SOUTHERN ATL. FIN. SERV. v. Middleton
Decision Date | 08 December 2003 |
Docket Number | No. 25759.,25759. |
Court | South Carolina Supreme Court |
Parties | SOUTHERN ATLANTIC FINANCIAL SERVICES, INC., Petitioner, v. Donna F. MIDDLETON, Respondent. |
Donald E. Rothwell and Scott L. Hood, both of Rothwell Law Firm, of Irmo, for Petitioner.
David Popowski, of Charleston, for Respondents.
We granted a writ of certiorari to review the Court of Appeals' opinion in Southern Atlantic Financial Services, Inc. v. Middleton, 349 S.C. 77, 562 S.E.2d 482 (Ct.App.2002). We affirm as modified.
On June 25, 1996, Donna Middleton entered into a note and mortgage with Petitioner, Southern Atlantic Financial Services, to borrow $186,000 to refinance her home. Four months later, in October 1996, Middleton brought suit against Southern, and the broker which obtained the loan, seeking a reduction in the stated interest rate from 11.99% to 8%. Middleton claimed the broker, Carolina Federal Mortgage Company, had orally agreed to an 8% interest rate. Summary judgment was granted to Southern on the basis that the broker was not its agent and could not reduce the interest amount.
Subsequently, Southern brought suit to foreclose on the mortgage and determine the amount due under the note.1 Middleton argued Southern failed to send her a notice of default and right to cure, as required by the note. The master ruled the note did not require Southern to provide Middleton notice prior to accelerating the balance. Based on the testimony of Southern's executive vice-president, the master awarded Southern judgment of $311,457.63.2 The Court of Appeals reversed; it found the default provision of the note created an ambiguity as to whether notice was required prior to accelerating the balance due; the Court of Appeals therefore remanded to the master for a new trial to determine the parties' respective intent and determine whether Middleton had a right to notice of default and a right to cure.
Is the default provision of the note ambiguous?
The Note signed by Middleton provides, in pertinent part, as follows:
(Emphasis added).
citing Yarborough v. Phoenix Mut. Life Ins. Co., 266 S.C. 584, 592, 225 S.E.2d 344, 348 (1976).
549 S.E.2d at 250; see also State v. Wilson, 274 S.C. 352, 356, 264 S.E.2d 414, 416 (1980).
The Court of Appeals nonetheless went on to hold, citing an Eighth Circuit case, that "[a]cceleration of an installment note, however, is a harsh remedy." 349 S.C. at 83, 562 S.E.2d at 486, citing First Bank Investors' Trust v. Tarkio College, 129 F.3d 471 (8th Cir.1997)
. Accordingly, it held that "[b]ecause of the severity of the circumstances, a payee's right to accelerate should therefore be clearly and unequivocally articulated within the agreement." Id. (Emphasis in original). The Court of Appeals held that the note here "was a contract of adhesion filled with boiler plate language made between a sophisticated lender and an unsophisticated maker," and cited a California case establishing judicial limitations on the enforcement of adhesion contracts when the contract "does not fall within the reasonable expectations of the weaker or "adhering party." Id. citing Graham v. Scissor-Tail, Inc., 28 Cal.3d 807, 171 Cal.Rptr. 604, 623 P.2d 165 (1981) (emphasis supplied).
Although we agree with the Court of Appeals' ultimate holding, we find its creation of a "reasonable expectations" test is an unwarranted and unnecessary extension of South Carolina law as this case may be decided utilizing basic principles of contract ambiguity.3
We find the provisions of the note here are patently ambiguous. While it is possible to construe the note as simply giving rise to an option on the part of Southern to give notice of default, the fact that it sets forth a mandatory notice provision renders it susceptible of another construction. As noted previously, the provisions states:
If I am in default, the Note Holder may send me a written notice telling that if I do not pay the overdue amount by a certain date, the Note Holder may require me to pay...
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