Title: Steinfurth v. Ski Lodge Apartments, LLC

State: alabama

Issuer: Alabama Supreme Court

Document:

Rel: 04/17/2015
Notice: This opinion is subject to formal revision before publication in the advance
sheets of Southern Reporter.  Readers are requested to notify the Reporter of Decisions,
Alabama Appellate Courts, 300 Dexter Avenue, Montgomery, Alabama 36104-3741 ((334) 229-
0649), of any typographical or other errors, in order that corrections may be made before
the opinion is printed in Southern Reporter.
SUPREME COURT OF ALABAMA
OCTOBER TERM, 2014-2015
____________________
1130832
____________________
Paul R. Steinfurth and Paul C. Steinfurth
v.
Ski Lodge Apartments, LLC
Appeal from Montgomery Circuit Court
(CV-12-901265)
PARKER, Justice.
Paul R. Steinfurth ("Paul R.") and Paul C. Steinfurth
("Paul C.") (hereinafter collectively referred to as "the
guarantors") appeal from the denial by the Montgomery Circuit
Court of their postjudgment motion requesting that a judgment
1130832
entered against them and in favor of Ski Lodge Apartments, LLC
("Ski Lodge"), be amended insofar as the judgment held that
the guarantors had waived their personal exemptions under § 6-
10-123, Ala. Code 1975.
Facts and Procedural History
The facts are undisputed.  On or about February 13, 2009,
Styles 
Manager, 
LLC 
("Styles 
Manager"), 
purchased 
from 
Vintage
Pointe Apartments, LLC ("Vintage Pointe"), an interest in an
apartment complex located in Montgomery ("the apartment
complex").  On February 13, 2009, as part of this transaction,
Styles Manager executed a promissory note promising to pay
Vintage Pointe $800,000 ("the promissory note").  Paul C.
signed the promissory note in his official capacity as
"manager" of Styles Manager.  In pertinent part, the
promissory note states:
"12. Renunciation and Assignment of Exemptions.
To the fullest extent allowed by law, the Maker
hereby waives and renounces for itself, its legal
representatives, successors and assigns, all rights
to the benefits of any moratorium, reinstatement,
marshaling, 
forbearance, 
valuation, 
stay, 
extension,
appraisement, and exemption now provided, or which
may hereafter be provided, by the Constitution or
laws of the United States of America or of any state
thereof, both as to itself and in and to all of its
property, real and personal, against the enforcement
and collection of the obligations evidenced by this
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Note. The undersigned hereby transfers, conveys, and
assigns to the Holder a sufficient amount of such
exemption, as may be set apart in bankruptcy, to pay
this Note in full, with all cost of collection, and
does hereby direct any trustee in bankruptcy having
possession of such exemption to deliver to the
Holder a sufficient amount of the property or monies
set apart as exempt to pay the indebtedness
evidenced hereby, or any renewal thereof, and does
hereby appoint the Holder as the attorney-in-fact
for the undersigned to claim any and all exemptions
allowed by law.
"....
"20. Loan Documents. As used herein, the term
'Loan Documents' shall refer to any and all
documents or agreements executed in connection with
or related to the loan evidenced by this Note
including, but not limited to, letters of credit,
guaranties, security agreements and instruments, and
financing statements (and any renewals, extensions
and 
modifications 
thereof) 
whenever 
any 
such
documents are executed."
As security for the performance of the payment of the
promissory note, the 
guarantors, 
in 
their individual
capacities, executed a "guaranty of payment and performance"
of the promissory note ("the guaranty agreement").  The
guaranty agreement states, in pertinent part:
"A. Styles Manager, LLC, a Delaware limited
liability company (the 'Maker'), has requested that
the Holder [(Vintage Pointe)] loan to the Maker the
principal sum of EIGHT HUNDRED THOUSAND AND NO/100
DOLLARS ($ 800,000.00) (the 'Loan'), to be evidenced
by a Promissory Note of even date herewith (the
'Note') payable by the Maker to the Holder and such
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other documents as are more particularly set forth
in the Note. As a condition to making the Loan (and
as an obligation in the Purchase Agreement (as
defined below)), the Holder has required that the
Guarantor 
guarantee 
the 
Loan 
and 
any 
other
obligations of the Maker to the Holder pursuant to
the Loan Documents (as such term is defined in Note)
executed in connection therewith, whether now
existing or hereafter incurred.
