Carolina Attractions, Inc. v. Courtney

• Decision Date: 23 September 1985
• Docket Number: No. 0579,0579
• Citation: 287 S.C. 140,337 S.E.2d 244
• Court: South Carolina Court of Appeals
• Parties: CAROLINA ATTRACTIONS, INC., Appellant, v. Sam COURTNEY, John X. Aragona, and The South Carolina National Bank, Defendants, of whom The South Carolina National Bank is Respondent. . Heard

Page 244

337 S.E.2d 244

287 S.C. 140

CAROLINA ATTRACTIONS, INC., Appellant, v. Sam COURTNEY, John X. Aragona, and The South Carolina National Bank, Defendants of whom The South Carolina National Bank is Respondent.

No. 0579.

Court of Appeals of South Carolina.

Heard Sept. 23, 1985.

Decided Nov. 20, 1985.

John R. Clarke, North Myrtle Beach, for appellant.

Stan McGuffin of South Carolina Nat. Corp., Columbia, for respondent.

CURETON, Judge.

Appellant Carolina Attractions, Inc. (Carolina) brought suit against both parties to a promissory note: John X. Aragona, the maker and Sam Courtney, the payee. Carolina claims that Courtney breached his contract with Carolina both by forming a corporation named Beach Music Awards Association, Inc. (BMAA) and by selling its stock to Aragona for which Courtney received the note in dispute. Respondent South Carolina National Bank (SCN) was joined as a defendant because it took the note as collateral for two loans to Courtney. On SCN's motion for summary judgment, the trial court found SCN entitled to the note proceeds. The contract action remains unresolved. Carolina appeals. We affirm.

Carolina argues that there exists a genuine issue of material fact concerning whether SCN's interest in the note proceeds is superior to its interest and thus, the court erred in granting summary judgment. Additionally, Carolina insists that even if the trial judge should have granted SCN's motion for summary judgment, he should not have dissolved the order of another circuit judge that required the note proceeds to be held in escrow. Carolina argues that the effect of the dissolution order was to grant relief not prayed for by proper pleadings. ¹ We reject these arguments.

Courtney, a former employee of Carolina, was charged with the responsibility of formulating and promoting the Beach Music Awards Program in Myrtle Beach, South Carolina. Carolina claims Courtney was contractually bound to pay it a percentage of the net profits from the Beach Music Awards Program. Carolina alleges that Courtney breached this contract by forming his own corporation, BMAA, and selling Carolina's ideas and work product in the form of BMAA stock to Aragona and others for $45,000.00. As part payment for the stock, Aragona gave Courtney a promissory note dated November 4, 1982, for $24,400.00.

Pursuant to a Rule To Show Cause, an order was issued dated March 25, 1983, permitting the joinder of SCN as a defendant and directing Aragona to pay all monies due Courtney under the note into a trust account to be held by the Clerk of Court "until a final hearing has been held, and an Order has been issued as to the disbursement of said monies." Carolina made SCN a defendant because it made loans to Courtney on January 10, 1983 and on January 31, 1983, accepting the note as collateral.

Carolina's second amended complaint alleges that Courtney assigned the note to SCN "in order to avoid [Carolina's] claim, and to defraud [Carolina] from monies owed it by [Courtney]" and that any rights of SCN to the note proceeds "would be inferior and subordinate to the claim of [Carolina]." It then prayed that its interest in the note be declared superior to that of the bank.

SCN answered the second amended complaint admitting that the note matured on July 1, 1983, but denying its interest in the note was inferior to Carolina's. SCN also moved for summary judgment on the basis that there was no genuine issue of a material fact regarding the priority of its claim to the note proceeds and further requested the March 1983 order be partially dissolved as it related to disbursement of the note proceeds. In support of its motion, SCN attached an affidavit of a loan officer stating that the bank had no knowledge of the pending suit against Courtney until after the loans were made. Carolina filed Courtney's affidavit indicating he advised SCN of Carolina's suit against him prior to SCN's making the loans.

By its order of September 30, 1983, the trial court granted SCN's motion for summary judgment finding that the original note was delivered to SCN on January 10, 1983; that the note remained in SCN's possession since that time; and that SCN had no notice of Carolina's suit against Courtney until after the loans were made. Having made these findings, the court concluded that the bank had a perfected security interest in the note and SCN's claim to the note proceeds were superior to Carolina's and ordered the Clerk to pay over the monies to SCN. ²

Rule 44(c) of the Rules of Practice of the Circuit Court provides that the court shall grant summary judgment if the pleadings, depositions and affidavits, if any, show that there is "no genuine issue as to any material fact and the moving party is entitled to a judgment as a matter of law." On appeal from an order granting a motion for summary judgment, this Court will review the evidence and all reasonable inferences therefrom in the light most favorable to the appellant. Threlkeld v. Christoph, 280 S.C. 225, 226, 312 S.E.2d 14, 15 (Ct.App.1984).

The trial court's order is premised on its finding that SCN had a perfected security interest in the note proceeds which would take priority over an inferior claim. Carolina does not contend that SCN did not perfect its security interest. Rather, Carolina argues that since the affidavits of the loan officer and Courtney state conflicting facts concerning whether SCN had notice of the litigation pending between Carolina and Courtney when it loaned funds to him, summary judgment was inappropriate. We agree that the affidavits reflect conflicting facts relative to SCN's knowledge at the time the loans were made. The issue, therefore, is whether notice to SCN of the lawsuit affects the priority of SCN's lien vis-a-vis the claim of Carolina to the note proceeds. We hold it does not.

At oral argument, Carolina conceded that it had no legal lien or claim against the note proceeds, but argued that it had an equitable claim against the note proceeds. The pleadings fall far short, however, of alleging a cause of action for the establishment of an equitable lien or charge against the note proceeds. See Georgia-Carolina Gravel Co. v. Blassingame, 129 S.C. 18, 123 S.E. 324, 326 (1924) (equitable lien held not to exist where complaint did not set forth sufficient facts showing an express agreement).

An equitable lien or charge is neither an estate or property in the thing itself, nor a right to recover the thing, but is simply a right of a special nature over the thing, which constitutes a charge upon the thing so that the very thing itself may be proceeded against in equity for payment of a claim. Collier v. Bank of Tupelo, 190 Ga. 598, 10 S.E.2d 62, 65 (1940). See 51 Am.Jur.2d Liens Section 22 (1970); Routon v. Woodbury Banking Co., 209 Ga. 706, 75 S.E.2d 561, 562 (1953). For an equitable lien to arise as to specific property, there must be a debt, a duty or obligation owing from one person to another, a res to which the obligation attaches, which can be described with reasonable certainty, and an intent, expressed or implied that the property serve as security for the payment or obligation. 51 Am.Jur.2d Liens Section 24 (1970); 53 C.J.S. Liens Section 4 (1948). See California Bank v. Leahy, 129 Cal.App. 243, 18 P.2d 709, 711 (1933) ("Whenever, in law or equity, a lien is created or declared there are two things prominently concerned, namely, an obligation and a res or rem to which or upon which that obligation fastens itself."); Harnsberger v. Wright, 185 Va. 586, 39 S.E.2d 737, 738 (1946) (equitable liens must rest on an expressed or implied contract. Moral obligations do not sustain equitable liens.).

A mere breach of contract does not give rise to an...