
    Curtis T. SPIVEY III and Sheryl H. Spivey v. FIRST COMMERCIAL BANK.
    1930164.
    Supreme Court of Alabama.
    April 28, 1995.
    
      Perryn Godbee Carrol of Boardman, Tyra & Godbee, P.C., Birmingham, for appellants.
    Roderick K. Nelson and T. Samuel Duck of Lamar, Nelson & Miller, P.C., Birmingham, and Rodney A. Max of Najjar Denaburg, P.C., Birmingham, for appellee.
   On Rehearing Ex Mero Motu

SHORES, Justice.

This Court’s order of June 24,1994, affirming the judgment, without opinion, and its July 29, 1994, order denying rehearing, are withdrawn.

Curtis T. Spivey III and his wife Sheryl H. Spivey appeal from a judgment based on a jury verdict for First Commercial Bank on the Spiveys’ fraud claim and based on the jury’s determination that the entire balance of the promissory note was subject to a mortgage held by First Commercial. We affirm in part, reverse in part, and remand.

This appeal arises from two cases consolidated for trial. On October 2, 1991, First Commercial Bank filed a complaint against the Spiveys, seeking a judgment on a promissory note and a judicial foreclosure on mortgages executed by the Spiveys to secure the note. On October 4,1991, the Spiveys filed a complaint against First Commercial, in which they alleged breach of contract, breach of fiduciary duty, and fraud. They alleged that First Commercial had fraudulently induced them to enter into a loan agreement on October 81,1990, and to give a mortgage on their property, by falsely representing to the Spi-veys that they would be able to use the entire proceeds of the loan to pay for construction of their residence — they alleged that in fact a substantial portion of the loan proceeds were actually used by First Commercial to pay off unsecured business-related loans of Curtis Spivey and Curt’s Cars, Inc.

The transactions that led to this appeal began in February 1990, when Curtis T. Spivey III, as president of Curt’s Cars, Inc., executed a promissory note to First Commercial Bank, specifically for business purposes. From February 1990 through June 1990, Curt’s Cars, Inc., through Spivey as its president, entered into other business loan agreements with First Commercial Bank. None of the documents relating to those loans refers to personal purposes or to residential construction purposes. The Bank charged an interest rate on these business loans equal to the prime rate plus one percent.

On August 13, 1990, the Spiveys executed a promissory note to First Commercial Bank in the amount of $150,000 at an interest rate equal to the prime rate plus two percent. The note stated on its face that it was for construction of a personal residence located at Route 1, Box 533, Pinson, Alabama. In connection with the promissory note, the Spi-veys gave First Commercial a first mortgage on the real property where the Spiveys’ home was located and upon which the new house was to be constructed. This promissory note contained a statement providing that no modification of the note or any agreement securing the note was effective unless in writing and signed by the borrower and the lender.

The Spiveys executed a second promissory note, also secured by a mortgage on their real property, to First Commercial Bank on October 31, 1990, in the amount of $332,000. On the face of this note, the purpose is stated as being “construction” and “personal.” The Spiveys also, at the same time, executed a construction loan agreement, which stated that the purpose of the loan was to pay the cost of construction. Both the note and the loan agreement contained statements providing that no modification of the note was effective unless in writing and signed by the borrower and the lender. The Spiveys also signed a “Truth-in-Lending Disclosure Form.” On that form, under the column entitled “Amounts Paid to Others on My Behalf,” there are no entries.

On November 6, 1990, First Commercial disbursed funds from the Spiveys’ construction line of credit to satisfy the business debts of Curt’s Cars, Inc., and Curtis Spivey. The Spiveys contend'that the disbursement was made without their knowledge or acquiescence. The evidence reflects that the promissory note executed by the Spiveys on October 31, 1990, was altered by First Commercial after they had signed it, to add the designation “Master Note,” to add the designation “Amended,” and to list the loan numbers of Curt Spivey’s business loans. The Bank contends that the Spiveys did not complain about the disbursement of funds from the October 31, 1990, line of credit until July 1991. The Spiveys argue that they complained to the Bank upon learning of the disbursement.

