CHARLES R. CHAMBERLAIN
MARSHALL AUTO & TRUCK CENTER, INC.
THE CIRCUIT COURT OF FAUQUIER COUNTY Herman A. Whisenant,
Jr., Judge Designate
W. LEMONS, CHIEF JUSTICE
appeal, we consider whether the Circuit Court of Fauquier
County ("circuit court") erred by holding that a
surety who was an accommodation guarantor of a promissory
note was not entitled to judgment against the maker of the
note under Code § 49-27 upon default by the maker and
seizure of collateral by the lender.
Facts and Proceedings
January 5, 2015, Charles R. Chamberlain
("Chamberlain") filed a complaint against Marshall
Auto & Truck Center, Inc. ("Marshall") in the
circuit court. The complaint alleged that Marshall executed a
promissory note ("Note") in the amount of $950, 000
in favor of Middleburg Bank ("Middleburg"), and
that Chamberlain executed a guaranty ("Guaranty")
of that Note. Marshall failed to make payments to Middleburg,
and the bank withdrew funds from Chamberlain's account to
satisfy Marshall's obligations under the Note.
Chamberlain maintains that, pursuant to Code § 49-27, he
is entitled to judgment against Marshall for the amount taken
by the lender from his account and applied in satisfaction of
Marshall's obligations under the Note. Chamberlain
demanded $50, 614.94, plus interest.
filed an answer, which admitted the validity of the Note and
that Chamberlain executed the Guaranty. As an affirmative
defense, however, Marshall asserted that "[a]ny and all
payments, if any, by Chamberlain constituted a gift."
bench trial on November 2, 2015, evidence was presented
demonstrating that in 2007 Marshall executed the Note in
favor of Middleburg to obtain a loan. Payment of the Note was
secured, in part, with the Guaranty. As collateral for the
loan, Chamberlain provided a $50, 000 certificate of deposit
("CD") on account with Middleburg and further took
out a $1 million life insurance policy on his life, naming
the bank as beneficiary.
numerous occasions between 2009 and 2011, Marshall failed to
make its scheduled payments on the Note. Consistent with the
Guaranty, Middleburg withdrew a total of $50, 614.94 from
Chamberlain's CD and applied those funds in partial
satisfaction of Marshall's payment obligations.
trial, Chamberlain testified that he executed the Guaranty
because he "wanted to help out" Marshall's sole
owner and president, Manzar Asjodi ("Asjodi"). The
two were "intimately involved." Chamberlain
believed that Asjodi would be unable to obtain a new loan
without his assistance. Chamberlain "was not looking to
make a profit" and he did not consider the arrangement
to be a business opportunity. Instead, Chamberlain testified
that he placed the CD on deposit with Middleburg "[t]o
help [Asjodi] gain loan approval."
further testified that the banker informed him and Asjodi
that the CD was intended only as a "backstop" in
the event that Marshall missed payments. According to
Chamberlain, the suretyship arrangement "was supposed to
be a low-risk situation." He "did not expect
payments would not be made." For her part, Asjodi
testified that "the purpose of that CD was whenever
[Marshall] needs money we can go take that money." At
some point after Chamberlain executed the Guaranty, his
romantic relationship with Asjodi ended. The two were no
longer communicating regularly when the bank began making the
withdrawals from the CD.
presentation of the evidence, the circuit court announced its
ruling from the bench. First, the court found that "the
gift was putting the CD up, " and that Chamberlain did
so because of the "romantic relationship that he was
having with [Asjodi]." Second, the court found that
Chamberlain wanted to help Asjodi and did not file suit until
"everything went sour between the parties." Third,
the lack of documentation between the parties to "make
it very clear as to who owed what to whom, " suggested
that Chamberlain "did it as a friend to another friend.
It wasn't a business transaction and, indeed, it was a
gift." For these reasons, the circuit court ruled
"that the Plaintiff recover nothing from the Defendant
and that the Defendant have a verdict in its favor."
Chamberlain filed a motion for reconsideration, which the
circuit court denied. Chamberlain then appealed to this
Court, and we granted his appeal on the following assignment
1. The trial court erred in ordering that the plaintiff
recover nothing and entering a verdict in favor of the
a. The trial court erred in failing to apply § 49-27 of