BODDIE-NOELL PROP. v. 42 MAGNOLIA PART.

• Decision Date: 18 December 2000
• Docket Number: No. 3270.,3270.
• Citation: 344 S.C. 474,544 S.E.2d 279
• Parties: BODDIE-NOELL PROPERTIES, INC., Respondent, v. 42 MAGNOLIA PARTNERSHIP and Robert Mundy, Defendants, of whom 42 Magnolia Partnership is, Appellant.
• Court: South Carolina Court of Appeals

344 S.C. 474

544 S.E.2d 279

BODDIE-NOELL PROPERTIES, INC., Respondent, v. 42 MAGNOLIA PARTNERSHIP and Robert Mundy, Defendants, of whom 42 Magnolia Partnership is, Appellant.

No. 3270.

Court of Appeals of South Carolina.

Heard November 8, 2000.

Decided December 18, 2000.

Rehearing Denied April 23, 2001.

Thornwell F. Sowell, A. Burns Jones, Sowell, Todd, Laffitte, Beard & Watson, Columbia, for appellant.

Mark W. Hardee, Lewis, Babcock & Hawkins, Columbia, for respondent.

ANDERSON, Judge:

In this breach of contract action, 42 Magnolia Partnership (the Partnership) appeals the trial judge's denial of its motion for judgment notwithstanding the verdict (JNOV). We affirm.

FACTS/PROCEDURAL BACKGROUND

The Partnership developed an apartment complex in Columbia, South Carolina. In February, 1994, the Partnership borrowed $6.9 million from the Lincoln National Life Insurance Company (Lincoln) to permanently finance the complex. About four months later, Southport Financial Asset Management, Inc. (Southport) offered to purchase the complex for $10.6 million. The Partnership and Southport entered into a purchase and sale agreement on June 23, 1994, to this effect.

The agreement was negotiated on behalf of Southport by John Parker and on behalf of the Partnership by Robert M. Mundy, Jr. Mundy is the president of Estates, Inc., which was the developer of the complex and the managing partner of the Partnership.

Pursuant to the purchase and sale agreement, Southport paid the Partnership a $100,000 earnest money deposit. In addition, as part of the deal, $100,000 of the purchase price was to be paid to Estates, Inc. in order to purchase Estates' management agreement with the apartment complex. The purchase agreement provided Southport was to assume the mortgage, which was held by Lincoln. The loan had severe prepayment penalties, plus a "favorable" interest rate. The Partnership and Southport agreed the assumption of the mortgage was an essential part of the contract.

In September of 1994, Southport assigned its rights under the purchase and sale agreement to Boddie-Noell Properties, Inc. (BNP), a publicly traded company.¹ At closing, Southport was to receive back its $100,000 deposit and $288,000 in consideration of the assignment.

The Partnership, Southport, and BNP executed a "First Amendment to Purchase and Sale Agreement," which referenced the assignment to BNP of the Southport contract, extended the closing date from September 30, 1994, to October 31, 1994, and required a $100,000 extension deposit from BNP. The amendment permitted BNP, upon written notice prior to 5:00 p.m. on September 30, 1994, to receive a refund of the extension deposit based on, inter alia, the failure to receive a loan assumption agreement from Lincoln. The First Amendment further provided:

In event such notice is received by the Extension Escrow Agent, this First Amendment will be null and void; provided, however, that the parties hereto agree that in such event, (1) the Purchase Contract shall remain in full force and effect, (ii) the parties hereto shall comply with the terms and conditions thereof, (iii) the Buyer shall remain obligated to perform all duties and obligations of the Buyer under the Purchase Agreement, and (iv) if the purchase and sale contemplated by the Purchase Agreement is not closed by September 30, 1994, such failure to close shall constitute a default under the Purchase Contract and the original Deposit shall remain non-refundable and the Buyer's (or Assignee's) right to purchase under the Purchase Contract shall be null and void; provided further, that after 5:00 p.m. on September 30, 1994, if no demand has been received by the Extension Escrow Agent, the Extension Deposit shall be fully non-refundable and the Purchase Contract shall remain in full force and effect as modified and amended by this First Amendment.

Bubba Ross, with Fleet Financial, Lincoln's servicing agent, instructed Southport by letter not to directly contact Lincoln or Fleet. Parker testified: "[T]hat letter ... pretty well said all information about the assumption of the loan and the potential borrower was to flow through Estates, Inc., or 42 Magnolia Partnership." (Emphasis added.) Scott Wilkerson, BNP's President, stated: "We were told from day one, long before we actually had a legal agreement in place, that we had to go through Bob Mundy, that we were specifically not to contact Lincoln—initially, we didn't know about Fleet. Later we heard Fleet was the servicing agent—that we had to go through Bob Mundy." (Emphasis added.) Mundy acted as the "conduit" between BNP, Fleet, and Lincoln regarding Lincoln's approval of BNP's assumption of the loan. John Parker, who was authorized by Southport to act on its behalf, declared Mundy became the "mouthpiece of Lincoln."