On May 20, 1991, the Spiveys signed a renewal note, which matured on August 20, 1991. The Spiveys made none of the interest payments on that loan, and on September 3, 1991, First Commercial sent a letter to the Spiveys informing them that they were in default. First Commercial Bank then sued the Spiveys on the promissory note of May 20, 1991, and sought foreclosure of the mortgage securing the note. The Spiveys sued First Commercial, alleging fraud and breach of contract. The cases were consolidated for trial.

The cases were tried in April 1993. At the beginning of his charges to the jury, the trial judge directed a verdict in favor of First Commercial Bank on the promissory note of May 20,1991, for $331,936.65, stating:

“I have decided as a matter of law that Curtis Spivey is liable for the full amount of the note plus interest accrued on the note from May 20, 1991, until the date of the judgment. The question still remaining for you to decide is the amount of the indebtedness owed to First Commercial which is subject to the mortgage.”

The trial judge then propounded these written interrogatories to the jury:

The jury returned a verdict for First Commercial on the Spiveys’ fraud claim and a holding that the amount of indebtedness owed to First Commercial Bank that was subject to the mortgage was $331,936.65. The Spiveys then filed a motion for a judgment notwithstanding the verdict or, in the alternative, for a new trial. The motion was denied, and they appealed.

The Spiveys contend that the trial court erred to reversal in charging the jury. SpecificaHy, they question the trial court’s failure to charge the jury on the Statute of Frauds and on the law of “set-off’ as to special accounts. They also argue that the trial court erred by instructing the jury on the law of agency.

The Spiveys requested the following jury instruction based on the Statute of Frauds, Ala.Code 1975, § 8-9-2(7):

“An agreement or commitment to lend money, delay or forbear repayment thereof or to modify the provision of such an agreement or commitment is void unless such agreement or some note or memorandum thereof expressing the consideration is in writing and subscribed by that party to be charged therewith or some other authorized persons by him thereunto lawfully authorized in writing.”

The construction loan agreement signed by the Spiveys, by its written terms, required that any amendment, waiver, or modification of that agreement be in writing, and be signed by the parties to be bound. Neither the promissory note nor the construction loan agreement contained any authority for any portion of the loan proceeds to go toward satisfying the debts of other entities, yet First Commercial altered the promissory note after it had been signed by the parties, to include a reference to the business debts of Curtis Spivey. This made necessary a jury instruction on the Statute of Frauds.

The Spiveys next contend that the trial court erred in failing to instruct the jury as to the law of “set-off.” They argue that the $332,000 construction loan with First Commercial constituted a “special account,” under the law of Alabama, and, therefore, that First Commercial was prohibited from setting off personal and business debts of other legal entities from the proceeds of the construction loan. First City Nat'l Bank of Oxford v. Long-Lewis Hardware Co., 363 So.2d 770, 772 (Ala.1978); Coffee County Bank Corp. v. Mitchum, 634 So.2d 148, 150 (Ala.Civ.App.1993). It is settled law in Alabama that where the customer has made a deposit for a “special purpose” known to the bank, the bank may not set the deposit off against a loan. Rainsville Bank v. Willingham, 485 So.2d 319, 323 (Ala.1986). Whether the $332,000 loan was actually a “special account” was a matter that was contested at trial; this question necessitated instructions to the jury.

The Spiveys argue that the trial court erred in instructing the jury on agency, because the Truth-in-Lending Act', 15 U.S.C. §§ 1601-1667 requires that all obligors be given actual notice of the material terms of the loan. The Spiveys contended at trial that Mrs. Spivey was never informed by First Commercial that a large portion of the proceeds of the October 31, 1990, loan was to be used to pay off Mr. Spivey’s business debts with First Commercial. At trial, First Commercial argued that Curtis Spivey was Sheryl Spivey’s agent and that notice to Curtis Spivey as to how the funds were going to be disbursed was sufficient for Sheryl Spivey also. Thus, the Spiveys say, when the trial court instructed the jury on the law of agency, this compounded the error.

When examining a jury charge that a party claims was erroneous, this Court looks to the entirety of the charge to see if there is reversible error. Grayco Resources, Inc. v. Poole, 500 So.2d 1030 (Ala.1986); Shoals Ford, Inc. v. Clardy, 588 So.2d 879 (Ala.1991). See Gist v. Vulcan Oil Co., 640 So.2d 940, 942 (Ala.1994). Considering the charge as a whole, we conclude that the court’s errors in giving its jury charge “probably injuriously affected substantial rights” of the Spiveys; therefore, we must further conclude that the trial court erred to reversal. Rule 45, Ala.R.App.P.

