CresCom Bank v. Edward L. Terry , 610 F. App'x 221 ( 2015 )

UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 13-2467
CRESCOM BANK, successor by merger to Community FirstBank,
Plaintiff – Appellee,
v.
EDWARD L. TERRY,
Defendant – Appellant,
and
HARRIS STREET LLC, now known as CCT Reserve LLC; SUGARLOAF
MARKETPLACE LLC; CCT RESERVE LLC,
Defendants.
No. 13-2549
CRESCOM BANK, successor by merger to Community FirstBank,
Plaintiff – Appellant,
v.
EDWARD L. TERRY,
Defendant – Appellee,
and
HARRIS STREET LLC, now known as CCT Reserve LLC; SUGARLOAF
MARKETPLACE LLC; CCT RESERVE LLC,
Defendants.
Appeals from the United States District Court for the District
of South Carolina, at Charleston. Patrick Michael Duffy, Senior
District Judge. (2:12-cv-00063-PMD)
Argued: January 27, 2015 Decided: May 21, 2015
Before MOTZ and DIAZ, Circuit Judges, and DAVIS, Senior Circuit
Judge.
Affirmed in part, vacated in part, reversed in part, and
remanded by unpublished opinion. Judge Diaz wrote the opinion,
in which Judge Motz and Senior Judge Davis joined.
ARGUED: Daniel Francis Blanchard, III, ROSEN, ROSEN & HAGOOD,
LLC, Charleston, South Carolina, for Appellant/Cross-Appellee.
Meredith Long Coker, ALTMAN & COKER, LLC, Charleston, South
Carolina, for Appellee/Cross-Appellant. ON BRIEF: Richard S.
Rosen, ROSEN, ROSEN & HAGOOD, LLC, Charleston, South Carolina,
for Appellant/Cross-Appellee. Charles S. Altman, ALTMAN &
COKER, LLC, Charleston, South Carolina, for Appellee/Cross-
Appellant.
Unpublished opinions are not binding precedent in this circuit.
2
DIAZ, Circuit Judge:
CresCom Bank brought suit in the district court to enforce
four promissory notes against borrower CCT Reserve, LLC, and to
enforce guaranty agreements executed by CCT Reserve’s sole
member, Edward L. Terry. After CresCom’s claims against CCT
were resolved in CCT’s bankruptcy proceedings, CresCom and Terry
each moved for summary judgment on the guaranty agreements. The
district court substantially granted CresCom’s motion, finding
Terry liable under the agreements and awarding CresCom damages
of $2,171,211.04. However, the district court denied CresCom’s
motion with respect to attorney’s fees, agreeing with Terry that
CresCom could not recover those fees because it did not give
adequate notice of its intent to seek them under Georgia law.
Terry appeals the district court’s ruling on liability and
its calculation of damages, and CresCom has cross-appealed on
the issue of attorney’s fees. For the reasons that follow, we
substantially affirm the district court’s grant of summary
judgment to CresCom but vacate its award of late fees on the
full outstanding principal and reverse its denial of the
attorney’s fees CresCom incurred in CCT’s bankruptcy.
I.
Although the basic facts of this case are not in dispute,
we view them in the light most favorable to Terry as the non-
3
prevailing party below, and resolve any factual ambiguities in
his favor. White v. BFI Waste Servs., LLC, 375 F.3d 288, 294
(4th Cir. 2004). Terry, a citizen of Florida, is a developer
who maintains his office in Georgia and has undertaken real
estate projects throughout the Southeast. Between February and
October 2006, CresCom 1 made three loans to Terry’s wholly owned
corporation, CCT Reserve, LLC, 2 for real estate developments in
South Carolina. The financing was extended in exchange for
promissory notes and mortgages in favor of CresCom on the
properties being developed.
On February 1, CresCom loaned CCT $1,275,000 for a
development called the “Maybank Tract,” and CCT delivered Note
No. 145002622 (“Note 2622”) to CresCom. On April 12, CresCom
loaned CCT $841,260 for another development called the “Baker
Tract,” and CCT delivered Note No. 145002718 (“Note 2718”) to
CresCom. Finally, on October 25, CresCom loaned CCT an
additional $881,250 for a development called the “Parker Tract,”
1
CresCom was at the time doing business as Community
FirstBank. In 2011, Community FirstBank merged with Crescent
Bank to create CresCom Bank, a South Carolina entity with twelve
locations in the state.
2
At the time the loans were extended in 2006, Terry’s
wholly owned corporations were known as Harris Street LLC and
Sugarloaf Marketplace LLC. In 2011, Harris Street and Sugarloaf
Marketplace merged into CCT, with CCT as the surviving entity.
We refer to Terry’s businesses collectively as CCT.
4
and CCT delivered Note No. 145002911 (“Note 2911”) to CresCom.
All three loans were “interest only,” meaning that CCT was only
required to pay the monthly interest on the loans until they
reached maturity.
In addition to executing the notes and mortgages on behalf
of CCT, Terry also guaranteed all three loans in his personal
capacity. He signed the notes, loan agreements, mortgages, and
guaranty agreements at his office in Georgia and mailed them to
CresCom’s office in South Carolina.
