SHORT, J.
This is an appeal from an order granting partial summary judgment to CoastalStates Bank (the Bank) in its breach of contract action against Hanover Homes of South Carolina, LLC, Hanover Homes, Inc., and George Cosman. Cosman appeals, arguing the trial court erred in: (1) finding the statute of limitations had not expired; (2) finding personal guaranties were controlling; and (3) granting the Bank summary judgment while also finding a genuine issue of material fact existed as to Cosman's defenses to the Bank's breach of
Cosman, a residential builder, entered into a series of business deals with Phillip Petrozzelli in 2007. Cosman and Petrozzelli formed the company, Hanover Homes of South Carolina, LLC (Borrower) to pursue real estate development. Petrozzelli was the managing partner of Borrower and was the "point man" for the Traditions, a development in Jasper County. According to Cosman, Petrozzelli had a previous longstanding relationship with the Bank and with a bank employee, Buzzy Lawson. Cosman explained his role was to "watch over the construction of [the two model homes]" at Traditions and to oversee the Borrower's other development.
On July 19, 2007, the Bank made three loans totaling $3.632 million to Borrower as follows:
Loan 203611 $2.6 million to purchase 21 vacant lots in the Traditions,
a community in Jasper, South Carolina
Loan 203613 $520,000 to construct a model home
Loan 203583 $512,000 to construct a second model home
Cosman and Petrozzelli each signed a personal guaranty to secure each loan. The guaranties provided the following:
Section 2(a) provided the following:
By the end of 2008, Borrower was experiencing financial difficulty. The notes were renewed on October 28, 2009. Thereafter, Cosman alleges he negotiated for both he and Petrozzelli to be released on loans for the other property they developed. As to the Traditions property at issue in this case, Borrower made three short sales to third parties with the Bank's consent and applied the proceeds to the loan balances. The first short sale, one of the model homes, was made in September 2010, and the Bank netted just over $220,000.
Unbeknownst to Cosman, the Bank entered into an agreement (the Agreement) with Borrower and Petrozzelli on October 22, 2010. The Agreement released Borrower and Petrozzelli from liability under the loans and guaranties in exchange for cooperation with any further sales of the property. The Agreement also provided the following:
The second model home was then sold as a short sale in April 2011, and the Bank netted approximately $181,000. In October 2011, a short sale of the 21 lots netted the Bank approximately $604,000.
The Bank filed this action against Cosman on the guaranties. In his answer and counterclaim, Cosman alleged, inter alia, a conspiracy between the Bank and Petrozzelli and breach of contract accompanied by a fraudulent act.
On August 10, 2012, and September 7, 2012, the trial court held hearings on the parties' cross-motions for summary judgment. At the time of the hearings, the Bank claimed a balance due on the notes of $3.299 million. The trial court: (1) dismissed Cosman's statute of limitations defense; (2) granted the Bank partial summary judgment, finding the release by the Bank of Borrower and Petrozzelli did not result in the release or discharge of Cosman under the three guaranties; (3) denied the Bank's motions for summary judgment as to Cosman's breach of contract accompanied by a fraudulent act and conspiracy causes of action; (4) granted judgment to the Bank for $3,299,665.51; and (5) awarded reasonable attorney fees and costs to be determined at a subsequent hearing. This appeal follows.
On appeal from the grant of a summary judgment motion, this court applies the same standard as that required for the circuit court under Rule 56(c), SCRCP. Brockbank v. Best Capital Corp., 341 S.C. 372, 379, 534 S.E.2d 688, 692 (2000). "`Summary judgment is proper where there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law.'" Adamson v. Richland Cnty. Sch. Dist. One, 332 S.C. 121, 124, 503 S.E.2d 752, 753 (Ct.App. 1998) (quoting Tupper v. Dorchester Cnty., 326 S.C. 318, 325, 487 S.E.2d 187, 191 (1997)).
