CresCom Bank v. Terry et al

Filing 62

ORDER granting in part and denying in part 51 Motion for Summary Judgment; granting 53 Motion for Summary Judgment Signed by Honorable Patrick Michael Duffy on October 1, 2013.(kspa, )

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF SOUTH CAROLINA
CHARLESTON DIVISION

CresCom Bank, successor by merger to
Community FirstBank ,

)
)
)
Plaintiff,
)
)
v.
)
)
Edward L. Terry; Harris Street, LLC, n/k/a )
CCT Reserve, LLC; Sugarloaf Marketplace, )
LLC; and CCT Reserve, LLC ,
)
)
Defendants.
)
____________________________________)

Case No.: 2:12-cv-00063-PMD
ORDER

This matter is before the Court upon cross motions for summary judgment filed by
Defendant Edward L. Terry (“Terry”) and Plaintiff CresCom Bank (“CresCom”).

For the

reasons that follow, the Court denies in part and grants in part Terry’s motion and grants
CresCom’s motion.
BACKGROUND
Plaintiff CresCom is the successor by merger to Community First Bank. At all times
relevant hereto, Defendant Terry was the sole member of three entities: Harris Street, LLC;
Sugarloaf Marketplace, LLC; and CCT Reserve, LLC. These entities were in the business of
purchasing and developing land. On or around February 4, 2011, Harris Street, LLC, and
Sugarloaf Marketplace, LLC, were merged into CCT Reserve, LLC, with the surviving entity
being CCT Reserve, LLC (collectively referred to as “CCT”).
From 2006 through 2009, CresCom made a number of loans to CCT for the purchase and
development of tracts of land in South Carolina. The four underlying obligations are: (a) Note #-

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----2622, entered into by Harris Street, LLC, on or about February 1, 2006, as modified; (b) Note
#-----2718, entered into by Harris Street, LLC, on or about April 12, 2006, as modified; (c) Note
#-----2911, entered into by Sugarloaf Marketplace, LLC, on or about October 25, 2006, as
modified; and (d) Note #-----3572, entered into by CCT Reserve, LLC, on or about June 25,
2009.1
Each of these loans was personally guaranteed by Terry. See Guaranty, dkt. 51-15, 5126, 51-30, 51-31, 51-32, 51-33, 51-34, 51-35 (hereinafter, “Guaranties” or “Guaranty
Agreements”). Terry signed the various Guaranties in Georgia. Each guaranty is “an absolute,
unconditional and continuing guaranty of payment.” Guaranty ¶ 2. Under the terms of each
Guaranty, the guarantor “waives any and all defenses, claims and discharges of Borrower, or any
other obligor, pertaining to Indebtedness, except the defense of discharge by payment in full.”
Id. ¶ 7. Moreover, the guarantor “waives presentment, demand for payment, notice of dishonor
or nonpayment, and protest of any instrument evidencing Indebtedness.” Id. ¶ 11. Paragraph 8
of each Guaranty states that the guarantor’s obligations remain, even in the event the obligations
of any other obligor are discharged in bankruptcy. “‘Indebtedness’ shall include post-bankruptcy
petition interest and attorneys’ fees and any other amounts which Borrower is discharged from
paying or which do not otherwise accrue to Indebtedness due to Borrower’s discharge.” Id. ¶ 8.
Finally, Paragraph 5 of each Guaranty requires the Guarantor to “pay or reimburse [CresCom]
for all costs and expenses (including reasonable attorneys’ fees and legal expenses) incurred by

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On or about June 19, 2009, CresCom, CCT, and Terry signed a written commitment letter under which CresCom
agreed to extend another line of credit to CCT in the amount of $750,000.00 and to make various amendments to the
loan documents for Loan Numbers 2622, 2718, and 2911. On or about June 25, 2009, in accordance with the June
19 commitment letter, CresCom extended the line of credit to CCT in the amount of $750,000.00 (Loan No. 3572).
CCT used this new loan to pay the accrued interest due on the previous loans from CresCom as well as to cover
various expenses for real estate developments. Also on or about June 25, 2009, in conjunction with Loan No. 3572,
Terry was required to execute several new guaranty agreements, and CresCom, CCT, and Terry entered into another
written contract, titled “Amendment to Loan Agreements and Mortgages to Provide for Cross Default” (“Loan
Amendment”).