"....
"NOW, THEREFORE, in consideration of the
foregoing recitals, and as an inducement to the
Holder to make the Loan to the Maker, and as
additional security for the payment of the Loan and
all interest thereon, all modifications, renewals
and extensions thereof, and all other indemnities,
charges, expenses and any other indebtedness of any
nature now existing and hereafter incurred by the
Maker to the Holder in connection therewith or
otherwise, and the performance of all other
obligations of the Maker under the Note, the Loan
Documents or any other obligations of any nature of
the Maker to the Holder (the Loan and all other
indebtedness, liabilities, and obligations secured
hereby being hereinafter called 'Obligations'), the
Guarantor agrees and covenants with the Holder and
represents and warrants to the Holder as follows:
"1. 
The 
Guarantor 
hereby 
absolutely 
and
unconditionally guarantees to the Holder when due
(whether at stated maturity, by acceleration or
otherwise), the regular, complete and punctual
payment and performance of the Obligations. The
Guarantor hereby further guarantees the prompt
performance of any other obligations of any kind or
character of the Maker to the Holder set forth in
any of the Loan Documents, as the same may hereafter
be amended by the Maker and the Holder, the consent
of the Guarantor to which shall not be required, and
upon failure of the Maker to timely do so, the
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Guarantor guarantees to the Holder the payment of
all costs and expenses incurred by the Holder in
performing such obligations. Further, the Guarantor
guarantees the payment of all costs, reasonable
attorney fees or expenses which may be incurred by
the Holder by reason of a default of the Maker under
the Obligations.
"Should an Event of Default as defined in the
Note (an 'Event of Default') occur, the Guarantor
unconditionally promises to pay to the Holder such
amounts and/or perform such Obligations as are
necessary to cure the default, or at the option of
the Holder, the Guarantor agrees to pay the entire
indebtedness owed the Holder by the Maker at the
time of such default.
"....
"2. 
The 
Guarantor represents 
and 
warrants 
to 
the
Holder that: (a) the Guarantor has full power and
unrestricted right to enter into this Guaranty, to
incur the obligations provided for herein, and to
execute and deliver this Guaranty to the Holder, and
that when executed and delivered, this Guaranty will
constitute a valid and legally binding obligation of
the Guarantor, enforceable in accordance with its
terms; (b) this Guaranty is executed at the request
of the Maker; (c) the Guarantor has established
adequate means of obtaining from the Maker on a
continuing basis information pertaining to, and is
now and on a continuing basis will be completely
familiar with, the financial condition, operations,
properties and prospects of the Maker; (d) the
Guarantor has received and approved copies of the
Note and all other Loan Documents; and (e) no oral
promises, assurances, representations or warranties
have been made by or on behalf of the Holder to
induce the Guarantor to execute and deliver this
Guaranty."
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1130832
(Capitalization in original.)  On September 8, 2010, Vintage
Pointe assigned to Ski Lodge the "loan documents," as that
term is defined in the promissory note, set forth above ("the
assignment"), including the promissory note and the guaranty
agreement.
The parties agree that Styles Manager defaulted on the
promissory note in January 2011.  Pursuant to the promissory
note, the entire principal amount of the promissory note and
all accrued interest was then due on February 13, 2011. 
Neither Styles Manager nor the guarantors cured the default.
Accordingly, on September 27, 2012, Ski Lodge sued the
guarantors, alleging breach of the guaranty agreement, in
order to collect the outstanding debt on the promissory note. 
Ski Lodge requested $804,333.36, together with additional
accrued interest, in damages.  In its complaint, Ski Lodge did
not expressly allege that the guarantors had waived their
right to a personal exemption.  However, Ski Lodge did attach
to its complaint copies of the loan documents, which include
the promissory note and the guaranty agreement, and stated
that each was "incorporated herein by reference."  The
guarantors filed an answer on November 8, 2012.
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On March 29, 2013, the guarantors filed counterclaims
against Ski Lodge alleging misrepresentation and suppression. 
