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Community First Bank and Trust v. The Velligan Family Trust

Court of Appeals of Tennessee, Nashville

May 1, 2015

COMMUNITY FIRST BANK AND TRUST
v.
THE VELLIGAN FAMILY TRUST et al.

Session December 9, 2014.

Appeal from the Chancery Court for Maury County No. 11578 Stella L. Hargrove, Chancellor

Carol A. Molloy and Jonathan Lynn Miley, Lynnville, Tennessee, for the appellants, The Velligan Family Trust, Mark Velligan and Mary Margaret Velligan.

David M. Anthony, Anne C. Martin and Mandy Strickland Floyd, Nashville, Tennessee, for the appellee, Community First Bank & Trust.

Frank G. Clement, Jr., P.J., M.S., delivered the opinion of the Court, in which Andy D. Bennett and Richard H. Dinkins, JJ., joined.

OPINION

FRANK G. CLEMENT, JR., JUDGE.

Between 2005 and 2007, Mark and Mary Velligan and The Velligan Family Trust[1] (collectively "the Velligans") executed four notes that are at issue in this appeal, [2] each of which is held by Community First Bank & Trust ("the Bank") and secured with real property located in Tennessee. On March 10, 2009, the Velligans executed a Forbearance Agreement which temporarily modified payments due under each note; subsequently, the Velligans executed an Amended and Restated Promissory Note for each note that modified the terms of repayment. On August 30, 2010, the Velligans executed a second forbearance agreement titled "Terms for the Forbearance Period" (the "Second Forbearance Agreement). In the Second Forbearance Agreement, the Velligans acknowledged that they were in default and waived all claims against the Bank. The Bank continued to forbear enforcement of the notes for almost a year, but by letter dated July 29, 2011, the Bank declared each note in default, accelerated the entire principal and interest balance, and made a demand for payment in full.

On October 12, 2011, the Bank filed a complaint against the Velligans alleging that they failed to meet the terms of the demand, and seeking a judgment for balances owed under the notes and related documents plus interest, attorney's fees, and court costs. Subsequently, the Bank initiated foreclosure proceedings on two properties secured by the notes. These two properties were sold at a foreclosure sale in December 2011 and credits from the sales were applied against the deficiency owing on the notes.

The Velligans answered and asserted counterclaims against the Bank and cross-claims against C. Tucker Herndon, as the substitute trustee[3], asserting, inter alia, claims for fraudulent inducement, civil conspiracy, violations of the federal Racketeer Influenced and Corrupt Organizations Act. The Velligans also sought forgiveness of any debts owed to the Bank and return of the foreclosed properties.

On June 13, 2013, the Bank filed a motion for summary judgment seeking judgment as a matter of law on the Bank's claims against the Velligans and summary dismissal of all counterclaims and cross-claims filed by the Velligans. The motion was supported by, inter alia, the affidavit of the Bank's Special Assets Officer, Charlie Goatz which cited to the first Forbearance Agreement. In opposition to the Bank's motion for summary judgment, the Velligans filed a motion to strike the affidavit of Mr. Goatz asserting "a general objection to all of the documents referred to in [Mr. Goatz's] affidavit, " that "[Mr. Goatz] is not the keeper of the record and he has not provided a proper foundation for any of the documents referred to in his affidavit, " and that Mr. Goatz's "affidavit is in direct contradiction of his deposition testimony." Specifically, the Velligans asserted that the forbearance agreement referenced by Mr. Goatz and attached as an exhibit to the affidavit did not contain the language upon which he relied.

Following the Velligans' motion to strike the affidavit of Mr. Goatz, the Bank filed a motion for leave to correct and supplement its motion for summary judgment to account for the clerical error, that being that the original memorandum of law and the affidavit of Mr. Goatz incorrectly cited the First Forbearance Agreement executed on March 10, 2009, rather than the Second Forbearance Agreement, executed on August 30, 2010. The court granted leave and the Bank corrected its error by filing a supplemental memorandum of law and a second affidavit of Mr. Goatz that properly cited to the Second Forbearance Agreement, which was attached as an exhibit. Subsequently, the Velligans moved to strike the second affidavit of Mr. Goatz for the same reasons asserted in the first motion to strike.

A hearing on the Bank's motion for summary judgment was held on December 23, 2013. The trial court granted the Bank's motion for summary judgment, entered judgment in its favor in the amount requested of $204, 024.25, and dismissed the Velligans' counterclaims and cross-claims against the Bank and Mr. Herndon. The trial court's final order read as follows:

[T]he Court finds that there are four loans from the Bank to the Velligans remaining at issue in this litigation: . . . The record documenting the Loans includes four Adjustable Rate Notes, Amended and Restated Promissory Notes, Forbearance Agreements, Deeds of Trust, and Notices of Default and Intent to Foreclose. Two of the properties secured by the Loans were foreclosed upon in December of 2011, and the Bank obtained close to their fair market values in the foreclosure sales. Credits were applied to the unpaid balances on the Loans, leaving deficiency balances which were the subject of the Bank's claims in this action. Also in support of their motion for summary judgment the Bank and Herndon submitted two affidavits from Charlie Goatz, Special Assets Officer for the Bank (the "Goatz Affidavits"). The Goatz Affidavits are appropriate for the Court's consideration at summary judgment. The amounts contained in the Goatz Affidavit regarding the unpaid balances on the Loans and the resulting deficiencies are not in dispute and thus the judgment amount sought of $204, 024.25 is accepted as accurate.
Even if the intent of the [Second Forbearance Agreement] is in dispute, it was signed by the Velligans dated August 30, 2010 and includes an agreement by the Velligans regarding the default, an agreement they did not have the ability to cure the default, and that the Bank was entitled to accelerate the balances on the Loans. All of the Forbearance Agreements were executed ...

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