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Lender in connection with the protection, defense or enforcement of” the guaranty. Id. ¶ 5. The
underlying loan documents also include provisions for the payment of attorneys’ fees and costs.
The maturity date on each of the loans was June 18, 2011. The outstanding principal, as
well as charges, fees, and interest accrued were due and owing on that date. Neither CCT nor
Terry made the payments, and the failure to pay was an event of default under the notes, as
renewed and modified, the respective mortgages, and the Guaranties.
On January 5, 2012, CresCom filed the instant suit against CCT to recover on the four
loans. CresCom also sued Terry as the guarantor of the promissory notes. The first four causes
of action in CresCom’s complaint allege claims against CCT based on the promissory notes
executed by CCT. The fifth and final cause of action alleges a claim against Terry based on the
Guaranties and seeks a monetary judgment against him.
On August 31, 2012, CCT filed a Chapter 11 Petition in the United States Bankruptcy
Court for the Northern District of Georgia. See In re CCT Reserve, LLC, C.A. No. 12-71670PWB (Bankr. N.D. Ga.). CCT’s schedules included the four loans referenced above. On March
14, 2013, the Bankruptcy Court entered orders confirming CCT’s bankruptcy plan and
determining that the value of the collateral securing CresCom’s loans totaled $2,551,000.00. As
a result of the CCT bankruptcy, and pursuant to the orders of the Bankruptcy Court, the
properties securing the underlying note obligations were conveyed to CresCom. The Bankruptcy
Court’s orders further determined that the total amount of CresCom’s remaining unsecured or
deficiency claim, after crediting the value of the real estate conveyed to CresCom as part of the
plan, was $1,121,029.00. Pursuant to CCT’s bankruptcy plan and the Bankruptcy Court’s
orders, CresCom’s claims against CCT were discharged.
Bankruptcy Court’s orders.

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CresCom did not appeal the

Terry and CresCom have filed cross motions for summary judgment seeking resolution of
the cause of action against Terry based on the Guaranties. The motions have been fully briefed
and are ripe for judgment.
JURISDICTION
This Court has subject matter jurisdiction over this matter based on 28 U.S.C. § 1332, as
there is complete diversity of the parties and the amount in controversy exceeds $75,000.
CresCom is a corporation organized under the laws of South Carolina with its principal place of
business in Charleston County, South Carolina. Defendant Terry is a citizen and resident of
Florida. Defendant CCT is a limited liability company organized under the laws of Georgia with
its principal place of business in Georgia.

Finally, CresCom seeks damages in excess of

$75,000. Therefore, this Court has diversity jurisdiction over this case.
STANDARD OF REVIEW
To grant a motion for summary judgment, a court must find that “there is no genuine
dispute as to any material fact.” Fed. R. Civ. P. 56(a). The judge is not to weigh the evidence
but rather must determine if there is a genuine issue for trial. Anderson v. Liberty Lobby, Inc.,
477 U.S. 242, 249 (1986). All evidence should be viewed in the light most favorable to the
nonmoving party. Perini Corp. v. Perini Constr., Inc., 915 F.2d 121, 124 (4th Cir. 1990).
“[W]here the record taken as a whole could not lead a rational trier of fact to find for the nonmoving party, disposition by summary judgment is appropriate.” Teamsters Joint Council No.
83 v. Centra, Inc., 947 F.2d 115, 119 (4th Cir. 1991). Summary judgment is not “a disfavored
procedural shortcut,” but an important mechanism for weeding out “claims and defenses [that]
have no factual basis.” Celotex Corp. v. Catrett, 477 U.S. 317, 327 (1986).

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ANALYSIS
I.

Choice of Law Determination
As an initial matter, the Court must determine whether South Carolina or Georgia law

governs the Guaranty Agreements.