That portion of the judgment based on the directed verdict in favor of First Commercial was not challenged on this appeal; that portion of the judgment based upon that directed verdict is affirmed. That portion of the judgment based upon the jury verdict is reversed, and the cause is remanded for a new trial.

ORDERS OF JUNE 24,1994, AND JULY 29, 1994, WITHDRAWN; AFFIRMED IN PART; REVERSED IN PART; AND REMANDED.

HORNSBY, C.J., and KENNEDY, INGRAM, and COOK, JJ., concur.

MADDOX, HOUSTON, and BUTTS, JJ., concur in part and dissent in part.

BUTTS, Justice

(concurring in part and dissenting in part).

I respectfully dissent from that portion of the majority opinion that reverses the trial court’s judgmént based on the jury verdict and orders a new trial. I concur as to that portion of the opinion that affirms the directed verdict in favor of First Commercial Bank.

The trial judge directed a verdict for First Commercial Bank on its claim against Curtis and Sheryl Spivey for collection on their May 20, 1991, promissory note, but left it for the jury to determine what amount of the debt owed to the bank was secured by a home mortgage. The jury found that the entire amount of the $332,000 loan was secured by the mortgage and that First Commercial was not liable on the Spiveys’, breach of contract and fraud claims against it. The Spiveys moved for a new trial, based on the argument that the trial court had refused to give certain jury instructions they contend were required and also had given an instruction they say should not have been given. The majority opinion holds that the trial judge committed reversible error by failing to instruct the jury on the Statute of Frauds and the law of “set-off’ as to “special accounts” and also erred by instructing the jury on the law of agency. As explained below, after reviewing the videotape record of the trial proceedings, I would affirm the judgment based on the jury verdict in favor of First Commercial Bank.

I.

First, the Spiveys argue that the trial court erred by refusing to instruct the jury regarding the Statute of Frauds, as they had requested in the proposed jury charges submitted to the trial judge. However, the record contains no written objections to the jury charges actually given by the trial judge, and a thorough review of the videotape trial record reveals that the Spiveys did not object to the trial court’s failure to instruct the jury regarding the Statute of Frauds, even though they were given an opportunity to state any objections when the judge completed his jury charge. Rule 51, A.R.Civ.P., clearly states:

“No party may assign as error the giving or faffing to give a written instruction, or the giving of an erroneous, misleading, incomplete, or otherwise improper oral charge unless he objects thereto before the jury retires to consider its verdict, stating the matter to which he objects and the grounds of his objection.”

Accordingly, I believe that this issue is not properly before this Court for review. See Reserve Nat’l Ins. Co. v. Crowell, 614 So.2d 1005 (Ala.1993), cert. denied, 510 U.S. 824, 114 S.Ct. 84, 126 L.Ed.2d 52 (1993), and Hamilton Auto Parts, Inc. v. Rea, 580 So.2d 1328 (Ala.1991).

II.

The Spiveys next argue that the trial court erred in faffing to apply the law of “set-off’ as to “special accounts” and in refusing to instruct the jury as to the law of “set-off.” Specifically, the Spiveys contend that the $332,000 line of credit provided to them by First Commercial constituted a “special account” and, therefore, that First Commercial was prohibited from “setting off personal and business debts of other legal entities from the proceeds of the construction loan.” However, overwhelming evidence presented during the trial proved that the Spiveys and First Commercial had agreed that the $332,-000 loan was to be used for construction purposes and to pay off Curtis’s other unsecured debts to the bank. In fact, Curtis admitted that he diverted a substantial sum of the proceeds from the loan for use in his used car sales business, a non-construction purpose. Thus, the line of credit loan was clearly not a “special account,” and I believe the trial judge did not err by not giving a specific jury instruction regarding “set-off’ of “special accounts.”

