Crafton v. Brown
| Decision Date | 09 July 2001 |
| Docket Number | No. 3366.,3366. |
| Citation | 550 S.E.2d 904,346 S.C. 347 |
| Court | South Carolina Court of Appeals |
| Parties | Edward W. CRAFTON, Appellant, v. Wilbur B. BROWN, Respondent. |
Stuart W. Snow, of Dusenbury, Snow & McGee, of Florence, for appellant.
E. Leroy Nettles, Sr., of Nettles, Turbeville & Reddeck, of Lake City, for respondent.
In this action to enforce a guaranty on a promissory note, Edward Crafton appeals the special referee's ruling on the admissibility of parol evidence to alter or amend the guaranty. Crafton also argues the referee erred in finding there was no mutual assent or meeting of the minds on the guaranty and the guaranty was not supported by consideration. We reverse and remand.
In January 1988, John Wellman and Wilbur Brown traveled to Dahlonega, Georgia, to present an investment proposal for a plastic reclamation and recycling business to Edward Crafton.1 Crafton was a wealthy man, and Wellman and Brown hoped he would bankroll the project. Crafton liked their proposal and over the next year and a half, made several large loans to Wellman. In 1989, Crafton permitted Wellman to consolidate these loans into a single note and defer payment until August 1994 or until Wellman Industries made an initial public offering of its stock. Accordingly, Wellman signed a promissory note for $2,395,484.00 on August 18, 1989. At the same time, Brown executed a guaranty for $500,000.00. When the note came due in 1994, Wellman defaulted.
In 1996, Crafton filed this action to collect on Brown's guaranty. Brown defended, arguing the note was part of a larger collateral oral agreement in which Crafton allegedly pledged to loan Wellman an additional twenty to twenty-five million dollars. Brown contended that the guaranty was conditioned upon the loaning of the money by Crafton to Wellman, and that Crafton's failure to loan the money invalidated the guaranty. Brown further asserted Crafton's failure to loan additional money resulted in a failure of consideration for the guaranty.
At trial, Brown sought to prove through the admission of parol evidence that a collateral contract existed. Crafton objected, arguing the guaranty was unambiguous on its face and parol evidence was not admissible to vary its terms. The referee ruled, however, that the parol evidence of a larger agreement was admissible. Based upon the parol evidence admitted at trial, the referee found that the guaranty was unenforceable because there was no meeting of the minds of the parties at the time the guaranty was executed and the guaranty was not supported by consideration. Crafton appeals.
A guaranty is a "promise to answer for the payment of some debt or the performance of some duty in case of the failure of another person who is himself in the first instance, liable to such payment or performance."2 An action to collect on a guaranty is an action at law.3 In an action at law, an appellate court will correct errors of law but must defer to the trial court's factual findings and affirm unless there is no evidence reasonably supporting those findings.4
Crafton first asserts the referee erred in admitting parol evidence to vary the terms of the guaranty because the guaranty was unambiguous. We agree.
"The parol evidence rule prevents the introduction of extrinsic evidence of agreements or understandings contemporaneous with or prior to execution of a written instrument when the extrinsic evidence is to be used to contradict, vary, or explain the written instrument."5 "[W]here the terms of [a] written guaranty agreement are clear and complete, extrinsic evidence of agreements or understandings contemporaneous with or prior to its execution cannot be used to contradict, explain, or vary its terms, in the absence of fraud, accident, or mistake in its procurement."6
The promissory note stated:
The guaranty stated:
In the consideration of the credit extended on a Promissory Note dated August 18, 1989 from John G. Wellman to Edward Crafton ("Holder") in the amount of Two Million Three Hundred Ninety-Five Thousand Four Hundred Eighty-Four and 00/100 ($2,395,484.00), I guarantee the payment of Five Hundred Thousand and 00/100 ($500,000.00) Dollars of the above referenced note.
The guaranty explicitly recites that it is in consideration of the credit extended in the amount of $2,395,484.00. In view of the clear and unambiguous nature of the language of the guaranty and the recitation of its consideration as the $2,395,484.00 promissory note, we conclude the referee improperly admitted parol evidence.
Brown cites Iseman v. Hobbs7 in support of his argument that parol evidence was properly admitted in this case. In Iseman, this court held parol evidence was admissible when the language of consideration was not contractual. The Iseman court explained:
[I]f the consideration recited is an act or forbearance, as distinguished from a promise or covenant, it may be shown that it did not take place and that therefore the writing is gratuitous and unenforceable. On the other hand, if a promise or covenant is recited as having been made as consideration, this recital cannot be contradicted, explained, or varied by extrinsic evidence. In the present case, the phrase "for value received" is not a recital of a promise or covenant, but a recital that an act (i.e., the receipt of value) has occurred. Contradiction of the fact of receipt would in no way alter the contractual terms of the note.8
Brown sought to introduce evidence that the promissory note and guaranty were part of a larger contract to loan between twenty and twenty-five million dollars, not that the consideration recited was never paid over.9 This is precisely the evidence the parol evidence rule seeks to bar.10 Accordingly, the referee erred when he admitted parol evidence to alter the terms of the guaranty.
Crafton next argues that the referee erred in finding there was no mutual assent at the time the guaranty was executed. Crafton argues mutual assent was proved because he accepted the guaranty contemporaneously with the execution of the note. We agree.
11 Because the guaranty and promissory note were executed simultaneously, there was no need for further evidence of a meeting of the minds.
We find it irrelevant that Crafton did not think anything of the guaranty at the time it was executed. Crafton primarily relied on the promissory note and looked to Wellman for payment under the note. Brown's guaranty only assumed importance after Wellman's default.12
Crafton next argues that the referee...
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