In this week’s Alabama Law Weekly Update, we bring you a case from the Alabama Supreme Court addressing jury trial waivers in loan contract packages.
Ex parte Sergio Acosta (In re: Sergio Acosta v. Trinity Bank), [1140200, June 5, 2015] (Ala. 2015) (jury trial waivers are interpreted narrowly, and in accordance with their express limitations).
The Alabama Supreme Court reversed the trial court's order to strike a party's demand for a jury trial. In 2006, Sergio Acosta, through various business entities, took out several loans from a bank to construct and manage rental properties. At that time, the loans were secured only by the properties. After the economic downturn in 2009, Mr. Acosta apparently pledged additional security and agreed to become personally liable on the notes. In 2013, the bank claimed that Mr. Acosta failed to pay the notes, foreclosed on the properties, and sought a judgment from Mr. Acosta for the balance due, plus interest and attorney fees. Mr. Acosta brought various counterclaims and demanded a jury trial.
Mr. Acosta executed three types of documents drafted by the bank (i) notes, (ii) mortgages securing the notes, and (iii) assignments of rents and leases. The assignments of rents and leases included a jury-waiver provision stating that Mr. Acosta “HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY IN ANY CIVIL ACTION ARISING OUT OF, OR BASED UPON, THIS ASSIGNMENT.”
The issue for the Alabama Supreme Court was whether a jury-waiver provision in one type of document (the assignments) can be extended to other documents (the notes and mortgages). The bank advanced three arguments, briefly summarized as follows: (i) the jury-waiver provision has broad language, (ii) the notes incorporate by reference provisions of the assignments, and (iii) the contemporaneous-writing principle applies. The Alabama Supreme Court concluded that the trial court erred in striking Mr. Acosta's demand for a jury trial.
In its analysis, the court emphasized that jury-waivers must be strictly construed as a matter of law and public policy, and focused on the language of the jury-waiver provision. In response to the bank's first argument that the language, “arising out of, or based upon” should be construed broadly, the court focused on the last two words, noting the jury-waiver only applies to civil actions “arising out of, or based upon, this assignment.” The court even offered an example of language that would apply more broadly – “claims arising out of, or based upon, the assignments or the loan documents.” The court disagreed with the bank's second argument that the jury-waiver provision contained in a collateral document which is incorporated by reference to a primary document, should apply to the primary document, where “the language of the jury-waiver provision expressly and unambiguously limits its scope to the collateral document.” Third, the court refused to apply the contemporaneous-writing principle – a rule of construction that writings executed at the same time, by the same parties, for the same purpose, in the course of the same transaction, are construed as one instrument. The court explained that the contemporaneous-writing principle is merely a rule of construction used when the intent of the parties is unclear. When a contract is unambiguous on its face, “there is no room for construction and [the contract] must be enforced as written.”