The guarantors also filed a third-party complaint against
Charles F. Mullins, Jr., the sole owner of Vintage Pointe at
the time Styles Manager purchased the apartment complex, 
alleging claims of misrepresentation and suppression.  Ski
Lodge and Mullins filed answers to the respective claims filed
against them by the guarantors.
On December 3, 2013, the guarantors filed a motion to
dismiss, with prejudice, their counterclaims against Ski
Lodge.  In that same motion, the guarantors stated they 
"no longer intend ... to defend themselves against
[Ski Lodge's] claims made in the original suit. The
[guarantors] do not contest judgment entered against
them on their personal guaranties in the amount of
$1,057,490.09. Upon information and belief, this
amount represents the principal and interest owed
pursuant to the subject guaranties. The [guarantors]
also do not contest an attorney's fee added to this
judgment in the amount of $158,623.51, which is 15
percent of the total amount owed through the date of
this pleading."
On the same day, the guarantors and Mullins filed a joint
stipulation to dismissal, with prejudice, of the guarantors'
third-party claims against Mullins.
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1130832
On December 9, 2013, Ski Lodge and Mullins filed a
response to the guarantors' motions, submitting a proposed
order to the circuit court granting the guarantors' motion to
dismiss its counterclaims against Ski Lodge and 
dismissing 
the
third-party claims against Mullins.  The proposed order
included the following language pertinent to this appeal: 
"Said judgment is entered with a waiver of
exemptions under the Constitution and the laws of
the United States of America, and any state thereof,
according to the terms expressed in the Promissory
Note and Guaranty of Payment and Performance which
are the subject matter of this action, as the same
were incorporated and adopted into the complaint."
The guarantors objected to the above language of the proposed
order, arguing that the proposed order "includes a 
declaration
that there has been a waiver of exemptions under the
[promissory] [n]ote and [the] [g]uaranty [agreement]."  The
guarantors argued that the guaranty agreement, "which is the
basis of the lawsuit against the [guarantors], does not
contain a waiver of exemptions."  The guarantors further
stated that they "agreed to the entry of a money judgment
under the Complaint and the amount of the attorney's fees
claimed in the proposed order, but have not agreed or
consented to a declaration that they have waived any
8
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exemptions."  In response, Ski Lodge requested a hearing. 
Before the hearing, which was held on January 21, 2014, Ski
Lodge and the guarantors submitted briefs to the circuit court
presenting their legal arguments on the issue whether the
guarantors had waived their personal exemptions.
On February 11, 2014, the circuit court adopted as its
final judgment the proposed order submitted by Ski Lodge and
Mullins, which states:
"This cause [was] called for trial on January
21, 2014. No testimony was taken as the counsel for
the parties stipulate that the Motion for Dismissal
of Counterclaims and Notice of Non-Contesting for
Entry of Judgment filed by the [guarantors] is
dispositive of any disputed issues of fact to be
tried.
"Having read and considered the motion, the
briefs, oral arguments of counsel, and based upon a
review of all pleadings and evidence in the record
in this cause, it is hereby ORDERED, ADJUDGED AND
DECREED as follows:
"1. The counterclaim filed by [the guarantors]
against ... Ski Lodge ... is hereby dismissed with
prejudice, with the costs to be taxed as paid. The
court notes that a separate Joint Stipulation for
Dismissal has been filed with respect to the third-
party 
claim 
asserted 
in 
this 
cause 
by 
the
[guarantors] against Charles F. Mullins, Jr., an
individual.
"2. Judgment is hereby entered in favor of Ski
Lodge ... and against the [guarantors], jointly and
severally, for the principal sum of Eight Hundred
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Thousand and No/100 Dollars ($800,000.00), together
with pre-judgment interest in the amount of Two
Hundred Fifty-Seven Thousand Four Hundred Ninety and
09/100 Dollars ($257,490.09), as calculated to
December 3, 2013, the date of the [guarantors']
pleading giving notice of non-contesting for entry
of judgment. Said judgment is entered pursuant to
Alabama law with a waiver of exemptions, according
to the terms expressed in the [p]romissory [n]ote
and [the] [g]uaranty [agreement] which are the
subject matter of this action, as the same were
incorporated and adopted into the complaint. This
finding 
is 
made 
overruling 
the 
[guarantors']
objection in their brief and oral argument on the
issue of whether the [guarantors] waived exemptions
and that the waiver was not properly [pleaded]. The
court specifically finds that the waiver of
exemptions does not constitute a waiver of any
homestead exemption rights.