"Summary judgment should be granted when plain, palpable, and indisputable facts exist on which reasonable minds cannot differ." Pee Dee Stores, Inc. v. Doyle, 381 S.C. 234, 240, 672 S.E.2d 799, 802 (Ct.App.2009). "However, summary judgment is not appropriate when further inquiry into the facts of the case is desirable to clarify the application of law." Id. "In determining whether any triable issues of fact exist, the evidence and all inferences must be viewed in the light most favorable to the nonmoving party." Pee Dee, 381 S.C. at 240, 672 S.E.2d at 802. "Thus, the appellate court reviews all ambiguities, conclusions, and inferences arising in and from the evidence in a light most favorable to the non-moving party." Id. Further, "`[s]ummary judgment should not be granted even when there is no dispute as to evidentiary facts if there is dispute as to the conclusion to be drawn from those facts.'" Gignilliat v. Gignilliat, Savitz & Bettis, L.L.P., 385 S.C. 452, 456, 684 S.E.2d 756, 758 (2009) (quoting Brockbank, 341 S.C. at 378, 534 S.E.2d at 692).
Cosman argues the trial court erred in finding the Bank was not barred from bringing the action based on the expiration of the statute of limitations. Cosman argues the statute of limitations began to run at the time the notes were made in July 2007.
Section 1 of the guaranty provides for "payment when and as due upon maturity." The maturity dates of the loans were
An action for breach of contract must be commenced within three years. S.C.Code Ann. § 15-3-530(1) (2005). Under "the discovery rule, the statute of limitations begins to run when a cause of action reasonably ought to have been discovered." Dean v. Ruscon Corp., 321 S.C. 360, 363, 468 S.E.2d 645, 647 (1996). "The discovery rule applies to breach of contract actions." Prince v. Liberty Life Ins. Co., 390 S.C. 166, 169, 700 S.E.2d 280, 282 (Ct.App.2010). "Pursuant to the discovery rule, a breach of contract action accrues not on the date of the breach, but rather on the date the aggrieved party either discovered the breach, or could or should have discovered the breach through the exercise of reasonable diligence." Maher v. Tietex Corp., 331 S.C. 371, 377, 500 S.E.2d 204, 207 (Ct.App.1998). "[T]he statute of limitations on an action on an absolute guaranty, which is conditioned only on the debtor's default, begins to run when the obligation matures and the debtor defaults." 38 Am.Jur.2d Guaranty § 96, at 1040 (2010).
Cosman argues the guaranties are demand notes, which are due immediately; thus, the statute of limitations runs in favor of the maker from the date of the execution of the instrument.
Cosman also argues the trial court erred in interpreting the guaranties as imposing liability on him when Borrower's obligations were fully satisfied. We agree.
"A guaranty is a contract." TranSouth Fin. Corp. v. Cochran, 324 S.C. 290, 294, 478 S.E.2d 63, 65 (Ct.App.1996). "The cardinal rule of contract interpretation is to ascertain and give legal effect to the parties' intentions as determined by the contract language." McGill v. Moore, 381 S.C. 179, 185, 672 S.E.2d 571, 574 (2009). "`Courts must enforce, not write, contracts of insurance, and their language must be given its plain, ordinary and popular meaning.'" USAA Prop. & Cas. Ins. Co. v. Clegg, 377 S.C. 643, 655, 661 S.E.2d 791, 797 (2008) (quoting Sloan Constr. Co. v. Cent. Nat'l Ins. Co. of Omaha, 269 S.C. 183, 185, 236 S.E.2d 818, 819 (1977)).
"The law in this state regarding the construction and interpretation of contracts is well settled." ERIE Ins. Co. v. Winter Constr. Co., 393 S.C. 455, 461, 713 S.E.2d 318, 321 (Ct.App.2011). "In construing a contract, it is axiomatic that the main concern of the court is to ascertain and give effect to the intention of the parties." D.A. Davis Constr. Co. v. Palmetto Props., Inc., 281 S.C. 415, 418, 315 S.E.2d 370, 372 (1984). "If its language is plain, unambiguous, and capable of only one reasonable interpretation, no construction is required and the contract's language determines the instrument's force and effect." Ellie, Inc. v. Miccichi, 358 S.C. 78, 93, 594 S.E.2d 485, 493 (Ct.App.2004).