After CCT renewed the loans several times, the final
maturity date for all three notes was July 25, 2009. In early
2009, with maturity approaching, CCT began having difficulty
making its monthly interest payments. To avoid default, the
parties executed a Commitment Letter in June 2009 under which
CresCom agreed to loan CCT an additional $750,000 to help CCT
pay the interest on the earlier loans, as well as property taxes
and other expenses related to the real estate securing the
loans. In exchange, the Commitment Letter required that the
earlier loans be amended to include cross-collateralization and
cross-default provisions, providing that in the event of CCT’s
default on any of the notes, CresCom “at its option and [with]
ten (10) days written notice may declare all of the loans in
default.” J.A. 265–70, ¶ 9. The Commitment Letter was to
survive the closing of the new $750,000 loan and become binding
5
together with the other loan documents. Id. ¶ 26. Terry signed
the Letter as CCT’s representative and in his personal capacity
as guarantor.
On June 25, 2009, pursuant to the Commitment Letter,
CresCom loaned CCT $750,000 and CCT delivered to CresCom Note
No. 145003572 (“Note 3572”), with a maturity date of June 18,
2011. 3 As with the earlier loans, Note 3572 was secured by a
mortgage in favor of CresCom on CCT’s real estate in South
Carolina and was also personally guaranteed by Terry.
The parties memorialized their new agreement in a written
contract titled “Amendment to Loan Agreements and Mortgages to
Provide for Cross-Default” (the “Loan Amendment”). The Loan
Amendment provided that if CresCom “determines to exercise its
rights [under the cross-default provision] it shall give
Borrowers no less than ten (10) days written notice from the
date of the receipt of the notice to cure default,” and
specified that notice be given by certified mail or another
method that provides proof of delivery. J.A. 310–12. The Loan
3
The parties also signed a written addendum to the
Commitment Letter stating that the maturity dates for the first
three loans would be extended to coincide with Note 3572’s
maturity date of June 18, 2011, and reinforcing the cross-
default and cross-collateralization provisions. On August 19,
2009, the parties formally executed loan modification agreements
to that effect.
6
Amendment was signed by Terry only in his capacity as CCT’s
representative, and not in his personal capacity.
Four days before the loans were scheduled to mature, on
June 14, 2011, CresCom sent letters to CCT and its predecessors
to inform them that full payment would be due on the notes on
June 18, 2011, and that there would be no further forbearance or
other arrangements. The letters were sent by regular and
certified mail to a number of addresses CresCom had on file for
the Borrowers, although none were the Marietta, Georgia address
specified in the Loan Amendment. Neither CCT nor Terry paid the
debt and on June 18, 2011, the principal of all four loans
remained outstanding.
After CCT and Terry failed to pay the debt, CresCom filed a
complaint in the district court seeking to enforce the four
notes against CCT and the guaranty agreements against Terry.
Terry answered and filed a motion to dismiss, which the district
court denied.
While this action was pending, CCT filed a Chapter 11
Petition in the U.S. Bankruptcy Court for the Northern District
of Georgia. CresCom participated in CCT’s bankruptcy
proceedings as a creditor and the bankruptcy court ultimately
ordered that the properties securing CCT’s loans be deeded
directly to CresCom. After an evidentiary hearing, the
bankruptcy court issued an order establishing the value of those
7
properties and crediting that value, $2,551,000, against the
principal owed on the loans. CCT conveyed the properties to
CresCom and at the conclusion of the proceedings, the bankruptcy
court found that the remaining value of CresCom’s unsecured
claim against CCT was $1,121,029, based on the amount of
principal remaining outstanding. CresCom did not appeal the
bankruptcy court’s rulings.
Following a period of discovery, CresCom and Terry filed
cross-motions for summary judgment in the case at bar. CresCom
argued that Terry breached the guaranty agreements by failing to
pay the outstanding balance on the notes after CCT defaulted,
and sought a judgment of $2,142,861.25 in principal, interest,
and late fees, plus attorney’s fees and continuing per diem
interest against Terry. In Terry’s motion for summary judgment,
he claimed that (1) his obligations under the guaranty
agreements were discharged because CresCom failed to give
written notice of default and an opportunity to cure the default
as required by the parties’ contracts, (2) CresCom could not
collect attorney’s fees because it failed to give notice and an
opportunity to cure as required under Georgia law, and that in
any event, (3) his liability was capped at $1,121,029 as a
result of the bankruptcy court’s order.
The district court granted CresCom’s motion for summary
judgment on liability, finding that the guaranty agreements were
8
valid and enforceable against Terry. It also held that the
bankruptcy court’s determination of the value of CresCom’s claim
in CCT’s bankruptcy did not discharge Terry’s independent
obligation to guarantee the full amount of CresCom’s debt.
However, the district court denied CresCom’s motion and
granted Terry’s motion on the issue of attorney’s fees. The
court found that because Georgia law governs the guaranty
agreements, CresCom’s failure to provide notice of its intent to
seek attorney’s fees as required under Ga. Code Ann. § 13-1-
11(a)(3) bars it from collecting any attorney’s fees from Terry.
After ordering supplemental briefing on damages, the
district court awarded CresCom $2,171,211.04 in principal,
interest, and fees (after subtracting the value of the conveyed
properties). This appeal followed.
II.