"3. Pursuant to § 8-8-10, Code of Alabama
[1975], and in accordance with the terms of the
promissory note upon which this action was based,
post-judgment interest shall accrue at the rate of
13 percent.
"4. Further, the court finds that an attorney's
fee in the amount of One Hundred Fifty-Eight
Thousand Six Hundred Twenty-Three and 51/100 Dollars
($158,623.51) is awarded to [Ski Lodge] and to which
the [guarantors] do not contest the reasonableness
of said fee.
"WHEREFORE, judgment is entered for the total
sum of $1,216,113.60, upon which execution may
issue, with waiver of exemptions."
(Capitalization in original.)
On March 12, 2014, the guarantors filed a Rule 59(e),
Ala. R. Civ. P., motion to alter, amend, or vacate the circuit
10
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court's judgment insofar as the circuit court held that the
"judgment is entered pursuant to Alabama law with a waiver of
exemptions, according to the terms expressed in the
[p]romissory 
[n]ote 
and 
[the] 
[g]uaranty 
[agreement] 
which 
are
the subject matter of this action, as the same were
incorporated and adopted into the complaint."  The guarantors
argued that "waiver was not properly [pleaded]" and that the
guaranty agreement did "not provide for waiver of exemptions
by" the guarantors.
On March 19, 2014, the circuit court denied the
guarantors' postjudgment motion.  The guarantors appealed.
Standard of Review
In Kappa Sigma Fraternity v. Price-Williams, 40 So. 3d
683, 694 (Ala. 2009), this Court stated:
"'Whether to grant relief under Rule 59(e), Ala. R.
Civ. P., is within the trial court's discretion.'
Bradley v. Town of Argo, 2 So. 3d 819, 823 (Ala.
2008). However, when the facts are undisputed and
the '"ruling [is] a reconsideration of a question of
law, ... the standard of review is de novo."' 2 So.
3d at 824 (quoting Pioneer Natural Res. USA, Inc. v.
Paper, Allied Indus., Chem. & Energy Workers Int'l
Union Local 4–487, 328 F.3d 818, 820 (5th Cir.
2003), applying the analogous Rule 59(e), Fed. R.
Civ. P.)."
Discussion
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The guarantors argue that the circuit court erred for two
reasons in holding that the guarantors had waived their
personal exemptions.  First, the guarantors argue that Ski
Lodge did not plead that the guarantors had waived their
personal exemptions.  Second, the guarantors recognize that
Styles Manager, the maker of the promissory note, waived its
exemptions in the promissory note, but the guarantors argue
that the guaranty agreement, which they personally signed,
does not provide for a waiver of their personal exemptions. 
We address the guarantors' arguments in turn.
First, the guarantors argue that § 6-10-123 requires that
a plaintiff alleging that a defendant has waived his personal
exemptions plead waiver in the plaintiff's complaint. 
 
Section
6-10-123 states:
"In any civil action, in which a waiver of the
right of homestead or other exemption is sought to
be enforced, the fact of waiver and its extent must
be averred in the complaint or petition and by
appropriate pleading may be controverted. If such
averment is sustained, the fact of waiver and its
extent must be declared in the judgment and endorsed
on the execution or other process issued thereon.
Such waiver shall extend to the costs of the
action."
Ski Lodge argues to this Court, as it did below, that its
attachment of the 
loan 
documents and its express incorporation
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of those documents into its complaint satisfied the
requirements of § 6-10-123.  In so arguing, Ski Lodge relies
upon Pierce v. Grant, 652 So. 2d 284 (Ala. Civ. App. 1994),
and upon Rule 10(c), Ala. R. Civ. P., which states:
"Statements in a pleading may be adopted by reference in a
different part of the same pleading or in another pleading or
in any motion. A copy of any written instrument which is an
exhibit to a pleading is a part thereof for all purposes."
In Pierce, a garnishment case, a lessor sued a lessee to
enforce a lease, which undisputedly contained a waiver of the
lessee's 
personal 
exemptions. 
