New Georgia Decision on Integrated Agreements

On November 28, 2012, the Georgia Court of Appeals decided Lovell v. Georgia Trust Bank, Case No. A12A1234.  The case is notable for its way it addresses a discovery dispute and for the Court’s implying an integrated agreement in the absence of a merger clause

The bank had sued Lovell to recover on a promissory note.  The bank received a summary judgment.  On appeal, Lovell contended that the bank failed to honor its oral promise to work with him in the event of default and appealed the trial court’s denial of his motion to compel the production of the underlying loan file, and the order granting summary judgment to the bank.

Of interest, the Court of Appeals affirmed the trial court’s denial of Lovell’s motion to compel production of non-privileged documents relating to the bank’s underwriting and approval process of the loan and renewals, internal communications regarding the loan, documents relating to the bank’s willingness or unwillingness to modify the terms of the loan, and documents reflecting any actions the bank took to mitigate damages.  The trial court denied Lovell’s motion to compel, finding that the requested documents were irrelevant, outside the scope of discovery and barred from admission by the parol evidence rule.  

Also of interest, notwithstanding the fact that the note did not contain a merger clause, the Court of Appeals found that the note was clearly an integrated document.  The note unambiguously expressed the remedies that immediately became available to the bank when Lovell defaulted on the note.  Nothing in the express remedy provisions required the bank to work with or engage in prelitigation negotiations as a condition to filing and pursuing a collection lawsuit.  Lovell’s reliance upon parol evidence to impose such non-existent conditions was unavailing.  In denying Lovell’s challenge, the Court of Appeals also relied upon a provision of the note that provided that no modification of the agreement may be made without the bank’s express written consent, and the payments provision which expressly stated that any contrary agreements regarding payments must be in writing.

In suits to recover on written debt agreements, a claim of an oral modification of the agreement is not uncommon.  Further, debtors may use discovery requests as a means to delay entry of judgment.  This decision may strengthen the hand of parties seeking to enforce written debt agreements.

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