Independence Nat'l Bank v. Buncombe Prof'l Park, LLC, Appellate Case No. 2011-196049

CourtCourt of Appeals of South Carolina
Writing for the CourtLOCKEMY
Decision Date20 February 2013
PartiesIndependence National Bank, Respondent, v. Buncombe Professional Park, LLC, and David DeCarlis, s/a David D. DeCarlis, Appellants.
Docket NumberOpinion No. 5090,Appellate Case No. 2011-196049

Independence National Bank, Respondent,
Buncombe Professional Park, LLC, and David DeCarlis, s/a David D. DeCarlis, Appellants.

Appellate Case No. 2011-196049
Opinion No. 5090


Heard November 13, 2012
Filed February 20, 2013

Appeal From Greenville County
Charles B. Simmons, Jr., Master-In-Equity


Mary Leigh Arnold, of Mary Leigh Arnold, PA, of Mount Pleasant, for Appellants.
Martin Kyle Thompson, of Clawson & Staubes, LLC, of Greenville, for Respondent.

LOCKEMY, J.: Buncombe Professional Park, LLC (Buncombe) and David DeCarlis (collectively Appellants) appeal the Master-In-Equity's (Master) reformation of Independence National Bank's (Independence) mortgage, which placed it in a superior position to DeCarlis's mortgage. Appellants also appeal the Master's additional finding that pursuant to the doctrine of equitable subrogation, Independence was entitled to a first and superior mortgage. We reverse.

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Buncombe obtained a commercial loan in the amount of $1.65 million from Independence, of which DeCarlis was an individual guarantor. This loan was secured by approximately 4.9 acres of land in Greenville County (Greenville property). Buncombe and DeCarlis retained attorney Tommy Dugas to handle the loan closing. Independence's loan was to satisfy a first mortgage on the Greenville property held by First National Bank of Spartanburg (First National). After receiving information from Independence regarding the details of the loan, Dugas conducted an examination of the Greenville property's title. As part of that examination, Dugas determined the Greenville property was encumbered by two mortgages of record, the one held by First National and a second mortgage held by DeCarlis individually.

At the closing, Robert M. Lowery was present on behalf of Independence, and DeCarlis was present on behalf of Buncombe and individually as a guarantor of the note. DeCarlis individually guaranteed the commercial promissory note, and a separate guaranty agreement was executed as well. Buncombe and Independence executed a loan commitment letter that stated Independence would make the requested loan to Buncombe under certain terms and conditions, one being that Buncombe would grant a first in priority real estate mortgage in the Greenville property to Independence. Specifically, one of the requirements within the conditions precedent section of the loan commitment letter stated,

A commitment to issue a standard ALTA mortgagee title insurance policy in form, content and from a title insurer satisfactory to Independence, insuring the mortgage as a first lien on the Property for the full amount of the loan, with such endorsements as Independence may require. Title shall be fee simple and marketable, free and clear of all defects, liens and encumbrances, including mechanics' liens.

(emphasis added). DeCarlis signed the loan commitment letter, dated September 25, 2007, as a guarantor and on behalf of Buncombe. Moreover, the mortgage included the following language: "The words "Related Documents" mean . . . any . . . documents or agreements executed in connection with this Security Instrument whether now or hereafter existing. The Related Documents are hereby made a part of this Security Instrument by reference thereto, with the same force and effect as

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if fully set forth herein." Dugas was the only attorney at the closing, representing all parties. DeCarlis, on behalf of Buncombe and individually, further signed a business loan agreement stating that any additional documents necessary to make the terms of the loan conform to the conditions contained in the lender's commitment would be executed accordingly. The commercial real estate mortgage issued to Buncombe contained similar language.

DeCarlis did not subordinate his previously recorded mortgage to that of Independence's mortgage, nor was his mortgage satisfied or released during the closing. Lowery testified that while Dugas reviewed the lender's commitment letter with DeCarlis, DeCarlis never revealed the existence of his mortgage on the Greenville property. Independence's mortgage was recorded in the Greenville County Register of Deeds (ROD) on September 26, 2007, at Book 4855, Page 978. The mortgage to DeCarlis remained open and of record.

The maturity date for Independence's loan was originally March, 25, 2009. However, through a change in terms agreement, the date was extended to March 25, 2010. The loan was not paid off by the maturity date, and Independence sought to foreclose on their mortgage. Independence then discovered that DeCarlis's loan was still open and of record. Dugas contacted Buncombe and DeCarlis regarding the issue and requested that DeCarlis sign a subordination agreement. DeCarlis declined to execute the agreement.

On May 14, 2010, Independence filed a foreclosure complaint against Appellants. On June 18, 2010, Appellants filed an answer and counterclaim challenging the priority of Independence's mortgage. On October 14, 2010, the court denied a motion for summary judgment by Independence. Thereafter, on March 24, 2011, Independence filed a motion to amend its complaint, which was granted over Appellants' objection. The amended complaint included a new cause of action for reformation.

Dugas testified at the hearing on April 29, 2011, and stated he had been aware of DeCarlis's mortgage on the Greenville property and had written himself a note that DeCarlis's mortgage needed to be released. Dugas admitted he made a mistake in failing to have DeCarlis execute a satisfaction, release, or subordination of DeCarlis's mortgage at the loan closing and stated the parties agreed Independence would have a first mortgage. However, when he tried to correct the mistake a couple of years later, DeCarlis replied through his attorney, refusing to sign a subordination agreement. He stated he did "not have any independent recollection

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that the loan was contingent on [his] subordinating his individual mortgage to Independence National Bank." A manager from Independence's loan department testified that Independence would not loan $1.65 million as a second mortgage and had DeCarlis's mortgage been revealed to him, he would have refused to issue the loan.

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