A federal court sitting in diversity must apply the choice of

law rules of the state in which it is located. See Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S.
487, 496 (1941); see also Spartan Iron & Metal Corp. v. Liberty Ins. Corp., 6 F. App’x 176, 178
(4th Cir. 2001). Under South Carolina’s choice of law rules, “[u]nless the parties agree to a
different rule, the validity and interpretation of a contract is ordinarily to be determined by the
law of the state in which the contract was made.” Unisun Ins. Co. v. Hertz Rental Corp., 436
S.E.2d 182, 184 (S.C. Ct. App. 1993); see King v. Marriott Intern., Inc., 520 F. Supp. 2d 748,
753 (D.S.C. 2007). In general, choice of law clauses are honored in South Carolina, unless
application of the designated foreign law would result in a violation of South Carolina public
policy. Team IA, Inc. v. Lucas, 717 S.E.2d 103, 108-09 (S.C. Ct. App. 2011); Nucor Corp. v.
Bell, 482 F. Supp. 2d 714, 728 (D.S.C. 2007).
In this case, the parties included a choice of law provision in each Guaranty, agreeing that
the contract would be governed by the laws of the State in which it is executed. Paragraph 13 of
each Guaranty Agreement provides, in pertinent part:
This guaranty shall be enforceable against each person signing this guaranty . . . .
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.
The parties disagree about the meaning of the term “executed.” According to Terry,
Georgia law governs CresCom’s claims on the Guaranty Agreements because Terry executed all
of the Guaranties when he signed them in Georgia. CresCom, however, contends that South
5

Carolina law governs the claims because the Guaranties were not fully executed until they were
delivered to the lender in South Carolina. Therefore, the choice of law determination depends on
the meaning of “executed” as used in the Guaranty Agreements.
Under South Carolina law, a guaranty is a contract subject to the rules of contract
interpretation. In re Southco, Inc., 168 B.R. 95, 99 (Bankr. D.S.C. 1994). “Where the contract’s
language is clear and unambiguous, the language alone determines the contract’s force and
effect,” McGill v. Moore, 672 S.E.2d 571, 574 (S.C. 2009), and the court must “enforce the
contract made by the parties regardless of its wisdom or folly, apparent unreasonableness, or the
parties’ failure to guard their rights carefully,” Ellis v. Taylor, 449 S.E.2d 487, 488 (S.C. 1994).
“A contract is ambiguous when it is capable of more than one meaning when viewed objectively
by a reasonably intelligent person who has examined the context of the entire integrated
agreement and who is cognizant of the customs, practices, usages and terminology as generally
understood in the particular trade or business.” Hawkins v. Greenwood Dev. Corp., 493 S.E.2d
875, 878 (S.C. Ct. App. 1997). The question of whether or not a contract is susceptible of more
than one interpretation is a question of law for the court. Id. “Whether a contract is ambiguous
is to be determined from the entire contract and not from isolated portions of the contract.” Farr
v. Duke Power Co., 218 S.E.2d 431, 433 (1975). “Even if an ambiguity exists in a contract,
extrinsic evidence may not be considered if the ambiguity is a patent ambiguity.” Beaufort Cnty.
Sch. Dist. v. United Nat. Ins. Co., 709 S.E.2d 85, 95 (S.C. Ct. App. 2011). “A patent ambiguity
is one that arises upon the words of a will, deed, or contract.” Id. A latent ambiguity, on the
other hand, “exists when there is no defect arising on the face of the instrument, but arising when
attempting to apply the words of the instrument to the object or subject described.”

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Id.

Interpretation of an unambiguous contract, or a contract with a patent ambiguity, is for the court.
Id.
The Court concludes that the term “executed” is ambiguous as used in the choice of law
provision. Black’s Law Dictionary defines “executed” to mean either (1) “(Of a document) that
has been signed”; or (2) “That has been done, given, or performed.” Black’s Law Dictionary
609 (8th ed. 2004). Similarly, Black’s Law Dictionary defines “execute” to mean, inter alia, to
“make (a legal document) valid by signing” or “to bring (a legal document) into its final, legally
enforceable form.” Id. Based on the above definitions, the Court finds support for both parties’
positions regarding the meaning of the choice of law provision. The provision could be read to
mean—as Terry urges—that once the Guaranty “had been signed” or made “valid by signing,” it
was executed. In that case, Georgia law would govern. However, when read in the context of
Paragraph 13 as a whole, the provision could mean—as CresCom argues—that the Guaranty was
brought “into its final, legally enforceable form” only when it was “given” or delivered to the
bank. According to that reading, South Carolina law would govern. In concluding that the
provision could have multiple interpretations, the Court notes that other courts and legal
commentators have observed that the term “executed” can create confusion. See Sentinel Prods.
Corp. v. Scriptoria, N.V., 124 F. Supp. 2d 115, 119 (D. Mass. 2000) (observing that “the
meaning of the elusive term ‘executed’ depends on context”); Black’s Law Dictionary 609
(citing William R. Anson, Principles of the Law of Contract, 26 n.* (Arthur L. Corbin ed., 3d
Am. ed. 1919) (“[T]he term ‘executed’ is a slippery word. Its use is to be avoided except when
accompanied by explanation. A contract is frequently said to be executed when the document
has been signed, or has been signed, sealed, and delivered.”)). Because the Court finds that the

