Peoples Federal Sav. and Loan Ass'n v. Myrtle Beach Retirement Group, Inc.

Decision Date20 March 1989
Docket NumberNo. 23090,23090
Citation300 S.C. 277,387 S.E.2d 672
CourtSouth Carolina Supreme Court
PartiesPEOPLES FEDERAL SAVINGS AND LOAN ASSOCIATION and Loyola Federal Savings and Loan Association, Respondents, v. MYRTLE BEACH RETIREMENT GROUP, INC., W.L. Williams, Gary R. Craven, Jack E. Shaw, J. Leonard Humphries, James E. Jordan, Covenant Towers Homeowners Association, Inc., New York Carpet World and John M. Pruitt, Receiver, of whom W.L. Williams, Myrtle Beach Retirement Group, Inc., Gary R. Craven, Jack E. Shaw, J. Leonard Humphries and James E. Jordan are Appellants. Appeal of W.L. WILLIAMS, Myrtle Beach Retirement Group, Inc., Gary R. Craven, Jack E. Shaw, J. Leonard Humphries and James E. Jordan. . Heard

Costa M. Pleicones, of Lewis, Babcock, Pleicones & Hawkins, for appellant W.L. Williams.

William C. Hubbard and Joel H. Smith, of Nelson, Mullins, Riley & Scarborough, Columbia, for appellant Jack Shaw.

Linda W. Gwin, of Thompson, Henry & Gwin, P.A., Conway, for appellant Gary Craven.

James E. Jordan, Registered Agent, Surfside Beach, for Myrtle Beach Retirement Group, Inc.

Howell V. Bellamy, Jr. and Preston B. Haines, III, of Bellamy, Rutenberg, Copeland, Epps, Gravely & Bowers, Myrtle Beach, for appellants J. Leonard Humphries and James E. Jordan.

Michael W. Battle, of Lovelace & Battle, P.A., Conway, for respondents.

John M. Pruitt, Receiver, Robert W. Dibble, Jr. and Jane W. Trinkley, of McNair Law Firm, P.A., Columbia, for Loyola Federal Sav. and Loan Ass'n.

FINNEY, Justice:

This is an appeal of the master's construction of two guaranty agreements which held that the agreements were valid and enforceable as to each guarantor in an amount up to 25% of the total initial indebtedness. We affirm.

In 1984, appellant Myrtle Beach Retirement Group, Inc. (MBRG) borrowed $10,590,000 from respondent Peoples Federal Savings and Loan Association (Peoples) to construct a condominium project known as "Covenant Towers." Appellants Jack E. Shaw (Shaw), W.L. Williams (Williams), Gary Craven (Craven), J. Leonard Humphries (Humphries), and James E. Jordan (Jordan) were at all relevant times shareholders in MBRG. Respondent Loyola Federal Savings and Loan Association (Loyola) is a party to this action because People's assigned an eighty (80%) percent interest in two of the three notes to Loyola. For purposes of this appeal, Peoples and Loyola occupy the same position. 1

As part of the inducement for the loan, appellants Williams, Craven, Shaw, Humphries and Jordan 2 signed guaranties which jointly and severally provided for the repayment of $10,590,000 together with interest and any other sums paid under the note and mortgage of MBRG. The guaranties further provided that the limit of liability for each guarantor was twenty-five (25%) percent of the debt of MBRG. At the same time MBRG signed the note for $10,590,000, it executed a second note for $125,000. By separate guaranty, appellants Williams, Craven, Shaw, Humphries and Jordan jointly and severally guaranteed the lesser note without limitation on the amount of liability.

Construction began on Covenant Towers and the loan proceeds were disbursed to MBRG. In February of 1985, a problem arose over the fact that the building contractor submitted change order draw requests totaling $802,441 more than the loan proceeds. The problem was resolved in January of 1986 when Peoples and Loyola made an additional loan of $430,000 to MBRG. As part of the inducement for the $430,000 loan, appellants Williams, Craven, Shaw, Humphries and Jordan signed guaranties similar to those used to guarantee the $10,590,000 note. Each guarantor's liability was again limited to twenty-five (25%) percent of the debt set out in the guaranty.

Subsequently, MBRG went into default on all indebtedness, and Peoples instituted a suit for collection and foreclosure. After several hearings, the master ordered judgment against MBRG on the notes and ordered foreclosure of the mortgage and the sale of Covenant Towers. No appeal was taken from that order. Thereafter, the master ordered judgment in favor of Peoples and Loyola on the guaranties. MBRG, Williams, Craven, Shaw and Humphries appealed from the order.

The issue on appeal is whether the master erred in applying a twenty-five (25%) percent limitation on each guarantor's liability for two of the notes given by MBRG as follows:

(a) First note dated July 16, 1984; each guarantor was found liable for twenty-five (25%) percent of the face amount of $10,590,000 or $2,647,500.

(b) Second note dated February 5, 1986; each guarantor was found liable for twenty-five (25%) percent of the face amount of $430,000 or $107,000.

Appellants contend the master erred in finding the guarantors individually liable for twenty-five (25%) percent of the face amount of each of the two notes. Appellants assert that each guarantor should be liable for twenty-five (25%) percent of the "balance" after foreclosure. The balance after foreclosure was $3,029,000; so under this theory each guarantor would be liable for $757,250.

A guaranty is a contract and is to be construed by the principles governing contracts. The construction of a guaranty calls for a...

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17 cases
  • Nandwani v. Queens Inn Motel
    • United States
    • Court of Appeals of South Carolina
    • June 20, 2012
    ...enforceable against the guarantor upon default of the debtor." Id.; see Peoples Fed. Sav. & Loan Ass'n v. Myrtle Beach Ret. Grp., Inc., 300 S.C. 277, 280, 387 S.E.2d 672, 674 (1989). "Unless the debt instrument or the instrument of guaranty prohibits assignment, an assignment does not relea......
  • Nandwani v. Mgmt. & Consulting, LLC
    • United States
    • Court of Appeals of South Carolina
    • June 20, 2012
    ...enforceable against the guarantor upon default of the debtor." Id.; see Peoples Fed. Sav. & Loan Ass'n v. Myrtle Beach Ret. Grp., Inc., 300 S.C. 277, 280, 387 S.E.2d 672, 674 (1989). "Unless the debt instrument or the instrument of guaranty prohibits assignment, an assignment does not relea......
  • AMA Management Corp. v. Strasburger
    • United States
    • Court of Appeals of South Carolina
    • February 17, 1992
    ...is immediately enforceable against the guarantor upon default of the debtor. See, Peoples Federal Savings and Loan Assoc. v. Myrtle Beach Retirement Group, Inc., 300 S.C. 277, 387 S.E.2d 672 (1989). If the principal obligation is assignable, assignment of the debt operates as an assignment ......
  • People's United Equip. Finance Corp. v. Halls, CIVIL ACTION H-10-2016
    • United States
    • United States District Courts. 5th Circuit. United States District Courts. 5th Circuit. Southern District of Texas
    • May 12, 2011
    ...National Loan Investors, LP, 915 S.W. 2d 241, 245 (Tex. App.-Fort Worth 1995, writ denied); Peoples Fed. Sav. And Loan Ass'n v. Myrtle Beach Retirement Group, Inc., 387 S.E. 2d 672, 674 (S.C. 1989); Ford Motor Credit Co. V. Sullivan, 318 S.E. 2d 188, 190-91 (Ga. 1984). The debtor on a secur......
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