 
The 
lessor's 
complaint 
included
the following boilerplate language from the lease: "'[T]he
lessee hereby waives all right which lessee may have under the
Constitution and Laws of the State of Alabama or any other
State of the United States, to have any personal property of
the lessee exempt from levy or sale or other legal process.'"
652 So. 2d at 285.  The lessor did not attach a copy of the
lease to his complaint.  The lessee did not answer the
complaint.  The lessor then filed "an application for entry of
default and default judgment" against the lessee.  652 So. 2d
at 285.  A copy of the lease was attached to the lessor's
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application for entry of default.  The trial court granted the
lessor's application and entered a default judgment against
the lessee.
The lessor then filed a motion to amend the default
judgment, noting that the default judgment did not state that
the lessee had waived his personal exemptions; the lessor
requested that the trial court alter its judgment to include
a determination that the lessee had waived his personal
exemptions.  The trial court granted the lessor's motion and
amended the judgment.  The lessee then filed a motion to
alter, amend, or vacate the trial court's order, which the
trial court denied.  The lessee appealed.
On appeal, the lessee argued "that the conditional nature
of the averment of the waiver of exemption contained in the
complaint was not sufficient to comply with the requirements
of Ala. Code 1975, § 6-10-123."  652 So. 2d at 256.  The
lessor argued "that the averment in his complaint was
sufficient to comply with the requirements of § 6-10-123
because the lease which was signed by [the lessee] and which
contained the waiver of exemption was adopted by reference
pursuant to Rule 10(c), A[la]. R. Civ. P."  Id.  The lessor
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also argued "that the averment in his complaint was sufficient
to place [the lessee] on notice that a waiver of exemption was
being claimed."  Id.
The Court of Civil Appeals disagreed with the lessor,
stating:
"As previously noted, [the lessor] filed a
complaint which contained boilerplate language to
the effect that if the contract contained a waiver
of exemption, then [the lessor] was claiming the
benefit of that provision of the contract. [The
lessor's] attorney testified at the February 25,
1994, hearing that the language contained in the
complaint regarding the waiver of exemption is
standard language included in all of his complaints.
[The lessor's] attorney also testified that he could
not recall whether he had the lease in hand when he
filed the complaint in the present case. It does not
appear from our review of the record that a copy of
the August 1990 lease was attached to the complaint,
which was filed with the court and, ultimately, was
served upon [the lessee]. [The lessee] could have
thought that there was no waiver of exemption in the
lease he executed. Without a specific averment
contained in the complaint or a copy of the lease
attached to the complaint, we cannot say with any
certainty that [the lessee] was 'on notice' that a
waiver of exemption was being claimed.
"Further, it does not appear that the averment
contained in [the lessor's] complaint was sufficient
to place the court and the clerk on notice that a
waiver of exemption was claimed, as there was no
mention of a waiver of exemption in the court's
[default] judgment of February 12, 1993."
652 So. 2d at 286 (emphasis added).
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In the present case, Ski Lodge did not specifically aver
in its complaint that the guarantors had waived their personal
exemptions.  However, Ski Lodge did attach to its complaint
the loan documents and stated that it was incorporating the
loan documents into its complaint.  Accordingly, Ski Lodge
satisfied the standard set forth in Pierce, that, in order to
place the defendant on notice that the plaintiff is claiming
that the defendant waived his or her personal exemptions, the
plaintiff must include a "specific averment" in the complaint
or a copy of the document containing the defendant's waiver of
his or her personal exemptions.  See Rule 10(c) ("A copy of
any written instrument which is an exhibit to a pleading is a
part thereof for all purposes." (emphasis added)); see also 1
Champ Lyons, Jr., and Ally Windsor Howell, Alabama Rules of
Civil Procedure Annotated 10.6 (4th ed. 2004) ("Ala. R. Civ.
P. Rule 10(c) expressly provides that the exhibit is then a
part of the pleading for all purposes." (emphasis added)). 
Therefore, the guarantors' argument that Ski Lodge "did not
plead waiver in its complaint, such that [the guarantors] did
not have the opportunity to appear and contest it" is
unpersuasive.
