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Callison v. Glick

Supreme Court of Virginia

April 18, 2019


          FROM THE CIRCUIT COURT OF THE CITY OF STAUNTON Herbert G. Gill, Jr., Judge Designate



         In this appeal, we consider whether the circuit court erred in refusing to declare a party a subsurety to a loan obligation, holding that a purchase option contract was enforceable, and declining to explain the meaning of its final order upon request of a party.


         A. The Lease and Option

         On March 1, 2007, Waller Callison (Mr. Callison) leased his commercial property in Staunton, Virginia (Property) to Elliott Chevrolet, Inc., which is owned by William Elliott, IV (Elliott).[1] The Property had a single building on it that Elliott Chevrolet used as an automobile service center. The lease term was five years with an automatic renewal. Under the lease, Elliott Chevrolet could "make additions or alterations to the Property" with Mr. Callison's consent.

         The lease gave Elliott Chevrolet an "Option to Purchase" (Option). Elliott Chevrolet had the right to purchase the Property if Mr. Callison decided to sell the Property, if Mr. Callison passed away, or "after the end of the first renewal term of this Lease." The Option set a purchase price to be determined by an appraiser. It also stated:

If Tenant exercises the right to purchase the Property, the Property shall be conveyed to Tenant, or its assign, by General Warranty Deed with English Covenants of Title, free and clear of all liens and encumbrances, in exchange for payment of the full purchase price in immediately available funds.

(Emphases added.) The Option gave Elliott Chevrolet the "unqualified right to assign the [Option] at any time and such assignment shall be binding on Landlord," and stated it would "survive the death of Landlord, and shall be binding on their heirs and successors in interest." Mr. Callison and Elliott signed the lease and Option.

         On March 25, 2011, Mr. Callison and Elliott signed a lease addendum, which fixed the Option purchase price for the Property at $550, 000.

         B. Property Construction and Renovations

         Elliott and David Trainum (Trainum) owned ET Investments, LLC, which leased its various properties to Elliott's car dealerships. Elliott Chevrolet wanted to renovate the Property's existing building and also to construct a second building on the Property for an auto paint shop. Elliott and Trainum decided that ET Investments would fund the construction of the second building and the renovations on the Property, and that Elliott Chevrolet would eventually assign the Option to purchase the Property, at the fixed Option purchase price, to ET Investments.

         On May 10, 2011, ET Investments took out a loan of $500, 000 (Note) from Frontier Community Bank (Bank) to finance the construction and renovations of the Property. A "Commercial Guaranty" (Guaranty) of the Note was signed by Trainum, who personally guaranteed

full and punctual payment and satisfaction of [Trainum's] Share of Indebtedness of [ET Investments] to [the Bank] and the performance and discharge of all [ET Investment's] obligations under the Note . . . . [The Bank] can enforce this Guaranty against [Trainum] even when [the Bank] has not exhausted [] remedies against anyone else obligated to pay the Indebtedness or against any collateral securing the Indebtedness.

Trainum's "Share of Indebtedness" was 50% of any outstanding debt on the Note. Another guaranty was signed by Elliott, personally, with the same terms as the Guaranty signed by Trainum, including responsibility for a 50% share of the indebtedness.

         Also on May 10, 2011, Mr. Callison signed a "Construction Deed of Trust" (Deed of Trust), which secured the Note with the Property. The Deed of Trust stated:

Except as otherwise provided in this Deed of Trust, [ET Investments] and [Mr. Callison] shall pay to [the Bank] all indebtedness secured by this Deed of Trust as it becomes due, and [ET Investments] and [Mr. Callison] shall strictly perform all their respective obligations under the Note, this Deed of Trust, and the Related Documents.
[The Bank] may . . . declare immediately due and payable all sums secured by this Deed of Trust upon the sale or transfer, without [the Bank's] prior written consent, of all or any part of the [Property].

(Emphases added.) The Deed of Trust specified that the Bank's successors and assigns could enforce the Note.

         Construction of the Property improvements began in 2011. In addition to paying Mr. Callison rent under the terms of the lease, Elliott Chevrolet also paid ET Investments $4, 250 per month for the construction and renovations, and ET Investments in turn made monthly payments of a similar amount to the Bank on the Note.

         Mr. Callison passed away intestate on November 26, 2011. His wife, Jean Callison (Mrs. Callison), was his only heir.

         In early 2012, the construction and renovations suffered unanticipated cost overages. As a result, on April 23, 2012, ET Investments and the Bank increased the Note amount to $600, 000.

         The same day, Mrs. Callison signed a "Modification Agreement" (Modification Agreement) changing the Deed of Trust's language so that it secured "the repayment of any and all loans and/or advance" from ET Investments up to $600, 000. The Modification Agreement also stated:

Except as expressly modified above, the terms of the original Deed of Trust shall remain unchanged and in full force and effect . . . . It is the intention of [the Bank] to retain as liable all parties to the Deed of Trust and all parties, makers and endorsers to the Note, including accommodation parties, unless a party is expressly released by [the Bank] in writing.

(Emphasis added.)

         The improvements were completed in 2012. Elliott Chevrolet continued its payments to Mrs. Callison under the terms of the lease, and to ET Investments for payment on the Note.

         C. Elliott Chevrolet Closes

         In the fall of 2015, Elliott's car dealerships began closing. On January 1, 2016, Elliott Chevrolet ceased its operations at the Property. Elliott Chevrolet subsequently stopped making its $4, 250 monthly payments to ET Investments, and Elliott transferred his 50% interest in ET Investments to Trainum's wife.

         At the end of January 2016, Trainum ceased ET Investment's monthly payments to the Bank on the Note. On February 8, 2016, Trainum executed a promissory note of approximately one million dollars to the Bank in exchange for acquiring several loan assets, including the Note. As manager of ET Investments, Trainum prevented ET Investments from paying anything further on the Note. Instead, ...

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