Terry raises a number of arguments on appeal that can be
distilled into two primary issues: first, whether the district
court erroneously granted summary judgment to CresCom on the
issue of Terry’s liability under the guaranty agreements; and
second, whether the district court erred in its calculation of
damages. Additionally, we consider CresCom’s contention that
the district court erred by applying Georgia law to the guaranty
9
agreements and thus refusing to award any attorney’s fees
incurred by CresCom.
We review the district court’s award of summary judgment de
novo, applying the same legal standards as the district court
did. Motor Club of Am. Ins. Co. v. Hanifi, 145 F.3d 170, 174
(4th Cir. 1998). Summary judgment is appropriate only if there
is no genuine dispute of material fact and the movant is
entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a);
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247 (1986).
Neither party argues that there are material facts in dispute in
this case, and we therefore review each of the district court’s
legal conclusions de novo.
A.
We first consider Terry’s claim that the district court
erred by finding him liable to CresCom under the guaranty
agreements he signed in connection with Notes 2622, 2718, 2911,
and 3572. Terry maintains that under the parties’ June 2009
Commitment Letter, Addendum, and Loan Amendment, CresCom was
required to provide him, as guarantor, with ten days’ written
notice and an opportunity to cure before declaring any of the
loans in default. Citing Georgia law for the proposition that
breach of a contractual notice of default provision discharges a
party’s contractual obligations, he argues that he is not liable
10
to CresCom because CresCom failed to give proper notice. We
disagree.
Under Georgia law, 4 the enforcement of unambiguous terms in
a guaranty agreement presents an issue appropriate for summary
judgment. Cong. Fin. Corp. v. Commercial Tech., Inc., 910 F.
Supp. 637, 641 (N.D. Ga. 1995). Georgia courts have readily
enforced unambiguous guaranty agreements, noting that competent
parties may “choose, insert, and agree to whatever provisions
they desire in a contract,” provided they do not contravene the
law or public policy. Core LaVista, LLC v. Cumming, 709 S.E.2d
336, 341 (Ga. Ct. App. 2011) (quoting Brookside Cmtys., LLC v.
Lake Dow N. Corp., 603 S.E.2d 31, 33 (Ga. Ct. App. 2004)).
Georgia law thus recognizes the enforceability of blanket
waivers of defenses in guaranty agreements. See Branch Banking
& Trust Co. v. Envtl. Tech., Inc., No. 5:12-CV-115, 2013 WL
4505884, at *9 (M.D. Ga. Aug. 22, 2013). Although Georgia
courts have held that notice of default provisions in contracts
must be strictly followed, In re Colony Square Co., 843 F.2d
4As explained infra in Part II.C., we agree with the
district court’s conclusion that Georgia law applies to the
guaranty agreements between Terry and CresCom because we
construe their ambiguous choice of law provisions against the
drafter, CresCom. However, because most of the other agreements
between CresCom and CCT (including the Commitment Letter and all
of the loan agreements) contained explicit choice of law
provisions selecting South Carolina law, South Carolina law
governs all other documents referenced herein.
11
479, 481 (11th Cir. 1988), they have not held that failure to
give proper notice discharges independent agreements with non-
parties, including guarantors.
As the district court observed, the guaranty agreements in
this case are absolute and relatively unambiguous. They provide
that the signatory (Terry, in his personal capacity) “hereby
absolutely and unconditionally guarantees to Lender the full and
prompt payment when due, whether at maturity or earlier by
reason of acceleration or otherwise, of the debts, liabilities
and obligations” of the notes guaranteed. J.A. 74 (emphasis
added). They further state that the guarantor “acknowledges and
agrees with Lender” that “[n]o act or thing need occur to
establish the liability of the Undersigned hereunder, and no act
or thing, except full payment and discharge of all indebtedness,
shall in any way exonerate the Undersigned.” J.A. 74. The
guaranty agreements also specifically provide that the
guarantor’s liability will be unaffected by any failure to give
notice, and the lender need not seek payment from the borrower
before asserting its rights under the guaranty agreements.
Finally, by signing the guaranty agreements, Terry waived “any
and all defenses, claims and discharges of Borrower . . . except
the defense of discharge by payment in full.” J.A. 75.
The loan agreements themselves are similarly clear. In
each agreement, CCT agrees that default will occur if it
12
“fail[s] to make a payment on time or in the amount due.” J.A.
189. Under the loan agreements, the only trigger required for
the loans to be in default is the failure to make a timely
payment, at which time CresCom may demand immediate payment of
the entire amount owed. The loan agreements contain no notice
requirement and no requirement that a loan be formally declared
in default after a missed payment.
Against this backdrop, Terry argues that he is nonetheless
excused from his obligations under the guaranty agreements
because CresCom was required to provide him, in his personal
capacity, with ten days’ written notice and an opportunity to
cure any default before enforcing the agreements against him.
For support, he points primarily to the notice provisions found
in the parties’ 2009 Commitment Letter and Loan Amendment,
through which CresCom and CCT negotiated a cross-default and
cross-collateralization provision concurrently with the
extension of $750,000 of additional credit to CCT. To
understand Terry’s argument, a brief explanation of the terms of
those documents is necessary.
The first page of the Commitment Letter defines the term
“Borrower”:
Borrower: A to-be-named entity owned 100% by Edward L.
Terry. The term “Borrower” as used herein shall be
deemed to include any person named as an endorser,
grantor or surety in connection with the proposed
loan.