Moreover, even if the trial judge should have instructed the jury as to the law of “set-off’ as to “special accounts,” the record indicates both that the judge gave a general instruction on that topic and that the Spiveys did not object to the judge’s failure to charge the jury more specifically. First, the videotape record reveals that the trial judge instructed the jury that it was for the jury to decide the amount of the indebtedness the Spiveys owed to First Commercial that was subject to the mortgage on their property, based on whether the jury determined the bank had represented to the Spiveys that the entire proceeds of the $332,000 loan would be used only to pay for construction of the Spiveys’ new house and not to also pay off Curtis’s unsecured debts to the bank.

The videotape record also shows that, at the close of the trial judge’s instructions to the jury, the Spiveys were given the opportunity to except to the trial court’s instructions. With regard to the issue of how the bank disbursed the proceeds of the $332,000 loan, the only objection made by the Spiveys was as follows:

“Then subsequent to that, you outlined the claim of the Spiveys about the agreement as to what to do with the proceeds of the $332,000 loan. At that point, you indicated that if you [the jury] find that the bank never entered into such an agreement or misrepresented the entire amount would be used for construction purposes, then the bank is entitled to the entire amount of the note. You did not then say that if you [the jury] do find that there was such an agreement or that the bank misrepresented that the entire amount would be used for construction purposes that the Spiveys would be entitled to have the amount that was mis — the amount only used for construction purposes subject to the mortgage.”

The judge responded by saying that he had so instructed the jury. Specifically, the judge noted that he had instructed the jury that if it found that First Commercial had represented to the Spiveys that the proceeds of the October 31, 1990, loan would be used only for construction purposes, rather than to pay off Curtis’s unsecured debts to the bank, then First Commercial would be entitled to the security of its mortgage for only that part of the line of credit loan that was actually withdrawn by the Spiveys to pay construction costs. The Spiveys’ counsel responded by saying that he had simply misunderstood the trial court’s instruction; he made no further objection. As noted previously, in order to preserve for appellate review an allegedly misleading or erroneous jury instruction, a party must object thereto “before the jury retires to consider its verdict, stating the matter to which he objects and the grounds of his objection.” Rule 51, A.R.Civ.P. It is clear that the Spiveys made no specific objection to the trial court’s failure to instruct the jury with regard to “set-off’ as to “special accounts,” and it is likewise clear that any objection by the Spiveys to the trial court’s more general jury instruction was insufficient to preserve any alleged error for appeal. See General Sales Co. v. Miller, 454 So.2d 532 (Ala.1984); Rule 51, A.R.Civ.P.

III.

Finally, the Spiveys contend that, in light of the Truth-in-Lending Act, 15 U.S.C. § 1601 et seq., which they say requires that all obligors be given actual notice of the material terms of the loan, the trial court erred by instructing the jury on the law of agency. The Spiveys contended at trial that Sheryl was never informed by First Commercial that it intended to use a large portion of the proceeds of the $332,000 line of credit to pay off Curtis’s unsecured indebtedness with the bank. Thus, the Spiveys argue that the trial court’s instruction to the jury on the law of agency could have led the jury to believe that Curtis was Sheryl’s agent for purposes of Truth-in-Lending requirements.

After reviewing the judge’s instruction on the law of agency, I believe that the instruction was a correct statement of law and that the trial judge did not err in giving the instruction. First, the instruction on agency was not given to the jury in relation to any comment regarding the intended use of the loan proceeds. The agency instruction immediately followed an instruction regarding the law of fraud and preceded an instruction stating that the jury was to be the finder of fact even though certain witnesses had been allowed to express their personal opinions on certain matters. Thus, given the Spiveys’ claim of fraud against First Commercial based on the alleged acts of one or more of its employees, a jury instruction on the law of agency was required. Clearly, the agency instruction related to the fraud instruction that had immediately preceded. Accordingly, I believe that there was no error — and certainly no reversible error — in the trial judge’s instructing the jury on the law of agency.

IV.

Accordingly, I would affirm the trial court’s judgment based on the jury’s verdict in favor of First Commercial.

MADDOX and HOUSTON, JJ., concur. 
      
      . The record contains no written transcript of the seven-day. The record of the trial consists of eight lengthy videotapes.
     
      
      . For example, Curtis Spivey took $55,000 in approved overdraft withdrawals from First Commercial, before the loan documents were completed; they were to be used solely to pay construction costs, but were actually transferred by Curtis to a Curt’s Cars business account at another bank.
     