On several occasions, Mundy inquired from Parker and Wilkerson as to the amount Southport was to receive from BNP for the assignment, referring to it as a "secret profit." Parker and Wilkerson refused to tell Mundy the terms of the assignment. Thereafter, according to Parker, Mundy acted "fishy."

Mundy told BNP that Lincoln would not agree to an assumption of the loan without a personal guaranty. Because BNP is a publicly traded corporation, a personal guaranty was impractical. Wilkerson related this information to Mundy and expected the information to be passed on to Lincoln. When BNP offered to provide Lincoln with a copy of its bond in lieu of the guaranty, which would protect Lincoln's interests, Mundy stated: "Well, that's not good enough. They want someone to personally sign." Wilkerson "was being told [by Mundy] that Lincoln was being contacted daily and that Lincoln was adamant that there had to be individual signers."

In addition, the loan included a requirement that there be no change in ownership of the company during the term of the loan. BNP explained that as a publicly traded corporation, it could not abide by that term as BNP's ownership constantly changed with the trade of its shares of stock. Thus, BNP would immediately be in technical default upon assumption of the loan. Mundy informed BNP that Lincoln would not change any of the terms of the loan, including the limitation on changes of ownership.

Parker visited Mundy on the eve of the final day BNP could rescind the contract without forfeiting the extension deposit. Parker testified that although it was urgent BNP and Mundy resolve the problems regarding the Lincoln loan, Mundy kept Parker waiting in his reception area for an hour and a half while Mundy stayed in his office "joking around and maybe talking sports scores ... and killing time."

The following day, relying on Mundy's representations that Lincoln would not approve the assumption of the loan, BNP "terminated" the Assignment Agreement and the First Amendment to the Purchase and Sale Agreement. BNP already owed Southport $100,000 for its initial deposit, and was hesitant to deposit an additional $100,000 if the loan could not be assumed. According to Wilkerson, on September 30, he was "still being told ... [BNP] cannot assume this loan unless [BNP] provide[s] an individual, a person, not the corporation." Wilkerson stated Mundy represented that if Lincoln subsequently permitted the assumption of the loan, BNP could continue under the contract.

Wilkerson said the Partnership was meeting the following week on October 5 to discuss a solution which would enable the parties to consummate the sale. On October 6, he learned the Partnership thought it could get a higher price and decided to sell the complex to someone else. Wilkerson contacted Calvin King, who works at Lincoln, to determine why Lincoln would not approve his company for the loan assumption. According to Wilkerson, King acted as if he had never heard of the requirement alleged by Mundy regarding a personal guarantor. The next day Wilkerson was advised Lincoln approved the loan without requiring a guarantor.

At a BNP Board of Directors' meeting on October 11, Wilkerson received the Board's approval to close on the property by October 15. When BNP attempted to get the paperwork signed for the assumption of the loan, Mundy refused to cooperate. BNP received a letter from the Partnership's attorneys, which read: "In accordance with Paragraph 1 of the First Amendment, we have received written notice from [BNP] that [BNP] terminated its obligations under the First Amendment." According to the letter, BNP's right to purchase the complex was null and void. The letter provided the Partnership was entitled to retain the $100,000 deposit delivered by Southport under the terms of the purchase agreement.

Audrey Navarre, the Fleet employee responsible for corresponding with Lincoln regarding the loan, professed she related all information from Mundy to Lincoln and vice versa. Navarre was unaware there was a September 30 deadline for the loan assumption, therefore, she never passed that information on to Lincoln. Navarre said Mundy knew Lincoln required a personal guarantor. She never told Lincoln that BNP could not provide a personal guarantor, and had offered a bond instead because she had no knowledge of that fact herself.

Calvin King testified that Lincoln would expect to be notified of any changes in a purchase agreement, such as the deadline change in the First Amendment, and would try to work with the parties regarding the change. However, King averred he did not "remember Fleet ever telling" Lincoln about the September 30 deadline. The following exchange occurred between BNP's attorney and King:

Q. Now, according to this e-mail [from Judy Litzenberg with Lincoln dated September 27th, 1994], Lincoln was being told that there would not be a personal guarantor for the carve-outs, is that true?

A. Yes, sir.

Q. And to your memory, is this the first time Lincoln was aware of that?

A. I can't remember. But just by reading this, it would make me think that that was the case.

Q. Okay. So before

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