13
J.A. 265. The Letter also separately addresses Terry’s role as
guarantor, stating under the heading “Guaranty Agreement” that
“Edward L. Terry (hereinafter referred to as ‘Guarantors’) shall
guarantee payment of the Loan and other sums advanced for the
Borrower’s account under the loan documents.” J.A. 266. The
Commitment Letter later provides as follows, under the heading
“Cross-Collateralization/Cross-default of Existing Loans”:
As part of the transaction contemplated herein, (i)
Borrower, will cause [the existing Loans to] be
amended to provide in the event of a payment default
on any of those loans or a payment default on the
[new] Loan, the Bank, at its option and ten (10) days
written notice may declare all of the loans in
default . . . .
J.A. 266. The Commitment Letter was signed by CresCom, CCT
(through Terry as its representative), and Terry in his personal
capacity under the heading “Guarantor.”
After Note 3572 was finalized, CresCom and CCT memorialized
their new agreement by signing the Loan Amendment. Terry was
not a party to this agreement in his personal capacity, and the
Loan Amendment makes no reference to him as guarantor. In its
introductory paragraph, the Amendment identifies only two
parties: (1) the Lender (CresCom Bank), and (2) the Borrowers
(Terry’s wholly owned companies). The Loan Amendment contains
the following notice provision:
[I]n the event of a payment default on either the
Previous Loans or the New Loan . . . the Lender may
declare some or all of the Previous Loans or the New
Loan in default and require the immediate repayment of
14
those loans . . . . In the event Lender determines to
exercise its rights hereunder it shall give Borrowers
no less than ten (10) days written notice from the
date of the receipt of the notice to cure the default.
J.A. 311. The Loan Amendment states that all notices to the
Borrower should be directed to Edward Terry at his business
address in Marietta, Georgia.
Terry contends that despite the unambiguous terms of the
guaranty agreements, CresCom was required under the Commitment
Letter and Loan Amendment to provide him, in his personal
capacity as guarantor, with notice and an opportunity to cure
before enforcing the guaranty agreements against him. He
stresses that the notice provisions in the Commitment Letter and
Loan Amendment were drafted “such that CresCom is required to
address and deliver the notice of default to Terry
individually.” Appellant’s Br. at 20. Because no notice of
default was provided to Terry, he argues that his obligations
under the guaranty agreements have been discharged.
Terry’s argument is unavailing for two independent reasons.
First, the notice of default provisions in the Commitment Letter
and Loan Amendment refer only to CresCom’s exercise of its
rights under the newly negotiated cross-collateralization and
cross-default provisions. Both provisions state that “in the
event of payment default” on any loan, CresCom may declare any
other loan in default with ten days’ written notice. The notice
15
provisions themselves thus presuppose that a “payment default”
occurs automatically, before any notice requirement kicks in.
This interpretation is consistent with the loan agreements,
which make clear that default occurs immediately upon non-
payment. The Loan Amendment’s notice provision further
clarifies that it refers to CresCom’s option to “exercise its
rights hereunder,” referring to the new cross-default provision.
On June 18, 2011, each of the loans matured independently.
Because full payment was not made, all of CCT’s loans were
immediately, automatically in default under the clear terms of
the loan agreements. Thus, we find that no resort to cross-
default was necessary because all of the loans were
independently in default. Because CresCom had no obligation to
provide notice in the event of an ordinary payment default, the
district court correctly found that Terry was owed no notice.
Terry’s argument also fails because, even if the notice
provisions did require CresCom to provide CCT with ten days’
notice of an ordinary default, neither the Commitment Letter nor
the Loan Amendment provides for notice to Terry in his personal
capacity as guarantor. As an initial matter, Terry is not a
party to the Loan Amendment. See J.A. 310-14. Therefore, his
claim relies on language in the parties’ Commitment Letter.
Specifically, Terry focuses on the definition of “Borrower” in
the Commitment Letter, which states that the Borrower is a “to-
16
be-named entity owned 100% by Edward L. Terry.” The provision
goes on to say that “as used herein,” the term “Borrower”
includes “any person named as endorser, grantor or surety in
connection with the proposed loan.” 5 J.A. 265. Terry argues
that this language, in combination with the notice requirement’s
reference to the “Borrower,” indicates that CresCom was required
to give him notice and an opportunity to cure before enforcing
the guaranty agreements.
Even if the notice requirement applied to all defaults, the
other terms of the Commitment Letter make clear that Terry was
not a “Borrower” under that agreement and was not owed notice
under this provision. Initially, paragraph 1 defines “Borrower”
as an entity owned by Terry. In paragraph 11, the Commitment
Letter separately provides for Terry personally as guarantor:
11. Guaranty Agreement: Edward L. Terry (hereinafter
referred to as “Guarantors”) shall guarantee payment
of the Loan and other sums advanced for the Borrower’s
account under the loan documents, and performance of
Borrower’s obligations under the loan
documents . . . .
J.A. 266. Finally, the last paragraph of the Letter provides
that Terry is signing “on behalf of Borrower, Brentwood
Homes . . . , Sugarloaf Marketplace, LLC, Whipple Development
5
Under South Carolina law, which governs the Commitment
Letter, there is no distinction between a surety and a
guarantor. See Carolina Hous. & Mortg. Corp. v. Orange Hill A.
