## Facts

- William Jack Sexton and Marsha C. Sexton obtained a construction loan of approximately \$160,000 from St. Clair Federal Savings Bank to build a residence, secured by a construction mortgage.
- The loan agreement required the bank to disburse funds in increments approximating the stage of construction and to monitor progress.
- After construction began, the bank halted further draws, stating progress did not justify prior disbursements.
- The Sextons alleged they then learned that all but about \$17,000 had been disbursed and that roughly \$93,000 of disbursed funds had not been used by the builder on the residence.
- The Sextons could not complete the home, stopped making loan payments, and the bank sued for foreclosure, sale of the unfinished residence, and a deficiency.
- The Sextons counterclaimed for breach of contract (improper monitoring/disbursement) and breach of fiduciary duty, seeking compensatory damages (including mental anguish), punitive damages, and lost profits tied to a sale of investment property.

## Issues

1. Whether mental-anguish damages are recoverable for breach of a construction loan contract connected to building the borrowers’ future residence.
2. Whether lost profits from the borrowers’ sale of investment property are recoverable as consequential damages for the alleged breach.
3. Whether the trial court could grant summary judgment disposing of the fiduciary-duty claim when the bank’s motion targeted only damages issues.

## Decision

- The Supreme Court of Alabama affirmed in part, reversed in part, and remanded.
- It reversed the ruling that barred mental-anguish damages, holding the contract fit an exception for agreements concerning a residence.
- It affirmed the ruling that denied recovery of the claimed lost profits as contract damages.
- It reversed the summary judgment on the fiduciary-duty claim because that claim was not properly presented by the scope of the summary-judgment motion, and remanded without deciding whether a fiduciary relationship existed.

## Legal Principles

- Mental-anguish damages are generally unavailable for breach of contract, but may be recoverable when the contract is closely tied to matters of mental concern such that emotional distress is a likely result of breach, including contracts involving construction or acquisition of a home.
- Consequential damages such as lost profits must be foreseeable, sufficiently connected to the breach, and not speculative; attenuated profits from unrelated investment-property decisions are not recoverable on these facts.
- Summary judgment must be confined to issues properly raised and supported in the movant’s motion; a court errs by adjudicating and disposing of a claim not placed in issue by the motion.

## Conclusion

The court held that a construction loan agreement for a future residence can support mental-anguish damages for breach, rejected claimed lost profits as too remote, and required further proceedings on the fiduciary-duty claim because it was improperly resolved on a damages-focused summary-judgment motion.


Sexton v. St. Clair Fed. Sav. Bank, 653 So. 2d 959 (Ala. 1995)