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term “executed” as used in Paragraph 13 is susceptible of more than one interpretation, the Court
concludes that the choice of law provision is patently ambiguous.
Under South Carolina law, when a contract term is patently ambiguous, the interpretation
of the contract is a question for the court. Beaufort Cnty. Sch. Dist. v. United Nat. Ins. Co., 709
S.E.2d at 95.

Moreover, South Carolina courts have adopted the general rule of contract

construction holding “that an ambiguity in a written contract should be construed most strongly
against the drafters.” Myrtle Beach Lumber Co. v. Willoughby, 274 S.E.2d 423, 426 (S.C. 1981);
see Duncan v. Little, 682 S.E.2d 788, 791 (S.C. 2009) (explaining that had the lease agreement
contained an ambiguity, “such ambiguity would have to be construed against the Bank which
drafted the agreement”).

It is undisputed that CresCom drafted the Guaranty Agreements;

therefore, the Court must construe the choice of law provision most strongly against CresCom.
Accordingly, the Court finds that Terry’s reading of “executed” as used in the choice of law
provision controls. Because Terry signed the Guaranties in Georgia, the Guaranties are governed
by Georgia law.2

2

CresCom argues that under either South Carolina or Georgia’s choice of law rules, the lex loci contractus with
regard to the Guaranty is the place of delivery because it was the delivery that rendered the Guaranty effective.
However, because the parties included an express choice of law provision in the Guaranty, the Court cannot apply
the traditional choice of law principle. See Team IA, 717 S.E.2d at 109 (observing that in South Carolina,
“traditional choice of law rules apply only in the absence of an express provision regarding the applicable law to
govern the contract”). CresCom also argues that Terry’s focus on the one-sentence provision fails to consider the
entirety of the loan transaction, the notes and mortgages (which include choice of law provisions specifying South
Carolina law), the place of performance, the in rem issues relating to the security, and the interests of the various
states. However, CresCom’s claim against Terry is based on a breach of the Guaranties and does not concern the
other loan documents or the real estate collateral. Moreover, the terms of the notes and mortgages were not
incorporated into the Guaranties. Accordingly, the Court will not consider these documents in interpreting the
choice of law provision in the Guaranty Agreements. See Beaufort Cnty. Sch. Dist., 709 S.E.2d at 95 (explaining
that “extrinsic evidence may not be considered if the ambiguity is a patent ambiguity”). Finally, although CresCom
argues that South Carolina has a greater interest in enforcing the Guaranties than Georgia, CresCom has neither
alleged nor demonstrated that application of Georgia law in this case would result in a violation of South Carolina
public policy. See Nucor Corp., 482 F. Supp. 2d at 728 (“[A] choice-of-law clause in a contract will not be enforced
if application of foreign law results in a violation of South Carolina public policy.”). Accordingly, the Court
concludes that, pursuant to the Guaranties’ choice of law provision, Georgia law governs the Guaranties.

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II.

Terry’s Motion for Summary Judgment
In both his motion for summary judgment and his response to CresCom’s motion, Terry

argues that the Court should dismiss the claims against him because (1) this Court lacks personal
jurisdiction over Terry; and (2) Terry’s obligations under the Guaranty Agreements were
discharged by virtue of CresCom’s failure to properly provide written notice of default and an
opportunity to cure, as required under Georgia law. Alternatively, he argues that the Court
should find that under the principles of collateral estoppel and res judicata, the total amount of
the debt owed to CresCom was reduced to a maximum of $1,121,029.00 by virtue of the orders
of the Bankruptcy Court.

