Burwell v. South Carolina Nat. Bank

• Citation: 340 S.E.2d 786,288 S.C. 34
• Decision Date: 07 October 1985
• Docket Number: No. 22470,22470
• Parties: Lewis C. BURWELL, Jr., Respondent, v. The SOUTH CAROLINA NATIONAL BANK, Appellant. . Heard
• Court: United States State Supreme Court of South Carolina

Page 786

340 S.E.2d 786

288 S.C. 34

Lewis C. BURWELL, Jr., Respondent, v. The SOUTH CAROLINA NATIONAL BANK, Appellant.

No. 22470.

Supreme Court of South Carolina.

Heard Oct. 7, 1985.

Decided Feb. 11, 1986.

Jesse C. Belcher, Jr., and O.G. Calhoun, Haynsworth, Perry, Bryant, Marion & Johnstone, Greenville, for respondent.

L. Henry McKellar and Manton M. Grier, Columbia, for appellant.

FINNEY, Justice:

The respondent, Lewis C. Burwell, Jr., commenced this action against the appellant, South Carolina National Bank (SCN), seeking actual and punitive damages on the grounds that SCN fraudulently induced him to sign documents guaranteeing a loan from SCN to Pinehurst Airlines, Inc., (Pinehurst). Mr. Burwell also alleged that SCN breached its fiduciary duty to him by allowing Pinehurst's loan to be renewed without his knowledge.

SCN appeals the general verdict in favor of Mr. Burwell for two hundred thirty-nine thousand seven hundred sixty and 94/100 ($239,760.94) dollars actual damages and two hundred fifty thousand and no/100 ($250,000.00) dollars punitive damages alleging that the trial judge erred in failing to grant its motion for a directed verdict, judgment n.o.v. or for a new trial. SCN contends Mr. Burwell failed to prove actionable fraud or to present evidence as to the existence of a fiduciary relationship between SCN and Mr. Burwell for the purposes of this transaction. We agree and reverse.

Lewis C. Burwell, Jr., was the founder of Pinehurst Airlines, Inc., Chairman of the Board and Executive Director until 1980. At that time, he sold his controlling interest in the corporation to J.W. Bailey. His family retained their shares, and Mr. Burwell remained actively involved in the operation of the company. He maintained an office in the Pinehurst building and he also attempted to help arrange a public offering of the corporation's stock after the business began to experience financial difficulties. After Pinehurst's problems began Mr. Burwell, at Mr. Bailey's request, agreed to guarantee a series of loans from SCN to Pinehurst to keep the operation running. Several of the loans Mr. Burwell guaranteed were successfully repaid by Pinehurst, but when the corporation went bankrupt in January of 1982, Mr. Burwell lost a large amount of money on one loan he had guaranteed. This action resulted.

From August to October, 1981, Burwell signed the following five documents to guarantee three of Pinehurst's loans:

1. Three loan guarantees each entitled, "Continuing Guaranty Of Payment," dated August 28, 1981, September 24, 1981, and September 29, 1981, for one hundred fifty thousand ($150,000.00) dollars, three hundred thousand ($300,000.00) dollars, and four hundred thousand ($400,000.00) dollars, respectively;

2. One Assignment of Safekeeping Account dated September 24, 1981, by which he assigned his SCN safekeeping account as collateral; and

3. One Third Party Collateral Assignment Agreement dated October 1, 1981, by which he again assigned his safekeeping account as collateral.

Before he signed the Third Party Collateral Assignment Agreement, Mr. Burwell noticed that it contained language related to renewals or successive transactions with which he did not agree. According to his testimony, he struck out the objectionable language by hand, then telephoned H. Reid Sherard at SCN and received his assurance that the changes were acceptable. Mr. Sherard subsequently initialed the changes made by Mr. Burwell. The following paragraph was also added to the document by typewriter:

This assignment and the assignment executed by the assignor on September 24, 1981 taken together are limited to secure the indebtedness of Pinehurst Airlines, Inc. in the amount of three hundred thousand dollars ($300,000.00).

On November 4, 1981, Pinehurst's three notes were paid out of the proceeds from the sale of one of the company's airplanes, and the five documents connected with these loans were cancelled.

On November 16, 1981, J.W. Bailey again contacted Mr. Burwell and asked him to guarantee the repayment of a one hundred seventy-five thousand ($175,000.00) dollar short term loan to the corporation. This loan was to be repaid out of additional escrow funds from the sale of the plane. Mr. Burwell was at home recovering from a heart condition when he was contacted by Mr. Bailey, but he agreed to guarantee the additional loan.

The following day, Mr. Burwell was taken to the office of Mr. Sherard at SCN where he carried on a detailed discussion with Mr. Sherard concerning his guaranteeing the Pinehurst loan. At the close of the meeting on November 17, 1981, Mr. Burwell executed the following documents:

1. Loan guarantee entitled, "Continuing Guaranty Of Payment," in the amount of two hundred twenty-five thousand ($225,000.00) dollars, which is identical to the loan guarantees he signed previously. (Mr. Burwell does not contest the fact that he agreed to guarantee the loan in this amount.)

2. Assignment Of Safekeeping Account; and

3. Third Party Collateral Assignment Agreement.

Mr. Burwell testified that he was physically able to read, but in fact did not read the documents; he merely looked over them. He also failed to check whether the language about renewals, which he had previously deleted, had been included in this document. Before he signed the forms, Mr. Burwell did ask Mr. Sherard if these were the same documents he had previously signed. Mr. Sherard replied in the affirmative, but testified at trial that at the time he replied, he did not remember the handwritten modifications Burwell made to the previous document. Mr. Burwell also testified that the parties agreed that this fourth loan was to be repaid from the remains of the proceeds of the sale of the plane. These proceeds were still in escrow in Chicago and due to arrive in South Carolina around mid December, 1981. This agreement was not reflected in any of the contract documents.

Mr. Burwell testified that at the time he executed the loan documents, he remembered that he had stricken language he objected to in the Third Party Collateral Assignment Agreement dated October 1, 1981, but did not check to see if these three documents contained similar language. The Continuing Guaranty Of Payment signed November 17, 1981, provided as follows:

... The undersigned (whose obligations and liability hereunder shall be joint and several if more than one) hereby absolutely and unconditionally guarantees to the bank the prompt and full payment when due, whether by acceleration or otherwise, of any and all existing and future indebtedness and liability of every kind, nature and character of the Debtor to the Bank, however and whenever incurred or evidenced, whether direct or indirect, absolute or contingent, joint or several, (including all renewals, extensions and modifications thereof ) together with all interest thereon ... (Emphasis added)...