M. E. Church, 97 S.E.2d 28, 31 (S.C. 1957).
17
Corporation and Harris Street, LLC.” J.A. 270. On a lower
line, he signs separately as “Edward L. Terry, Individually”
under the heading “Guarantor.”
Examining each of these provisions and the Commitment
Letter as a whole, the term “Borrower” simply cannot be read to
include Terry in his personal capacity without inviting an
absurd result. By way of example, in the above-quoted “Guaranty
Agreement” passage, it would mean that the guarantor and the
borrower are one and the same. Additionally, paragraph 3 of the
agreement refers to “the Bank’s loans to the Borrower,” but
there are no loans in this case to Terry personally. Still
other sections would be redundant if the “Borrower” was Terry
personally, for example, paragraph 25, requiring “Borrower and
guarantor[]” to provide annual financial statements. J.A. 268.
Moreover, as the district court observed, CresCom’s claim
against Terry is not based on CCT’s breach of the promissory
notes or Commitment Letter or any other agreement between those
parties; it is based on Terry’s breach of the guaranty
agreements. Under the unambiguous and absolute terms of those
agreements, notice is not a prerequisite to liability. See J.A.
81 (“No act or thing need occur to establish the liability of
the Undersigned hereunder . . . .”); J.A. 82 (“The Undersigned
waives presentment, demand for payment, notice of dishonor or
nonpayment, and protest of any instrument evidencing
18
Indebtedness.”). Therefore, even if CresCom failed to give
proper notice of default to CCT, Terry’s obligation to guarantee
the loans would be unaffected. See J.A. 82 (“The Undersigned
waives any and all defenses, claims and discharges of
Borrower . . . except the defense of discharge by payment in
full.”). Because Terry’s guaranty obligations arose
automatically upon CCT’s failure to pay, we find that they have
not been discharged.
B.
Having found that the district court correctly concluded
that Terry is liable under the guaranty agreements, we turn to
Terry’s claim that the district court’s computation of damages
was erroneous. Specifically, he assigns error to three
different aspects of the district court’s award. First, he
argues that the district court erred by failing to cap CresCom’s
damages at $1,121,029, the value the bankruptcy court assigned
to CresCom’s remaining unsecured claim at the conclusion of
CCT’s Chapter 11 proceedings. Second, he argues that the
bankruptcy court’s valuation of the properties conveyed to
CresCom in CCT’s bankruptcy was improperly low, and that the
district court erroneously adopted that figure. Third, Terry
argues that the district court erred by awarding CresCom a “late
19
fee” on the entire unpaid balance of the notes. We address
Terry’s arguments in turn. 6
1.
Terry first contends that the district court was obligated
to cap damages at $1,121,029, which reflects the bankruptcy
court’s assessment of the value of CresCom’s claim against CCT
after subtracting the value of the properties deeded to CresCom.
Terry stresses that because “[a] guarantor’s liability is
commensurate with the outstanding indebtedness of the principal
debtor,” Appellant’s Br. at 29, he cannot be responsible for
more than the amount that CCT owed CresCom in its bankruptcy.
This argument, however, misapprehends CCT’s actual indebtedness
to CresCom and misapplies settled bankruptcy law.
Under the guaranty agreements, Terry is obligated to pay
CCT’s entire outstanding debt to CresCom, including interest and
fees, “even though any other person obligated to pay
Indebtedness, including Borrower, has such obligation discharged
6
Terry also contends that the district court erred by
applying the parties’ contractual default interest rate to all
interest accruing after the loans reached maturity despite
CresCom’s failure to formally declare them in default. As
explained above, we find that default occurred automatically
upon nonpayment under the terms of the loan agreements.
Therefore, no formal declaration of default was necessary
(either to CCT or to Terry personally) for the default interest
rate to apply, and default interest is appropriately part of the
Indebtedness guaranteed by Terry.
20
in bankruptcy.” J.A. 82 ¶¶ 7, 8. This result is consistent
with 11 U.S.C. § 524(e), under which the discharge of a debt in
bankruptcy “does not affect the liability of any other entity
on, or the property of any other entity for, such debt.” As the
district court explained in its order, creditors are not barred
by res judicata or any other doctrine from seeking the full
amount of remaining debt against a guarantor unless the
bankruptcy court has made a specific finding releasing claims
against third parties. No such finding was made in this case.
Terry nonetheless argues that even if the discharge of
CCT’s debt in bankruptcy does not relieve him of his guaranty
obligations, those obligations are limited to the $1,121,029
value of CresCom’s deficiency claim. He stresses that § 524(e)
does not preclude the bankruptcy court from releasing a non-
debtor as part of a debtor’s bankruptcy plan, nor does it
prevent a finding that a debt has been wholly or partially
satisfied because of a debtor’s bankruptcy plan. However, Terry
also acknowledges that the bankruptcy court “credited [the value
of the transferred properties] against CresCom’s claim in
partial satisfaction of the debt,” Appellant’s Br. at 28, and
does not contend (nor could he) that the value of those
properties was not subtracted from the amount he now owes
CresCom.