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Moreover, we note that the guarantors did, in fact,
receive notice that Ski Lodge was claiming that the guarantors
had waived their personal exemptions and that the guarantors
did, in fact, appear and contest their alleged waiver of those
exemptions before the circuit court entered its final
judgment.  The guarantors argue that the attachment of the
loan documents to Ski Lodge's complaint was not sufficient to
comply with the requirements of § 6-10-123.  The guarantors
state that Ski Lodge "did not plead waiver in its complaint,
such that [the guarantors] did not have the opportunity to
appear and contest it."  Guarantors' brief, at 7.  As set
forth above, after the guarantors consented to a judgment
being entered against them, Ski Lodge presented a proposed
order to the circuit court that included language holding that
the guarantors had waived their personal exemptions.  Before
the circuit court entered its final judgment, the guarantors
objected to the proposed order based on the language
indicating that they had waived their personal exemptions.  As
a result, the circuit court ordered a hearing on the issue and
ordered the parties to submit briefs addressing the issue
before the hearing.  Only after the guarantors had had the
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opportunity to raise their concerns in writing and at the
hearing did the circuit court enter its final judgment, which
included the holding that the guarantors had waived their
personal exemptions.  Therefore, even if Ski 
Lodge's 
complaint
had failed to meet the requirements of § 6-10-123, the
guarantors nonetheless received notice that Ski Lodge was
alleging that they had waived their personal exemptions and
had the opportunity to be heard concerning this matter.  For
this reason as well, 
the guarantors' argument 
is 
unpersuasive.
Next, the guarantors argue that the guaranty agreement,
which they executed, "does not provide for a waiver of
exemptions by the ... guarantors."  Guarantors' brief, at 8. 
It is undisputed that the promissory note is the only document
that includes a waiver of exemptions; the guaranty agreement
contains no such waiver.  It is also undisputed that the
promissory note was executed only by Paul C. and only in his
official capacity as manager of Styles Manager; neither Paul
C. nor Paul R. signed the promissory note in his individual
capacity.  Thus, the guarantors argue that they did not waive
their personal exemptions by signing the guaranty agreement.
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In response, Ski Lodge argues that the loan documents
must be read together and that "[i]t is abundantly clear from
the plain meaning of the language of the contractual
instruments, the [p]romissory [n]ote and the [g]uaranty
[agreement], read together as part of a single transaction,
that the trial court properly found that the Steinfurths had
waived their personal exemptions in writing as required by
law."  Ski Lodge's brief, at 16.  In so arguing, Ski Lodge
notes the undisputed fact that the promissory note contains a
waiver of Styles Manager's personal exemptions.  Ski Lodge
then directs this Court's attention to the several instances
in the guaranty agreement that state that the guarantors agree
to perform the "obligations" of Styles Manager if Styles
Manager defaults on the promissory note.  The entire crux of
Ski Lodge's argument is that those "obligations" in the
guaranty agreement the guarantors agreed to perform include
the waiver, in the promissory note, of Styles Manager's
personal exemptions.  Ski Lodge argues: "The Steinfurths not
only obligated themselves to make payment under 
the 
promissory
note in the event of default, in their individual capacities,
but also to perform all obligations of the note, including, we
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contend, the waiver of personal exemptions."  Id., at 12.  We
disagree with Ski Lodge's argument.
The guaranty agreement requires the guarantors to perform
all "obligations" Styles Manager had under the promissory
note; the term "obligations" in the guaranty agreement does
not, however, include Styles Manager's waiver of personal
exemptions in the promissory note.  In Broadway v. Household
Finance Corp. of Huntsville, 351 So. 2d 1373, 1377 (Ala. Civ.
App. 1977), the Court of Civil Appeals stated:
"The [Alabama Supreme Court] further said in
Neely v. Henry, 63 Ala. 261 (1879), 'A waiver of
exemption is a contract, and it must be construed,
and have the operation and effect of other
contracts.' Whether there has been a waiver may be
determined from a fair and reasonable construction
of the contract. Terrell & Vincent v. Hurst, Miller
& Co., 76 Ala. 588 (1884). Tit. 7, § 707 [now § 6-
10-121, Ala. Code 1975,] provides that the waiver
may be made by separate instrument in writing
subscribed by the party, or it may be included in
any promissory note, or other written contract
executed by him. Though contained therein, the
waiver is not a part of the obligation of the note
but is an additional agreement which the maker
enters into and must be so pleaded in suit.
