ($6,332,500) and B ($5,990,000).
- Mortgage, assignment of rents/leases, and security interests secured the loan; Capmark held first-priority security in fixtures and intangibles.
- Owners Randall and Martin executed three guaranties guaranteeing payment and performance (full, conditional/penalty, and carve-out guarantees).
- Capmark allegedly promised a $300,000 cash-flow fund and permanent financing; the loan allegedly contemplated conversion to permanent financing with a single underwriting expense.
- Trial court granted a preliminary injunction to restrain foreclosure; Capmark appeals, arguing the injunction was improper due to lack of likelihood of success and other deficiencies.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether RGR showed a reasonable likelihood of success on the merits of breach-of-contract claims. | RGR contends Capmark promised cash-flow funding and permanent financing. | Capmark asserts no enforceable contract requiring cash-flow funding or permanent financing beyond the loan documents. | No; no valid separate agreements; merger clause controls; no enforceable obligation. |
| Whether Capmark had unclean hands to bar foreclosure. | RGR argues Capmark’s alleged fraud and failure to fund cash-flow harmed RGR. | Capmark contends alleged misrepresentations lacked basis where no valid obligations existed. | Raised issues not proven; unclean-hands finding reversed as to these claims. |
| Whether merger/integration clause and collateral agreements bar extrinsic agreements. | RGR claims collateral contemporaneous agreement to fund cash-flow. | Capmark relies on merger clause to bar extrinsic terms. | Merger clause valid; collateral terms not proven; extrinsic cash-flow agreement not enforceable. |
Key Cases Cited
- White Sands Group, L.L.C. v. PRS II, LLC, 998 So. 2d 1042 (Ala. 2008) (integration/merger clauses and collateral-agreement limits on parol evidence)
- Palm Harbor Homes, Inc. v. Hartford, 798 So.2d 656 (Ala. 2001) (merger clause presumes integrated contract; parol evidence limited)
- Hartford Fire Ins. Co. v. Shapiro, 270 So. 2d 286 (Ala. 2006) (three Mitchill factors for collateral agreements outside merger clause)
- Ritter v. Grady Auto. Group, Inc., 973 So. 2d 1058 (Ala. 2007) (three-pronged Mitchill test for collateral contemporaneous agreements)
- Southern Guaranty Ins. Co. v. Rhodes, 243 So. 2d 717 (Ala. Ct. App. 1971) (collateral agreements outside merger clause considerations)
- Reynolds Metals Co. v. Hill, 825 So. 2d 100 (Ala. 2002) (elements of breach-of-contract claim; performance required)
- Holiday Isle, LLC v. Adkins, 12 So. 3d 1173 (Ala. 2008) (standard for reviewing preliminary injunctions)
- Ex parte Palm Harbor Homes, 798 So.2d 656 (Ala. 2001) (integration clause presumptions)