ADMINISTRATOR, UNITED STATES SMALL
BUSINESS ADMINISTRATION, Plaintiff
v.
AMERIKA SAMOA BANK, Defendant
High Court of
Trial Division
CA No. 68-98
[1]
In a motion for judgment on the pleadings, a court may look only at the
pleadings.
[2]
Where Motion for Judgment on the Pleadings is made, but Court looks beyond the
pleadings, it is considered a Motion for Summary Judgment.
[3]
A subordination agreement is to be interpreted according to ordinary contract
principles.
[4]
If a contract’s language is plain and unambiguous, the intention expressed
controls, rather than whatever may be claimed to have been the intention of the
parties
[5]
Where the language is plain and unambiguous, the meaning of a contract should
be determined without reference to extrinsic facts or aids.
[6]
The requirement that mortgage creditors be paid according to the priority of
their liens is statutorily mandated. [3ASR3d146]
[7]
Where entity was not initial party to foreclosure proceedings, but subsequently
intervened, and where it had waited five years before bringing its own suit on
delinquent debt, court found delay to be unduly dilatory and denied it
prejudgment interest.
Before
Counsel: For Plaintiff, Brian M. Thompson
For Defendant, Jennifer L. Joneson
ORDER GRANTING PLAINTIFF’S MOTION
FOR SUMMARY JUDGMENT
(COUNT I—BREACH OF CONTRACT)
On December 8, 1998, plaintiff Administrator, United States Small
Business Administration (“SBA”) filed a motion for partial judgment on the
pleadings and or for summary judgment on the breach of contract claim (Count I)
against defendant Amerika Samoa Bank (“ASB”). The
motion was heard on
[1-2] A motion for partial judgment on the
pleadings is made under T.C.R.C.P. 12(c).
In a motion for judgment on the pleadings, a court may look only at the
pleadings. A judgment on the pleadings only has utility when all material
allegations of fact are admitted in the pleadings and only questions of law
remain.” 5A Charles
Alan Wright & Arthur R. Miller, Federal Practice and Procedure §
1367 (2d ed. 1990 & Supp. 1998). Because this court looked beyond
the pleadings, this court treats the motion as one for summary judgment. In a
motion for summary judgment, the court may examine “pleadings, depositions,
answers to interrogatories, and admissions on file, together with the
affidavits.” T.C.R.C.P. Rule 56(c).
At issue in this motion for summary judgment on the breach of contract
claim is the interpretation of the subordination agreement, specifically, the
following paragraph:
SBA does hereby subordinate and does hereby declare to
be subordinate to 68% of ASB’s mortgage covering the
restaurant building known as Soli & Mark’s Family Restaurant. In no event
however, shall this subordination exceed 68% of the principal amount of ASB’s loan to Borrower for One Hundred Eighty-Three
Thousand Seven Hundred Five Dollars ($183,705.00) plus interest, fees, or costs
applicable to the bank loan or mortgage.
[3ASR3d147]
Subordination Agreement at 3.
[3-5] A subordination agreement is
to be interpreted according to ordinary contract principles. In
re General Homes Corp. 134 B.R. 853, 864 (Bankr.
S.D. Tx. 1991) cited in In
re Exec Tech Partners, 107 F.3d 677, 681 (8th Cir. 1997). Ordinary contract
principles provide that if the language of the contract is plain and
unambiguous, the intention expressed and indicated controls, rather than
whatever may be claimed to have been the actual intention of the parties. 17A
AM.JUR.2d Contracts § 337
(2d ed 1991 & Supp. 1998). Where the language is
plain and unambiguous, the meaning of a contract should be determined without reference
to extrinsic facts or aids. 17A Am.Jur.2d, Contracts § 337.
In this
instance, the express intention of the subordination agreement was that SBA
subordinated itself to ASB, thereby changing lien priorities with ASE. The subordination agreement, however, did
more than change lien priorities. The
agreement also subjected the lien priorities to certain restraints. ASB’s lien priority changed to first upon this agreement,
but only up to 68% of the original principal loan amount plus interest, fees,
or costs applicable to the loan or mortgage.
SBA, as the creditor with a second lien priority, was entitled to all or
an appropriate portion of the amount exceeding the 68% limitation. ASH, therefore, is contractually allowed to
receive no more than 68% of the initial principal loan amount plus applicable
interest, fees or costs. As such, the subordination agreement was not a fully
performed contract. The allowance of receiving only up to the amount of the 68%
limitation remained to be performed.
SBA is further eligible to receive the contractually
specified amount from ASH based upon A.S.C.A. § 37.1103. A.S.C.A. § 37.1103 provides:
Mortgage creditors shall be entitled to payment
according to the priority of their liens, and not pro rata; and the judgments
of foreclosure shall operate to extinguish the liens of subsequent mortgages of
the same property, without forcing prior mortgages to their right of
recovery. The surplus after payment of
the mortgage foreclosed shall be applied pro tanto to
the next junior mortgage, and so on to the payment, wholly or in part, of
mortgages junior to the one assessed.
[6] The requirement that mortgage creditors be paid according to the
priority of their liens is statutorily mandated. SBA, therefore, is entitled to
receive its share of the sale price according to A.S.C.A. § 37.1103.
ASH
claims that SBA failed to receive funds from the foreclosure sale due to its
failure to fully and timely assert its interest as a competing [3ASR3d148] lienholder.
As a result, ASH asserts that SBA missed its opportunity to collect from Soli
Corporation on its debt. Even if SEA missed its opportunity to collect from the
Soli Corporation, SBA has not missed its opportunity to collect from ASH as
contractually allowed.
The subordination agreement allowed ASH to receive no more than
68% of
the principal amount of ASH’s loan to Borrower for
One Hundred Eighty-Three Thousand Seven Hundred Five Dollars ($183,705.00) plus
interest, fees or costs applicable to the bank loan or mortgage.
SEA’s share, therefore, is calculated as follows:
(1) ASB’s original loan (principal amount of
subordination limitation) $183,705.00
(2) Interest to
(3) Interest from
(4) Total
interest
46,200.32
(5) Fees and
costs 9,572.71
(6) Total
subordination limitation $239,478.03
(7) Credit Bid $176,254.71
(8) Minus 68% x
239,478.03 162,845.06
(9) Surplus over
subordination limitation
$13,409.65
[7] SBA
wants, in addition, simple interest at the rate of 6% from
SBA is entitled to receive $13,409.65 from ASE. Therefore,
SBA is granted summary judgment in the sum of $13,409.65 against ASH.
It is so Ordered
*********