21
The critical fact overlooked by Terry is that the amount
CresCom could seek in CCT’s bankruptcy proceedings was less than
the full amount it was owed. As Terry notes in his brief,
CresCom’s claim in CCT’s bankruptcy “was allowed in the amount
of $3,747,314 plus costs and attorneys’ fees through the
Petition Date.” Appellant’s Br. at 27 (emphasis added and
internal quotation marks omitted). But that figure represented
only the principal of the loans in question; CresCom’s claim in
the bankruptcy court did not include any interest or fees. At
the time the properties were conveyed to CresCom in June 2013,
the actual amount of CCT’s debt to CresCom, including interest
and fees, was $4,663,294.70. Therefore, although CresCom’s
outstanding unsecured claim at the conclusion of CCT’s
bankruptcy was only $1,121,029, CCT actually owed CresCom
$2,112,294.70, the total indebtedness less the value of the
conveyed properties.
Contrary to Terry’s suggestion that CresCom will enjoy a
windfall if it is allowed to recover more than $1,121,029 under
the guaranty agreements, it is clear from the record that CCT’s
actual indebtedness to CresCom exceeded $2 million after the
value of the conveyed properties was applied. Under the clear
language of § 524(e) and the terms of the guaranty agreements,
Terry remains liable for CCT’s entire indebtedness regardless of
the discharge of any of CCT’s obligations in bankruptcy. We
22
therefore reject Terry’s contention that the district court
erred by awarding more than $1,121,029 to CresCom. 7
2.
Terry next argues that the district court’s award was
excessive because it improperly adopted the bankruptcy court’s
valuations of the properties transferred to CresCom. He points
out that the loan documents CresCom submitted to the district
court for calculation of damages included appraised values of
the properties from 2009 that totaled well over $4 million,
significantly more than the $2,551,000 value determined by the
bankruptcy court. If the district court had adopted those
figures, Terry argues, the debt would have been fully satisfied
upon transfer of the properties. Although the value assigned to
the properties by the bankruptcy court was undoubtedly more
favorable to CresCom than its internal valuations, we find no
error in the district court’s use of this figure because Terry
7
We observe that the bankruptcy court and the district
court differed in their estimations of the outstanding principal
balance because the bankruptcy court did not take into account
that a small portion of the principal (approximately $75,000)
was paid off prior to the default. Thus, the bankruptcy court
appears to have allowed CresCom to claim slightly more than the
outstanding principal it was owed. However, because the
district court had a more complete record before it and
correctly stated the outstanding principal in its damages order,
this inconsistency did not affect CresCom’s final award or lead
to a double recovery.
23
provided no alternative evidence of the properties’ value at the
time of their conveyance in 2013.
The bankruptcy court arrived at its valuations in March
2013 after a two-day hearing during which it heard testimony
from three different appraisers (two offered by CresCom and one
offered by CCT). Although Terry’s wholly owned entity was a
party to those proceedings, we agree with Terry that because he
was not a party in his personal capacity, the valuations are not
directly binding on him in this case. Understanding that the
bankruptcy court’s findings were not binding, CresCom proposed
to stipulate to the findings for purposes of the district
court’s calculation of damages. Although Terry stresses that
CresCom “offered no evidence in the district court to establish
the values of the properties” other than proffering the
bankruptcy court’s orders, Appellant’s Br. at 25, CresCom was
not required to present additional evidence to propose a
stipulation.
Notably, the only evidence Terry presented to contradict
the bankruptcy court’s valuations were CresCom’s 2009
appraisals. Terry submitted no affidavits or other evidence to
the district court to support his assertion that the figure
reached by the bankruptcy court was inaccurate. His reliance on
outdated, one-line notations in CresCom’s loan documents does
not create a genuine issue of fact because it does not bear on
24
the only valuation relevant in these proceedings: the value of
the properties in 2013.
As the district court explained in its order on damages,
“[t]here is no evidence in the record to support a finding that
the old appraised value noted in the payment records reflects
the value of the properties at the time of conveyance,”
particularly in light of the bankruptcy court’s thorough
examination of the evidence and consideration of testimony from
both sides. CresCom Bank v. Terry, No. 2:12-cv-00063-PMD, Dkt.
No. 73, at 5 n.5 (D. S.C. Nov. 25, 2013). Because the
bankruptcy proceedings contained the only evidence before the
district court regarding the 2013 value of the properties, the
district court did not err by adopting the bankruptcy court’s
findings and concluding that Terry had not created a genuine
issue of material fact.
3.
Finally, Terry objects to the award of contractual “late
fees” of five percent on the entire principal due at the time of
the default. He argues that the terms of the loan agreements
make clear that the parties intended late fees to apply only to
missed monthly interest payments and not to the entire
principal, and further, that a late fee on the entire principal
constitutes an unenforceable penalty. CresCom devotes only
three sentences of its brief to this issue, simply stating that
25
late fees are an “accepted business practice” that do not
violate the lending laws or public policy of South Carolina or
Georgia. 8 Appellee’s Br. at 28. While we agree with CresCom
that late fees are a permissible and unremarkable element of the
parties’ agreement when applied to monthly interest payments, it
is evident from the loan documents and Commitment Letter that
the parties did not intend the five percent late fee to apply to
the entire outstanding principal.
The late fees agreed upon by the parties are described in
three different documents: the loan agreements, the Commitment
Letter, and the loan modification agreements executed after the
Commitment Letter and final loan were finalized. The loan
agreements provide that “[i]f a payment is not made within 10
days days [sic] after it is due, [Borrower] agree[s] to pay a
late charge of 5.00% of the late payment.” See, e.g., J.A. 26. 9
Under a separate heading labeled “Payments,” the loan agreements
describe both “Interest” and “Principal,” establishing monthly
interest payments due on the first of each month and a single
8
While the parties cite cases from a number of
jurisdictions, we reiterate that South Carolina law governs the
loan agreements in which the late fee provisions are found. See
supra note 4.