Finally, he contends that CresCom is barred from recovering

attorneys’ fees because it failed to provide notice of its intent to pursue such fees as required
under Georgia law. The Court will address these arguments in turn.
A. The Court has personal jurisdiction over Terry
When personal jurisdiction is challenged by the defendant, the plaintiff has the burden of
showing that jurisdiction exists. See In re Celotex Corp., 124 F.3d 619, 628 (4th Cir. 1997).
“[T]o validly assert personal jurisdiction over a non-resident defendant, two conditions must be
satisfied.” Christian Sci. Bd. of Dirs. of the First Church of Christ v. Nolan, 259 F.3d 209, 215
(4th Cir. 2001). First, the exercise of jurisdiction must be authorized by the long-arm statute of
the forum state, and second, the exercise of personal jurisdiction must not “overstep the bounds”
of Fourteenth Amendment due process. Anita’s New Mexico Style Mexican Food, Inc. v. Anita’s
Mexican Foods Corp., 201 F.3d 314, 317 (4th Cir. 2000). South Carolina’s long-arm statute has
been construed to extend to the outer limits allowed by the Due Process Clause. Foster v. Arletty
3 Sarl, 278 F.3d 409, 414 (4th Cir. 2002). Thus, the scope of the court’s inquiry is whether
defendants have “certain minimum contacts” with the forum, such that “maintenance of the suit

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does not offend ‘traditional notions of fair play and substantial justice.’ ” Int’l Shoe Co. v.
Washington, 326 U.S. 310, 316 (1945) (citations omitted).
A defendant has minimum contacts with a jurisdiction if “the defendant’s conduct and
connection with the forum State are such that he should reasonably anticipate being haled into
court there.” World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297 (1980). Under this
standard, “it is essential in each case that there be some act by which the defendant purposefully
avails itself of the privilege of conducting activities within the forum State, thus invoking the
benefits and protections of its laws.” Hanson v. Denckla, 357 U.S. 235, 253 (1958).
The analytical framework for determining whether minimum contacts exist differs
according to which species of personal jurisdiction—general or specific—is alleged.

See

generally ESAB Group, Inc. v. Centricut, Inc., 126 F.3d 617, 623-24 (4th Cir. 1997). When a
cause of action arises out of a defendant’s contacts with the forum, a court may seek to exercise
specific jurisdiction over a defendant who purposefully directs activities toward the forum state
and the litigation results from alleged injuries that arise out of or relate to those activities.
Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472-73 (1985). However, when the cause of
action does not arise out of the defendant’s contacts with the forum, general jurisdiction may be
exercised upon a showing that the defendant’s contacts are of a “continuous and systematic”
nature. Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 416 (1984).
The Fourth Circuit has applied a three-part test when evaluating the propriety of
exercising specific jurisdiction: (1) whether and to what extent the defendant purposely availed
itself of the privileges of conducting activities in the forum state, and thus invoked the benefits
and protections of its laws; (2) whether the plaintiff’s claims arise out of those forum-related
activities; and (3) whether the exercise of jurisdiction is constitutionally “reasonable.” Nolan,

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259 F.3d at 215-16 (citing Helicopteros, 466 U.S. at 414-16, and Burger King, 471 U.S. at 472,
476-77).
The Supreme Court has made clear that an out-of-state party’s contract with a party based
in the forum state cannot “automatically establish sufficient minimum contacts” in the forum
state. Burger King, 471 U.S. at 478. Instead, the court must perform an individualized and
pragmatic inquiry into the surrounding facts of the disputed contractual relationship to determine
“whether the defendant purposefully established minimum contacts within the forum.” Id. at
479. Although the test for purposeful availment can be somewhat imprecise, significant factors
typically include: (a) whether the defendant maintains offices or agents in the forum state; (b)
whether the defendant owns property in the forum state; (c) whether the defendant reached into
the forum state to solicit or initiate business; (d) whether the defendant deliberately engaged in
significant or long-term business activities in the forum state; (e) whether the parties
contractually agreed that the law of the forum state would govern disputes; (f) whether the
defendant made in-person contact with the resident of the forum state in the forum state
regarding the business relationship; (g) the nature, quality, and extent of the parties’
communications about the business being transacted; and (h) whether the performance of
contractual duties was to occur within the forum. Consulting Eng’rs Corp. v. Geometric Ltd.,
561 F.3d 273, 278 (4th Cir. 2009). Underlying these factors is the central question of whether
each defendant has performed purposeful acts in the forum state such that the defendant has
created a substantial relationship with the forum state. See Diamond Healthcare of Ohio, Inc. v.
Humility of Mary Health Partners, 229 F.3d 448, 451 (4th Cir. 2000).
Terry initially challenged personal jurisdiction in this case in a motion to dismiss
pursuant to Federal Rule of Civil Procedure 12(b)(2). At the time, the Court concluded that,

