Regions Bank v. Bric Constructors, LLC, f/k/a Bric Contractors, LLC, and Patricia McIntosh
380 S.W.3d 740
Tenn. Ct. App.2011Background
- Regions Bank sued Bric Constructors, LLC and Patricia McIntosh to recover on a line of credit, then a fixed loan, and collateral pledged by the LLC; multiple advances were made under the ELOC, AR Note, and FA Note, with some documents bearing Ms. McIntosh’s signatures allegedly forged or signed by others; the LLC’s operating agreement empowered debt incurrence but also restricted unauthorized acts; the trial court found ratification of unauthorized advances and entered a judgment against the LLC and Ms. McIntosh; the court of appeals reverses as to one advance and remands for further findings, affirming other aspects.
- The LLC pledged collateral (Bentley, 2008 Ford Truck, Excavator with hammer and bucket) and accounts receivable to secure the various notes; additional security interests were created by FA Note and FA Security Agreement, later modified by the Modified FA Note; the bank filed UCC-1 statements evidencing security interests in the collateral.
- Key trial events: (a) ELOC issued March 30, 2007; (b) numerous advances under ELOC totaling $528,182.90; (c) AR Note issued December 2007 secured by accounts receivable; (d) FA Note issued December 26, 2007 refinancing the ELOC with a five-year term; (e) modifications and sale of collateral; (f) alleged signatures of Ms. McIntosh on several documents signed by Mr. McIntosh; (g) trial court credited handwriting expert and Bank officer testimony in finding signing by Mr. McIntosh and ratification; (h) eventual appellate reversal on ratification grounds for one AR Note advance and remand for factual determinations.
- The court addressed enforceability of the FA Note and FA Security Agreement, ratification issues for the ELOC and AR Note, and the Bank’s perfected security interests in the collateral, including the Excavator, Bentley, and 2008 Ford Truck.
- Final posture: judgment affirmed in part, reversed in part, and remanded for further proceedings consistent with the opinion.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Enforceability of the FA Note and FA Security Agreement | FA Note/FA Security Agreement were enforceable | Lack of consideration and fraudulent inducement | Enforceable; lack of consideration and fraud claims rejected |
| Ratification of ELOC and AR Note by LLC | LLC ratified unauthorized advances via conduct | Ratification not proven for AR Note; mixed for ELOC | FA Note affirmed; AR Note ratification remanded for factual findings; ELOC ratification not the basis for FA Note security interest |
| Security interests in Bentley and 2008 Ford Truck | Bank validly perfected liens via FA Security Agreement and title filings | Possible forgery or improper perfection | Bank had valid, perfected security interests in both vehicles (forgery not established) |
| Security interest in Excavator | Security interest properly described and perfected | Descriptive sufficiency challenged | Security interest in Excavator valid and perfected |
Key Cases Cited
- Bells Banking Co. v. Jackson Ctr., Inc., 938 S.W.2d 421 (Tenn. Ct. App. 1996) (ratification elements and agency concepts for unauthorized acts)
- Webber v. State Farm Mut. Auto Ins. Co., 49 S.W.3d 265 (Tenn. 2001) (ratification and intent in agency context; credibility of principal’s intent)
- King v. Hamilton First Bank (In re King), 30 B.R. 2 (Bankr. E.D. Tenn. 1983) (corporate knowledge and ratification standards in agency/ratification)