Borrower liable for breaching loan agreement

Where a company sued for violating a loan agreement argued the plaintiff failed to approve third-party financing options that would have allowed the loan to be repaid, but it failed to show that it would have been unreasonable or wrongful for the plaintiff to withhold its approval, the plaintiff was granted summary judgment.

Background

This appeal is governed by North Carolina law and raises two questions. First, did the district court err in granting summary judgment for Colorado Bankers Life Insurance Company in its suit against Academy Financial Assets for violating a loan agreement? Second, did the district court err in concluding a North Carolina statute requires Academy to pay 15 percent of the outstanding loan balance as attorney’s fees?

Summary judgment

In opposing Colorado Bankers’ summary judgment motion, Academy insists Colorado Bankers failed to mitigate its damages and obstructed Academy’s contract performance by declining to approve several third-party financing options supposedly available to Academy, which would have (the argument goes) enabled Academy to repay the loan. Academy criticizes the district court for ignoring these purported proposals and for failing to determine whether Colorado Bankers acted reasonably in rejecting them.

But there was nothing for the district court to consider. To avoid summary judgment based on its affirmative defenses, it was not enough for Academy to create a genuine dispute about whether refinancing offers existed. Instead, Academy needed to raise triable issues about whether any such offers could have prevented a breach of the revolver, mitigated damages or enabled repayments and whether the offers’ terms were sufficiently favorable that it would have been unreasonable or wrongful for Colorado Bankers to withhold its approval.

Academy failed to do so. Its vague assertion about alternative financing arrangements represents precisely the sort of “conclusory testimony” that is, “without more, … insufficient to preclude granting [a] summary judgment motion.”

Attorneys’ fees

North Carolina General Statute § 6-21.2 makes “[o]bligations to pay attorneys’ fees upon any … evidence of indebtedness … valid and enforceable … subject to” certain “provisions” set forth in the rest of the statute. Subsection one addresses circumstances where the “evidence of indebtedness provides for attorneys’ fees in some specific percentage of the ‘outstanding balance.’” In that situation, “such provision and obligation shall be valid and enforceable up to but not in excess of fifteen percent (15%) of said ‘outstanding balance’ owing on said note, contract or other evidence of indebtedness.”

Subjection two, in contrast, applies if the “evidence of indebtedness provides for the payment of reasonable attorneys’ fees by the debtor, without specifying any specific percentage.” In that case, “such provision shall be construed to mean fifteen percent (15%) of the ‘outstanding balance’ owing on said note, contract or other evidence of indebtedness.”

This statute’s plain words divide the world into two types of fee-shifting provisions: those that “provide[] for attorneys’ fees in some specific percentage of the ‘outstanding balance’” and those that “provide[] for the payment of reasonable attorneys’ fees … without specifying any specific percentage.” Because the revolver provides for “the reasonable fees, charges and disbursements of outside counsel and the allocated cost of inside counsel,” without mentioning any specific percentage, it is governed by subsection two.  Subsection two, in turn, provides the revolver “shall be construed to mean” that Academy is required to pay “fifteen percent (15%) of the ‘outstanding balance’” as attorneys’ fees. The district court thus did not err in imposing a 15% fee award.

Affirmed.

Colorado Bankers Life Insurance Company v. Academy Financial Assets LLC, Case No. 22-1104, Feb. 15, 2023. 4th Cir. (Heytens), from EDNC at Raleigh (Dever). Matthew Nis Leerberg for Appellant. Lauren Elizabeth Fussell for Appellee. VLW 023-2-044. 13 pp.