Klutts Resort Realty, Inc. v. Down'Round Development Corp., 20347

• Decision Date: 13 January 1977
• Docket Number: No. 20347,20347
• Parties: KLUTTS RESORT REALTY, INC., et al., Respondents, v. DOWN'ROUND DEVELOPMENT CORPORATION et al., Appellants.
• Court: South Carolina Supreme Court

Page 20

232 S.E.2d 20

268 S.C. 80

KLUTTS RESORT REALTY, INC., et al., Respondents, v. DOWN'ROUND DEVELOPMENT CORPORATION et al., Appellants.

No. 20347.

Supreme Court of South Carolina.

Jan. 13, 1977.

Irvine F. Belser, Jr., and Weston Adams, Columbia, for appellants.

Bellamy, Rutenberg, Epps & Gravely, Myrtle Beach, for respondents.

RHODES, Justice:

This is an appeal from an Order decreeing specific performance under a contract to purchase real property. We affirm.

This cause came on for trial before the court sitting without a jury on December 17, 1974. Under their amended Complaint, the plaintiffs sought a judgment which would require the defendants to specifically perform in accordance with alleged contractual obligations under a document entitled, 'Agreement of Assignment, Release and Extension of Time for Closing' (the Basic Contract), dated October 8, 1973, together with an Addendum allegedly executed contemporaneously therewith.

Klutts Resort Realty, Inc., (Klutts), is the owner of the land in question. Originally, Klutts had contracted to sell the property to its present co-plaintiffs, namely, Advance Corporation, Smith-Williams & Associates, Inc., John W. Ahern, John A. Scarborough, and Thaddeus E. Williams (hereinafter the 'other plaintiffs'). Thereafter, it became apparent that this proposed sale could not be consummated because of the inability of one or more of the intended purchasers to perform. Eventually, Down'Round Development Corporation (Down'Round) expressed an interest in being substituted as purchaser of the property. After extensive negotiations among the various parties, it was agreed that the transaction would be formalized in one document known herein as the Basic Contract. Under this Contract, Down'Round agreed to purchase the property from Klutts for a consideration of $386,120, and Down'Round consented to pay to the 'other plaintiffs' the sum of $106,950 as consideration for the assignment to it of their contractual rights to purchase the property. The consideration for the assignment could be paid either in cash or by a short-term promissory note, provided that the note were personally guaranteed by the endorsements of all the stockholders and directors of Down'Round. The defendants elected to pay by note rather than pay cash.

Evidence presented by the plaintiffs at the trial shows that on or about October 7, 1973, Welbourne Bradham, an officer of Klutts, discussed the Basic Contract with Patrick H. Grayson, Jr., attorney for Down'Round, and expressed certain reservations about the contents of the Contract. On October 7, Bradham met with Thaddeus E. Williams, one of the plaintiffs, and with three of the individual defendants at a Columbia restaurant. At the meeting the proposed Basic Contract and Addendum were reviewed. Bradham testified that while the agreement, as then constituted, provided for an individual guarantee to the 'other plaintiffs' of the promissory note by the stockholder-directors of Down'Round (who are the named individual defendants in this action), it did not provide for an individual guarantee of the obligation to pay the purchase price of the real estate to Klutts. Bradham therefore inserted with ballpoint pen the words 'individually by' before four of the signature lines on the Addendum. For some unexplained reason, however, these words were not added opposite the line where the defendant Charles Larsen subsequently signed his name. Bradham then executed the Basic Contract and the Addendum on behalf of Klutts. It was agreed that the other parties would execute the documents at a later date after studying them. The time set for closing the transaction was extended until December 1, 1973.

On or about November 9, 1973, Bradham and another officer of Klutts met with three of the individual defendants at the office of B. C. Inabinet, Jr., Chairman of the Board of Directors of Down'Round. Bradham testified that during the course of this meeting, he and the other Klutts representative reviewed the Basic Contract, as well as the Addendum attached thereto, and determined that both of these documents had been executed by all the parties involved in the transaction. Thereafter, the parties recessed for lunch. Upon returning it was discovered that the Addendum had disappeared. This document remained unaccounted for until it turned up in the possession of one of the defendants on the day preceding the start of the trial.

Subsequently, the attorney for the 'other plaintiffs' delivered certain documents to the plaintiff Williams for the purpose of circulating same for approval by all of the parties. Thereafter, Williams' attorney learned through his client that Down'Round, through its chairman, had advised Williams that Down'Round would not complete the transaction. Williams' lawyer contacted counsel for the defendant corporation in order to determine what impediments there were to the closing. Williams' attorney was advised that Down'Round did not intend to close the transaction because, in the opinion of the individual defendants, the plaintiffs had, in effect, proposed a counter-offer by requesting the individual defendants to sign a 'Guaranty of Contract'. This instrument, in clear language, would have bound the individual defendants personally on the contractual obligations of their corporation if Down'Round defaulted. It was explained to their counsel that the proposed Guaranty was not a counter-offer but was one of the contemplated closing documents circulated for approval. The defendants were, however, unwilling to sign this document and refused to do so. By Order dated December 10, 1975, the trial judge ruled in favor of the plaintiffs and decreed that specific performance be granted against all the defendants. From this Order the defendants appeal.

We consider first the question of whether the defendants are individually liable to the 'other plaintiffs' on the promissory note. The language of the Basic Contract pertinent to the note is the following:

'1. Advance, Smith-Williams & Associates, John W. Ahern, John A. Scarborough and Thaddeus E. Williams agree to assign all their right, title and interests in and to the above-described 13.79 acres, if any, and in and to that certain Contract of Sale set forth in Exhibits A and B hereof, as their interests may appear, to Down'Round for and in consideration of the payment to them of One Hundred Six Thousand, Nine Hundred-Fifty and no/100 ($206,950.00) Dollars to be divided among them as they may determine, and Down'Round hereby agrees to accept the assignment as aforesaid and pay the said consideration . . .. It is understood and agreed that the consideration ($106,950.00) for the assignment agreed to herein may be paid by a Promissory Note of Down'Round endorsed and guaranteed by all of its stockholders, individually, to be due and payable December 1, 1973 . . ..' (emphasis added).

Although there is a dispute as to whether the defendants ever actually executed and delivered the promissory note, the trial judge found, on the basis of the evidence presented, that the note was executed and delivered in conformity with the terms of the Basic Contract quoted above. The Basic Contract was signed by each of the five individual defendants in a corporate capacity. However, it contained a promise of individual guaranty with respect to the promissory note. In such a case a contract signed by an individual as an officer has been held to be the contract of the officer where the contract contains a provision with respect to individual liability of the signing officer. ¹ 19 Am.Jur. (2d), Corporations § 1343 (1965). A director, officer, or other agent, signing a corporate contract containing a promise in the proper form for an individual, is not relieved from personal liability by the addition to his name of terms such as 'director', 'president' or the...