"On the other hand, a contract is ambiguous when its terms are capable of having more than one meaning when viewed by a reasonably intelligent person who has examined
"A guaranty of payment is an absolute or unconditional promise to pay a particular debt if it is not paid by the debtor at maturity." Citizens & S. Nat'l Bank of S.C. v. Lanford, 313 S.C. 540, 543, 443 S.E.2d 549, 550 (1994). "The general rule in South Carolina ... is that a guaranty of payment is an obligation separate and distinct from the original note." Id. at 544, 443 S.E.2d at 551 (internal citation omitted). In Lanford, our supreme court further defined a guaranty as follows:
Id. (quoting 38 Am.Jur.2d Guaranty § 4). The court in Lanford "adhere[d] to the principle that the guaranty of payment and the promissory note are two separate contracts" and concluded the guarantor, who was not a party to the note, could not avail himself of defenses available to the debtor. Id.; see Frank S.H. Bae & Marian E. McGrath, The Rights of A Surety (or Secondary Obligor) Under the Restatement of the Law, Third, Suretyship & Guaranty, 122 Banking L.J. 783, 783 (2005) (("The Bible warned against becoming a surety (secondary obligor), stating that `[h]e who is a surety for a stranger will surely suffer for it, but he who hates going surety is safe.'") (quoting Proverbs 11:15)).
Citing the Restatement (Third) of Suretyship & Guaranty §§ 37-41(1996), Cosman argues, "The law developed so that a guarantor may be discharged under certain circumstances if modifications of the obligations between the bank and the borrower are made without the consent of the guarantor." For instance, Cosman relies on sections 37, 38, and 41, which provide protection to guarantors. Restatement (Third) of
Cosman maintains that amendments to South Carolina's UCC after our supreme court's decision in Lanford indicate our Legislature intended to provide the Restatement protections to guarantors. Cosman argues our Legislature has recognized this development in the law by enacting the current versions of Articles 3 and 4 of the UCC, found in S.C.Code Ann. §§ 36-3-101, 36-4-101 (2003 & Supp.2013). Cosman contends that reading the guaranties as the trial court did, which results in guarantors being forever obligated on a debt that is forgiven, is unconscionable.
The Bank argues section 36-3-605(a), providing for the discharge of secondary obligors, only applies to an "instrument," which is a negotiable, unconditional promise to pay a fixed sum. See S.C.Code Ann. § 36-3-605(a) (Supp.2013).
The general rule releasing a guarantor when a creditor is released provides:
38A C.J.S. Guaranty § 111, 720-21 (2008); see Poole v. Bradham, 143 S.C. 156, 166, 141 S.E. 267, 270-71 (1927) (stating "in equity[,] the discharge of one surety operates to discharge all others `in the like relation to the debt,' unless it be shown by competent testimony that the parties intended otherwise," and further explaining that equity "construes a release according to the intention of the parties").
Cosman distinguishes his guaranties from those in Cochran. In Cochran, the lender loaned money to a used car dealership, and three corporate officers and a company guarantied the loan. Id. at 292, 478 S.E.2d at 64. A collection action by the lender resulted in a confession of judgment against all parties except one guarantor, Ralph Cochran. Id. Many years later, the lender filed an action against Cochran to collect the judgment. Id. at 292-93, 478 S.E.2d at 64. The trial court directed a verdict in favor of Cochran; however, this court reversed, finding the ten-year expiration of the confession of judgment did not extinguish Cochran's obligation to the lender under his guaranty, which was an independent contractual obligation. Id. at 293-95, 478 S.E.2d at 65.
