SE Property Holdings, LLC, f/k/a Vision Bank v. Bank of FranklinAnnotate this Case
SE Property Holdings, LLC ("SEPH") appealed the grant of summary judgment entered in favor of Bank of Franklin ("BOF") on BOF's claim demanding specific performance of a contractual provision. In March 2005, Vision Bank, a Florida company, loaned Bama Bayou, LLC, formally known as Riverwalk, LLC ("the borrower"), $6,000,000. Multiple individuals allegedly personally guaranteed repayment of the loan ("the guarantors"). In June 2008, pursuant to a "participation agreement," Vision Bank conveyed to BOF a 25 percent interest in the loan. Vision Bank conveyed additional participation interests in the loan to other banks. The borrower and the guarantors allegedly defaulted on their obligations with respect to the loan, and in January 2009 Vision Bank filed suit against them. The borrower and the guarantors asserted counterclaims against Vision Bank and brought BOF into the action as an additional counterclaim defendant. In April 2009, Vision Bank foreclosed on a mortgage securing the loan. Vision Bank was the highest bidder at the foreclosure sale and thereafter executed foreclosure deeds in favor of BOF and the other participating banks. In 2012, Vision Bank sold its operating assets to Centennial Bank and relinquished its Florida bank charter. Vision Bank and SEPH entered into an "agreement and plan of merger," whereby Vision Bank merged "with and into" SEPH. In October 2016, the trial court entered an order setting aside the foreclosure sale and declaring the foreclosure deeds void. Among other things, BOF asserted in its cross-claim that SEPH had an obligation to repurchase BOF's participation interest in the loan. In support, BOF pointed to the participation agreement between BOF and SEPH's predecessor, Vision Bank. The court granted BOF's motion for summary judgment on its claim for specific performance based on the participation agreement. SEPH argued on appeal that the trial court erred in determining that a "proceeding" involving Vision Bank's termination of existence was "commenced," so as to invoke the contractual provision; it asserted Vision Bank's voluntary merger with SEPH was not a "proceeding." The participation agreement in this case stated that BOF's participation interest was conveyed without recourse, but the contract provision provided BOF at least some security in the form of a right to force the repurchase of its participation interest in the event of the financial deterioration of the originating bank, i.e., Vision Bank. The Alabama Supreme Court concluded the voluntary merger like the one entered into by Vision Bank and SEPH is not a "proceeding" as that term is used in the participation agreement, and reversed the trial court's judgment ordering SEPH to purchase BOF's participation interest.