Citizens and Southern Nat. Bank of South Carolina v. Smith, 21578
| Decision Date | 05 October 1981 |
| Docket Number | No. 21578,21578 |
| Citation | 277 S.C. 162,284 S.E.2d 770 |
| Court | South Carolina Supreme Court |
| Parties | The CITIZENS AND SOUTHERN NATIONAL BANK OF SOUTH CAROLINA, Appellant, v. Stephen D. SMITH; Thaddeus E. Williams; Smith-Williams & Associates, Inc.; St. John's Episcopal Church; University of South Carolina Educational Foundation for the benefit of Maximillian LaBorde Scholarship Fund; University of South Carolina Gamecock Club, Athletic Fund; First Palmetto Bank & Trust Company, Inc.; Hellams-Ullman, Inc.; South Carolina Employment Security Commission; United States Leasing Corporation; Robert F. Lindsey; and Pierre F. LaBorde, Jr., Defendants, of whom First Palmetto Bank and Trust Company and Pierre F. LaBorde, Jr., Stephen D. Smith; Thaddeus E. Williams, Smith-Williams & Associates, Inc.; St. John's Episcopal Church, University of South Carolina Educational Foundation for the Benefit of Maximillian LaBorde Scholarship Fund and the University of South Carolina Gamecock Club Athletic Fund are Respondents. |
John S. Taylor, Jr., of Robinson, McFadden, Moore & Pope, Columbia, for appellant.
John Gregg McMaster, Timothy G. Quinn, Frank E. Robinson, II, Joe E. Berry, Jr., Walter B. Todd, Jr., Harry M. Lightsey, Jr., James B. Richardson, Glenn Bowers, and Robert G. Horine, Columbia, and Philip Wittenberg, Sumter, for respondents.
This appeal involves the priorities of several mortgages.
This foreclosure, involving a most complex factual situation, began in 1973 when the respondent Dr. Pierre F. LaBorde owned three parcels of undeveloped land in Richland County (132.9, 489 and 490 acres). He sold this land to Stephen D. Smith and Thaddeus Williams only receiving purchase money mortgages in return. He agreed to subordinate these purchase money mortgages in order for the developers to obtain money to develop the land. This provision read in part:
"(A)nd the seller agrees to execute such documents as may from time to time, be required to perfect such subordination."
The precise meaning of this provision is in dispute. Subsequently, LaBorde was informed that the developers had placed additional mortgages on the land without advising him or obtaining his consent.
Upon contacting the developers a new agreement was entered into in March, 1974 in which they agreed:
(1) The purchase money mortgages would be satisfied.
(2) New mortgages were to be executed in place of the purchase money mortgages.
(3) LaBorde would in writing subordinate these new mortgages to any other mortgages provided the developers would satisfy the outstanding mortgages (to C & S Bank, and to Ira Miller) within three months and to pay to LaBorde $4,000.00.
Pursuant to this agreement LaBorde executed a complete release to Smith & Williams, and fully complied with the terms of the new (March 1974) agreement. Smith & Williams agreed to pay off the mortgages. Instead they extended the mortgages without the knowledge of LaBorde.
LaBorde has not been paid anything by Smith & Williams on any mortgage, new or old.
While there are numerous foreclosures relating to this financial debacle, here we are only concerned with the foreclosure by LaBorde, and others, on the 490 acre tract which was sub-divided into four tracts of 130, 160, 160 and 40 acres.
C & S is involved because it loaned the developers Two Hundred and Fifty Thousand ($250,000.00) Dollars, took a mortgage on the 490 acres and extended this mortgage. The three charities, St. John's Episcopal Church, University of S. C. Educational Foundation and University of S. C. Gamecock Club are involved because as soon as LaBorde gave undivided portions of the 490 acre tract to each of them, they, in turn, deeded it over to the developers, taking purchase money mortgages from the developers.
The appellant Citizens and Southern National Bank of South Carolina asserts the original subordination agreement was self-executing. The respondents contend they had to consent in writing for the subordination to be effective. In view of our resolution of this case it is not necessary to pass on this issue.
At common law and in equity a purchase money mortgage will ordinarily be given priority over other security instruments in realty. Crystal Ice Co. of Cola. v. First Colonial Corp., 273 S.C. 306, 310, 257 S.E.2d 496 (1979), but it may be subordinated by agreement of the parties. Rivers v. Rice, 233 Ga. 819, 219 S.E.2d 678 (1975); 55 Am.Jur.2d, Mortgages, § 314, 344. Because it alters the normal priority of the mortgages, priority under a subordination agreement is strictly limited by the express terms of the agreement. Gluskin v. Atlantic Savings & Loan Association, 32 Cal.App.3d 307, 322, 108 Cal.Rptr. 318, 323 (1973).
Here, LaBorde consented to the subordination of his mortgage to C & S and acknowledged in writing that his mortgage would be subordinate to the bank's until the latter had been satisfied, at which time LaBorde's mortgage would become a "first mortgage." This agreement was drafted by LaBorde's attorney and signed by LaBorde with full knowledge of the facts and circumstances. This written acknowledgment of subordination makes it immaterial whether the original subordination clause was "self-executing" or required LaBorde's written consent. We hold the circuit...
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