The relevant provisions of Cochran's guaranty provided:
Id. at 294, 478 S.E.2d at 65 (alteration in original). As the guarantor, Cochran "unconditionally agreed to pay `all sums due' and `all losses' that [the lender] suffered due to [the car dealership's] default. The terms of the guaranty provided that Cochran's obligation to [the lender] would be unaffected if [the lender] decided to release [the car dealership's] obligation." Id. This court found the lender suffered "a loss" due to the dealership's default, and Cochran's obligation to the
Cosman argues the guarantor in Cochran guarantied more than the obligations of the borrower; whereas in this case, he provided a guaranty only for the liabilities of Borrower, and the Agreement extinguished those obligations. Cosman also distinguishes Cochran, arguing the debt in Cochran was no longer enforceable against the borrower; thus, the obligation of the guarantor was not extinguished. In this case, the underlying debt is satisfied.
Under our reading of the relevant authorities, we must review the terms of the guaranty and the Agreement to determine if Cosman was released from liability with the release of Borrower. Cosman argues section 1 of the guaranty is controlling: The guarantor "absolutely and unconditionally guaranties to the Bank ... the payment ... of: (a) all liabilities and obligations of the Borrower to the Bank...." Cosman maintains the release of Borrower released him as a guarantor under this section of the guaranty because there is no longer an obligation of Borrower to the Bank.
Cosman also argues that section 2, in which he "acknowledges and understands that nothing except the full and final payment ... shall release and discharge the Guarantor from his obligations and liability hereunder" supports his interpretation of the guaranties because the Bank's acceptance of the proceeds of the short sales and release of Borrower acted as "full and final payment" of Borrower's debts. Cosman argues that at a minimum, the guaranties are unclear about whether he is released from liability when Borrower is released; thus, there is a genuine issue of material fact precluding summary judgment.
As to the waiver portion of section 2(a), Cosman argues that interpreting it to provide that the guarantor is obligated would lead to the ridiculous and unconscionable outcome of requiring Cosman to pay the full amount of the notes regardless of any amounts already paid to the Bank. Cosman maintains the trial court erred in relying on cases that consider guaranties with materially different terms than the guaranties in this case.
Section 2(a) provided the following:
We agree the guaranties in this case can reasonably be read to limit Cosman's liability to "all liabilities and obligation of the Borrower to the Bank." Because the Bank has accepted full and final payment from the Borrower, the guaranties can reasonably be interpreted to conclude there is no longer any liability of the Borrower to the Bank. Viewing the evidence in the light most favorable to Cosman, as we must do in reviewing the trial court's grant of the Bank's motion for summary judgment, we find the guaranties created an ambiguity. See Hard Hat Workforce Solutions, LLC v. Mech. HVAC Servs., Inc., 406 S.C. 294, 750 S.E.2d 921, 923-24 (2013) (reviewing the grant of a motion for summary judgment in the light most favorable to the nonmoving party in an action for a claim against a payment bond). Thus, we find the trial court erred in finding Cosman's liability was not extinguished as a matter of law. See Progressive Max Ins. Co., 405 S.C. at 46-47, 747 S.E.2d at 184 (finding a contract is ambiguous when its terms are capable of having more than one meaning when viewed by a reasonably intelligent person who has examined the entire agreement); Mathis, 389 S.C. at 309, 698 S.E.2d at 778 (construing ambiguities in an agreement against the drafter of the agreement). Accordingly, we reverse the trial court's order granting summary judgment, which concluded the release of the Bank and Petrozzelli did not release Cosman.
Cosman lastly argues the trial court erred in granting summary judgment on the breach of contract cause of action while also finding a genuine issue of material fact existed as to his "defenses" to the breach of contract claim. Based on our disposition of the trial court's grant of summary judgment on the guaranties, we need not address this issue. See Futch v.
For the foregoing reasons, the order granting summary judgment is affirmed in part, reversed in part, and remanded for proceedings consistent with this opinion.
WILLIAMS and THOMAS, JJ., concur.