Scarbrough v. City Nat'l Bank, 157 Ala. 577, 48 So.
62 (1908). There must be an adjudication of the fact
of waiver and its extent or judgment may not be
entered thereon even though there is judgment on the
obligation of the note. A.G. Story Mercantile Co. v.
McClellan, 145 Ala. 629, 40 So. 123 (1905)."
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(Emphasis added.)  The Court of Civil Appeals in Broadway,
relying upon this Court's decision in Scarbrough v. City
National Bank, 157 Ala. 577, 48 So. 62 (1908), held that a
waiver in a promissory note is not part of the obligation of
the promissory note, but is an additional agreement that the
maker of the promissory note enters into.  See Scarbrough, 157
Ala. at 583, 48 So. at 64 ("The waiver of the exemptions is no
part of the obligation of the note, but simply an additional
agreement which the maker of the note makes.").  As stated
above, the guarantors did not sign the promissory note in
their individual capacities; only Paul C. signed the
promissory note, and he signed it in his official capacity as
manager of Styles Manager.  Therefore, Ski Lodge's argument is
unavailing.  The fact that the guarantors agreed to perform
all of Styles Manager's obligations under the 
promissory 
note,
in the event that Styles Manager defaulted on the promissory
note, did not include Styles Manager's waiver of its personal
exemptions because a waiver is not an obligation of a
promissory note.
Lastly, related to its argument that the loan documents
must be read together, we note that Ski Lodge also argues that
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"contractual documents executed at the same time on the same
subject matter constitute one and the same contract."  Ski
Lodge's brief, at 13.  Although Ski Lodge does not explicitly
say as much, it appears that Ski Lodge may be arguing that the
guarantors have waived their personal exemptions based on
Styles Manager's waiver in the promissory note because, by
signing the guaranty agreement, the guarantors essentially
signed the promissory note.  However, Ski Lodge appears to
abandon this argument immediately after asserting it because
Ski Lodge relies exclusively on language in the guaranty
agreement to support its argument that the guarantors waived
their personal exemptions.  Out of an abundance of caution, we
will address what we perceive to be a potential argument
asserted by Ski Lodge.
Ski Lodge relies upon Beaver Construction Co. v.
Lakehouse, L.L.C., 742 So. 2d 159, 166 (Ala. 1999), in making
its argument, which states in pertinent part: "A familiar rule
of contract law holds that '[w]here a written contract refers
to another instrument and makes the terms and conditions of
such other instrument a part of it, the two will be construed
together as the agreement of the parties.' 17A Am. Jur. 2d
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Contracts § 400 (1991)."  (Emphasis added.)  Beavers does not
support Ski Lodge's assertion that the promissory note and the
guaranty agreement are "one and the same contract," nor does
any other general authority relied upon by Ski Lodge.  Under
Beavers, in order for the guaranty agreement to fully
incorporate the terms and conditions of the promissory note,
the guaranty agreement would have to refer to the promissory
note -- which it does -- and make the terms and conditions of
the promissory note a part of the guaranty agreement -- which
it does not.  The guaranty agreement does not incorporate the
terms of the promissory note as part of the guaranty
agreement.  In fact, the guaranty agreement states:
"11. This Guaranty constitutes the entire
agreement and supersedes all prior agreements and
understandings both oral and written between the
parties with respect to the subject matter hereof.
This Guaranty may be executed in any number of
counterparts, each of which shall be deemed an
original, but such counterparts together shall
constitute one and the same instrument."
Therefore, we reject Ski Lodge's argument that the promissory
note and the guaranty agreement are "one and the same
contract."  The terms and conditions of the promissory note
were not incorporated into the guaranty agreement.
Conclusion
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The circuit court's holding that the guarantors waived
their personal exemptions was in error.  Accordingly, we
reverse the circuit court's judgment and remand the matter for
proceedings consistent with this opinion.
REVERSED AND REMANDED.
Moore, C.J., and Stuart and Wise, JJ., concur.
Shaw, J., concurs in part and concurs in the result.
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SHAW, Justice (concurring in part and concurring in the
result).
