Edge v. Klutts Resort Realty, Inc., 21471

• Citation: 278 S.E.2d 783,276 S.C. 389
• Decision Date: 01 June 1981
• Docket Number: No. 21471,21471
• Court: South Carolina Supreme Court
• Parties: Samuel B. EDGE, Appellant, v. KLUTTS RESORT REALTY, INC., J. Vaughn Klutts and P. Welbourne Bradham, Respondents.

Page 783

278 S.E.2d 783

276 S.C. 389

Samuel B. EDGE, Appellant, v. KLUTTS RESORT REALTY, INC., J. Vaughn Klutts and P.

Welbourne Bradham, Respondents.

No. 21471.

Supreme Court of South Carolina.

June 1, 1981.

John C. Thompson of Thompson, Henry & Lovelace, Conway, for appellant.

Howell V. Bellamy, Jr. of Bellamy, Rutenberg, Copeland, Epps, Gravely & Bowers, Myrtle Beach, for respondents.

LITTLEJOHN, Justice:

This action was commenced by plaintiff Samuel B. Edge to collect principal and interest on a note executed by defendant Klutts Resort Realty, Inc. (Klutts Realty), and guaranteed by its co-directors, defendants J. Vaughn Klutts and P. Welbourne Bradham. The trial judge granted a summary judgment in favor of all defendants. The plaintiff has appealed, submitting that there are genuine issues of fact to be determined at trial. We reverse.

In December, 1972, Klutts Realty executed and delivered to plaintiff its promissory note in the amount of $56,800.00, secured by a purchase money mortgage on a 4 acre tract. Plaintiff agreed to subordinate his mortgage to subsequent construction and permanent financing mortgages for improvement and development of the mortgaged property. Pursuant to this provision, the plaintiff, in May, 1973, subordinated his purchase money mortgage to the lien of a mortgage from Klutts Realty to C. Douglas Wilson & Co. (by name change N.C.N.B. Mortgage Corp.) in the principal sum of $1,275,000.00 and Klutts Realty began building a condominium on the premises.

In October, 1974 (after only one payment had been made on the plaintiff's mortgage), Klutts Realty requested the plaintiff to subordinate his mortgage to an additional $300,000.00 to be advanced by N.C.N.B. Mortgage Corp. As consideration for this additional subordination, the individual defendants, Klutts and Bradham, executed a personal guarantor agreement guaranteeing payment of the plaintiff's note. Accordingly, at this time, plaintiff's purchase mortgage was subordinated to a total debt of $1,575,000.00.

Klutts Realty failed to make payments as provided in the plaintiff's note and in February, 1975, plaintiff commenced a foreclosure action of his purchase money mortgage. This action was ended by agreement and dismissed in April, 1975, with the payment of $3,911.01 interest plus $2,000.00 principal; also, the maturity date of the plaintiff's note was extended and plaintiff was to receive on his note the sum of $1,000.00 for release payment for each condominium unit sold.

In December, 1975, Klutts Realty, being unable to complete the condominium project, conveyed the premises to N.C.N.B. Mortgage Corp. in lieu of foreclosure and in consideration of a release of Klutts and Bradham from their personal liability on their endorsement of the obligation from Klutts Realty to N.C.N.B. Mortgage Corp. Simultaneously, at the request of N.C.N.B. Mortgage Corp., the plaintiff canceled his purchase money mortgage, only, with the following verbiage:

"The within mortgage is cancelled but this is not a cancellation of the debt which the mortgage secured."

In consideration of this cancellation of plaintiff's mortgage, N.C.N.B. Mortgage Corp. paid to the plaintiff the sum of $5,000.00 and agreed to pay the plaintiff 1% of the net sale proceeds of condominium units after the first 10 units, which payments plaintiff received and applied to the note balance, leaving a balance due as of October, 1978, of $32,747.51 principal and interest.

The present action was commenced by plaintiff against the defendant Klutts Realty, the maker of the note, and the individuals Klutts and Bradham, guarantors of the note, for the principal and interest due thereon.

The motion of defendants for a summary judgment was on the ground that there was "... no material issue of fact which would entitle the plaintiff to a recovery against the defendants (,) for the pleadings and depositions revealed that the mortgage securing the debt was canceled without the consent and/or knowledge of the defendants." The trial judge ruled that the "... surrender or release by a creditor, without the guarantors' consent, of any security held at the time when the debt is guaranteed will operate as a discharge of the guarantors." Citing 38 C.J.S. Guaranty § 81. In so ruling, the judge ended the case as to all defendants as a matter of law.

The law upon which the judge relied would in no event lend comfort to...