9
Later loan renewals altered this language slightly to
provide that the late charge would be “5.00% of the late payment
or $25.00 whichever is greater.” See, e.g., J.A. 29 (emphasis
added).
26
date on which the principal would be due. In June 2009 when the
parties signed the Commitment Letter, they addressed the issue
of late fees more specifically:
Late Charge: The note shall impose a late charge of
five (5%) percent of the current monthly interest
installments if the payment is not received within ten
(10) days of its due date.
J.A. 266 (emphasis added). Although Note 3572 (closed six days
after the Commitment Letter was signed) used the same standard
late charge provision as the other loan agreements, the parties
agreed that the terms of the Commitment Letter would survive the
closing of the new loan and the modifications to the existing
loans. The subsequent modifications essentially incorporated
the standard language in the earlier loan agreements, specifying
that if a payment is ten days late or more, the Borrower “will
be charged 5.00% of the unpaid portion of the payment amount or
$25.00, whichever is greater.” J.A. 46.
Given the binding nature of the Commitment Letter, we
cannot agree with the district court that a late charge on the
entire principal is supported by the loan documents because Note
3572 “broadened the late charge language to cover all payments.”
J.A. 742. Rather, we find that to the extent the late charge
provision in the loan agreements might previously have been
ambiguous in scope, that confusion was eliminated by the clear
language of the Commitment Letter, the terms of which explicitly
27
survived Note 3572 and the modifications to the existing loans.
See J.A. 269 (providing that the Letter “shall survive the loan
closing and become binding together with all other loan
documents”). Moreover, although the terms of the Commitment
Letter only directly applied to Note 3572, the language used in
Note 3572 regarding late charges was identical to the language
used in the other notes. Because there is no indication that
the parties intended identical late charge provisions in the
four notes to be interpreted differently, we read the language
of the Commitment Letter as an indication that the parties
intended to limit the five percent late charge to outstanding
monthly interest under all of the notes. Accordingly, the
assessment of a late charge on the multi-million dollar
outstanding principal is impermissible. 10 We therefore vacate
10
Terry cites a body of non-precedential case law to
support his argument that even if the parties did intend the
late fee to apply more broadly, a five percent late fee on the
entire principal amounts to an unenforceable penalty. See
Appellant’s Br. at 47–51. However, neither his brief nor the
district court’s opinion cites any relevant cases decided under
South Carolina law. Although it appears that at least one court
in our circuit has refused to award a five percent late charge
on the entire principal due upon a loan’s maturity, see Mountain
1st Bank & Trust v. Holtzman, No. 7:11-cv-01433, 2012 WL
3126833, at *3 (D.S.C. July 31, 2012) (providing no reasoning
but “declin[ing] to grant Plaintiff” over $10,000 in late
charges after the defendant failed to pay the principal of
$200,000 when due), we need not decide whether the late charge
was an unenforceable penalty under South Carolina law because we
find that the parties’ contracts only provide for late charges
on monthly interest payments.
28
the district court’s award of a five percent late fee on the
full outstanding principal. Because the outstanding principal
to which the improper fee was applied totaled $3,672,029.78, we
direct the district court to reduce CresCom’s award by five
percent of that amount, or $183,601.49.
C.
We now turn to CresCom’s sole basis for appeal--that the
district court improperly refused to award attorney’s fees
because it found that Georgia law applies to the guaranty
agreements and bars recovery of those fees for lack of notice.
CresCom alternatively contends that even if Georgia law does
apply, the district court still erred by refusing to reimburse
CresCom for the attorney’s fees it incurred as a result of CCT’s
bankruptcy. Although we agree with the district court that the
guaranty agreements are governed by Georgia law, we also agree
with CresCom that the attorney’s fees it incurred in CCT’s
bankruptcy are a part of the underlying “Indebtedness” and their
recovery is therefore not barred by Georgia law.
The parties agree that the loan agreements, promissory
notes, mortgages, and Commitment Letter contain unambiguous
choice of law clauses selecting South Carolina law. However,
the choice of law provision in the guaranty agreements is less
clear:
29
This guaranty shall be effective upon delivery to
Lender, without further act, condition or acceptance
by Lender, shall be binding upon the
Undersigned . . . and shall inure to the benefit of
Lender and its participants, successors and
assigns. . . . This guaranty shall be governed by the
laws of the State in which it is executed. The
Undersigned waives notice of Lender’s acceptance
hereof.
J.A. 75 (emphasis added). Terry argues that Georgia law governs
the guaranty agreements because the agreements were “executed”
when he signed them at his office in Georgia. CresCom
disagrees, maintaining that the agreements were “executed” when
they became effective (i.e., upon delivery to its office in
South Carolina), and moreover that the parties’ course of
dealing demonstrates that the entire transaction (including
Terry’s personal guaranty) was intended to be governed by South
Carolina law.
As the district court observed, the term “executed” is
problematic here. Black’s Law Dictionary defines “execute” to
mean either (1) “[t]o make (a legal document) valid by signing,”
or (2) “to bring (a legal document) into its final, legally
enforceable form.” Black’s Law Dictionary 609 (10th ed. 2014).
