Ralls v. First Federal Savings and Loan Association of Andalusia

John Ralls (plaintiff) sought to construct and operate a Days Inn Motel franchise in Evergreen, Alabama. On August 28, 1978, Ralls submitted an application for a $600,000 construction loan to First Federal Savings and Loan Association of Andalusia (First Federal) (defendant). Maggie Rogers, a representative of First Federal, verbally informed Ralls that all construction loans had an eight-month completion date. On October 27, 1978, First Federal issued Ralls a commitment letter for the loan. The commitment letter established that the loan was approved for a 20-year term at a guaranteed interest rate of 10 percent, provided that Ralls paid half of the 2 percent service charge. On December 21, Ralls met with Rogers to accept the commitment letter. At that time, Ralls paid First Federal the $6,000 service charge to secure the interest rate. The commitment letter did not contain a completion date, and Rogers did not mention the eight-month deadline again until after the $6,000 payment was made. Ralls told Rogers that eight months would not be a reasonable time frame to complete his project and that he could not accept a loan on those terms. Rogers told Ralls not to worry about the eight-month completion date and that First Federal had always granted extensions as needed. On January 9, 1979, Rogers secured interim financing from another bank establishing the terms of the loan as $6,000 at a guaranteed 10 percent interest rate. The letter did not mention an eight-month completion date. On April 12, Rogers stated that First Federal would not approve an extension of the completion date. In August, Ralls formally requested an extension of the completion date, and First Federal stated that the completion period could not be extended unless the 10 percent interest rate was increased to reflect the then prevailing interest rate. On December 5, the loan was closed at a 12 percent interest rate. Ralls filed suit against First Federal for breach of contract, fraud, misrepresentation, and deceit. Ralls further contended that he had no choice but to accept the terms of the loan at 12 percent because he was under economic duress. The trial court found in favor of First Federal and granted it a directed verdict. Ralls filed an appeal.