I do not believe that Pierce v. Grant, 652 So. 2d 284
(Ala. Civ. App. 1994), stands for the proposition that 
attaching to a complaint certain documents evidencing 
a 
waiver
of an exemption is sufficient to comply with the requirements
of Ala. Code 1975, § 6-10-123.1
In Pierce, the complaint referred to the possible
existence of a waiver of an exemption: "'In the event
Plaintiff's contract contains a clause allowing for waiver of
exemption ..., Plaintiff hereby claims the benefit of said
provision.'"  652 So. 2d at 285.  That reference,
characterized as an "averment" by the appellate court, was
conditional: "[The complaint] contained boilerplate language
Section 6-10-123 provides:
1
"In any civil action, in which a waiver of the
right of homestead or other exemption is sought to
be enforced, the fact of waiver and its extent must
be averred in the complaint or petition and by
appropriate pleading may be controverted.  If such
averment is sustained, the fact of waiver and its
extent must be declared in the judgment and endorsed
on the execution or other process issued thereon.
Such waiver shall extend to the costs of the
action."  
 
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to the effect that if the contract[, which was a lease,]
contained a waiver of exemption, then [the plaintiff] was
claiming the benefit of that provision of the contract." 652
So. 2d at 286 (emphasis added).  No copy of the contract was
included with the complaint.  In concluding that there was
insufficient notice of a waiver under § 6-10-123, the court
stated: "Without a specific averment contained in the
complaint or a copy of the lease attached to the complaint, we
cannot say with any certainty that Pierce was 'on notice' that
a waiver of exemption was being claimed."  Pierce, 652 So. 2d
at 286.
Pierce does not hold that attaching "a copy of the lease"
to the complaint would alone be sufficient to satisfy § 6-10-
123; instead, it holds that attaching a copy of the lease in
conjunction with the conditional averment in the complaint
would be sufficient.  Thus, later in Pierce, the court states:
"[T]he boilerplate language contained in the complaint,
without the lease being attached to the complaint, was not
sufficient to place [the defendant] on notice that [the
plaintiff] was seeking to enforce a waiver of exemption,
particularly in view of § 6-10-123."  652 So. 2d at 287
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(emphasis added).  I read Pierce to hold that compliance with
§ 6-10-123 would have been accomplished with either the
"specific averment" or the "boilerplate language"/conditional
averment in combination with the attachment of the document
containing the waiver.  
This view of Pierce complies with the language of § 6-10-
123, which requires that, when a "waiver ... is sought to be
enforced," the existence of the waiver "must be averred."  To
"aver" is "to declare or assert; to set distinctly and
formally; to allege."  Black's Law Dictionary 135 (6th ed.
1990).  The complaint in this case did not allege, declare,
assert, or state distinctly and formally that a waiver existed
under § 6-10-123 (or that Ski Lodge Apartments, LLC ("Ski
Lodge"), sought to enforce it).  Although it is true that the
actual written waiver found in the loan documents was
considered, by virtue of Rule 10(c), Ala. R. Civ. P., to be
"part" of the pleadings, I do not believe that this
constitutes placing the party on notice under § 6-10-123 that
the existence of the "waiver and its extent" was averred or
that it was "sought to be enforced."
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Despite 
my 
disagreement 
with 
the 
main 
opinion's
interpretation of Pierce, I agree with the 
alternate rationale
that the guarantors nevertheless received notice that Ski
Lodge was claiming that the guarantors had waived an
exemption. The guarantors' brief quotes Fears v. Thompson, 82
Ala. 294, 2 So. 719 (1887), which, in examining a predecessor
statute to § 6-10-123, stated: "The design of the statute is,
to provide the mode by which the claim of the waiver of
exemptions may be regularly and appropriately presented in 
the
pleadings, so that issue thereon may be joined, and the
defendant have opportunity to appear and contest it."  82 Ala.
at 296, 2 So. 720 (emphasis added).  Here, as demonstrated by
the main opinion, the guarantors had the opportunity to
"contest" the waiver. No authority is cited for the
proposition that such a waiver cannot be enforced when it is
not pleaded even if, as in this case, the party had the
opportunity to contest it.  Therefore, the failure to comply
with § 6-10-123 does not control the outcome of this case, and 
the discussion of the Pierce decision appears to be dictum.  
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I concur in the result as to the issue whether Ski Lodge
complied with § 6-10-123.  As to the remainder of the main
opinion, I concur.
29