It further defines “executed” to mean a document “that has been
signed.” Id. It is thus unclear whether the state “in which
[the guaranty] is executed” is the state in which it was signed
by Terry (Georgia) or the state in which it became legally
enforceable (South Carolina). A clear contractual term
30
susceptible to more than one reasonable interpretation
constitutes a patent ambiguity appropriate for resolution by the
court. Am. Trucking Ass’n, Inc. v. Fed. Highway Admin., 51 F.3d
405, 412 & n.9 (4th Cir. 1995); Ward v. Dixie Nat’l Life Ins.
Co., 257 F. App’x 620, 627 (4th Cir. 2007) (unpublished).
Under basic principles of either South Carolina or Georgia
contract law, we construe the ambiguity in the parties’
agreement strictly against the drafter, CresCom. Duncan v.
Little, 682 S.E.2d 788, 791 (S.C. 2009); J & E Builders, Inc. v.
R C Dev., Inc., 646 S.E.2d 299, 301 (Ga. Ct. App. 2007).
Although CresCom argues strenuously that the parties’ course of
dealing demonstrates that South Carolina was the “home base” for
all transactions, the guaranty agreements are legally distinct
instruments, made with a private citizen of Florida from his
office in Georgia. Notably absent in the guaranty agreements
are the clear South Carolina choice of law clauses found in each
of the parties’ other documents. Therefore, because Terry
signed the guaranty agreements in Georgia and reasonably
believed that they were consequently covered by Georgia law, we
find that Georgia law applies.
Under Georgia law, a party may not seek attorney’s fees
unless it complies with the requirements of Ga. Code Ann. § 13-
1-11(a)(3), which provides that obligations to pay attorney’s
31
fees are valid and enforceable subject to the following
condition:
[T]he holder of the note or other evidence of
indebtedness . . . shall, after maturity of the
obligation, notify in writing the maker, endorser, or
party sought to be held on said obligation that the
provisions relative to payment of attorney’s fees in
addition to the principal and interest shall be
enforced and that such [party] has ten days from the
receipt of such notice to pay the principal and
interest without the attorney’s fees.
CresCom concedes, and we agree, that under Georgia law it would
not be entitled to attorney’s fees incurred in this litigation
because it did not provide Terry proper notice. But CresCom
argues that Georgia law does not bar it from recovering the
attorney’s fees it incurred participating in CCT’s bankruptcy,
because those fees are a part of the underlying indebtedness and
are not covered by Georgia law. We find that CresCom’s argument
is supported by the loan and guaranty agreements, and that the
district court erred by refusing to award CresCom this portion
of its attorney’s fees.
Although CresCom’s enforcement of the guaranty agreements
against Terry is governed by Georgia law, CCT’s obligations to
CresCom (and thus, the total “indebtedness” CresCom can seek
from Terry) are governed by South Carolina law by virtue of the
unambiguous choice of law clauses in the loan agreements.
Unlike Georgia, South Carolina does not have a provision
requiring CresCom to give notice of its intent to collect
32
attorney’s fees. The loan agreements between CCT and CresCom
make clear that CCT is liable for reasonable attorney’s fees and
costs incurred as part of CresCom’s collection of the debt,
including in bankruptcy proceedings. J.A. 250. The guaranty
agreements also define the “Indebtedness” of the borrower for
which the guarantor is responsible to include “post-bankruptcy
petition interest and attorneys’ fees,” even if those fees are
discharged in bankruptcy. J.A. 77.
Because the loan agreements made CCT liable for CresCom’s
attorney’s fees upon default, the expenses that CresCom incurred
due to its participation in CCT’s bankruptcy (before any efforts
to enforce the guaranty agreements and before Terry personally
became a party) were not governed by the guaranty agreements or
by Georgia law. Rather, CresCom’s attorney’s fees from those
proceedings became a part of the underlying indebtedness owed to
it by CCT under the loan agreements, which are governed by South
Carolina law and do not require notice. Because the fees are a
part of CCT’s indebtedness, they are guaranteed absolutely by
Terry. We therefore partially reverse the district court’s
grant of summary judgment to Terry and remand with instructions
33
to award CresCom attorney’s fees stemming from its participation
in CCT’s bankruptcy. 11
III.
For the reasons given, we affirm the district court’s grant
of summary judgment to CresCom with respect to Terry’s liability
under the guaranty agreements. We vacate the district court’s
award of a five percent late fee to CresCom on the outstanding
principal of the loans, reverse its refusal to award CresCom the
attorney’s fees it incurred in CCT’s bankruptcy proceedings, and
remand for recalculation of attorney’s fees.
AFFIRMED IN PART, VACATED IN PART,
REVERSED IN PART, AND REMANDED
11
The “Affidavit of Indebtedness” and “Affidavit of
Attorney’s Fees” submitted by CresCom describe $51,156.00 in
attorney’s fees related to CCT’s bankruptcy, but also reference
unallocated fees of over $22,000 paid to the Falcone Law Firm
and the Annino Law Firm. J.A. 589–93. Because it is unclear
from the record whether those fees were expended in the instant
action or in CCT’s bankruptcy proceedings, we remand for the
district court to recalculate CresCom’s attorney’s fees.
34