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based on the pleadings and affidavits before the Court, CresCom had met its burden of
establishing a prima facie showing of personal jurisdiction. See July 31, 2012 Order, Dkt. 18.
Upon review of the complete, post-discovery record, the Court reaffirms its conclusion that it has
personal jurisdiction over Terry in this matter.
The evidence in this case reveals that Terry purposefully availed himself of the privileges
of conducting activities in South Carolina by entering into contracts with a South Carolina bank
and securing those contracts with South Carolina property.3 Terry signed all of the relevant loan
agreements as an authorized signatory for, and the sole member of, Harris Street, Sugarloaf, and
CCT. Moreover, Terry was an authorized signatory on multiple accounts at the bank, held in the
name of entities in which he holds an interest. Additionally, Terry made telephone and other
communications directly to officers and employees of the bank on multiple occasions with
regard to the obligations under the notes, related mortgages, and the Guaranties. Terry made
personal visits to the bank in Charleston to meet with officers, agents, and/or employees of the
bank and met on multiple occasions with the same relating to obligations under the notes,
mortgages, and Guaranties. These contacts are sufficient for this Court to assert jurisdiction over
Terry. See State Bank of Alleghenies v. Hudnall, No. 94–1809, 1995 WL 469445, at *2 (4th Cir.
Aug. 9, 1995) (affirming jurisdiction and finding sufficient contacts where guarantor acted with
apparent authority of borrower, called the Virginia bank at least once to inquire about collateral,
provided financial statement to the Virginia bank, and signed a Virginia loan guaranty for a
Virginia business); Cozi Invs. v. Schneider, 252 S.E.2d 116, 118 (S.C. 1979) (affirming
jurisdiction and finding that the acts of the guarantors in executing the guaranty clearly brought

3

The following facts are drawn from the affidavit of Jamin M. Hujik, the Vice President of CresCom Bank. See
Hujik Affidavit, dkt. 14-1.

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them within the parameters of the long-arm statute in that they entered into a contract to be
performed in whole or part by either party in South Carolina).
Furthermore, CresCom’s claim against Terry for breach of the Guaranties arises out of
the forum-related activities discussed above.

Additionally, the Court reaffirms its prior

conclusion that exercising jurisdiction over Terry comports with fair play and substantial justice
and is constitutionally reasonable. See July 31, 2012 Order (finding that the burden on Terry is
reasonable, that South Carolina has an important interest in adjudicating a dispute involving
guaranties of loans issued by one of its banks for the purpose of developing land in South
Carolina and secured by property in South Carolina, and that CresCom has an interest in
obtaining convenient and effective relief in South Carolina). Accordingly, the Court holds that it
has personal jurisdiction over Terry in this matter, and it denies Terry’s motion with respect to
this issue.
B. Terry’s obligations under the Guaranty Agreements have not been discharged
Terry next argues that his obligations under the Guaranty Agreements were discharged
because CresCom failed to comply with both the terms of the loans and Georgia law. According
to Terry, CresCom failed to provide the borrowers with written notice of default or an
opportunity to cure any default, as required under the Loan Amendment. See June 25, 2009
Loan Amendment ¶ 2, Dkt. 51-37 (“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.”); id. ¶ 5 (“[A]ny notices that are to be sent to any of the
parties regarding a default under the terms set forth herein . . . shall be given by certified mail, . .
. UPS or FEDEX, [etc.]”). He cites Georgia law for the proposition that failure to give notice of
default and an opportunity to cure as required under a contract bars recovery under the contract.

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See In re Colony Square Co., 843 F.2d 479, 481 (11th Cir. 1988) (applying Georgia law); Orkin
Exterminating Co. v. Stevens, 203 S.E.2d 587, 593 (Ga. Ct. App. 1973).
CresCom’s claim against Terry, however, is not based on a breach of the promissory
notes or an attempt to recover under those notes; instead, it is based on a breach of the Guaranty
Agreements. The Guaranty Agreements do not contain any provision requiring notice of default
or an opportunity to cure. Instead, as guarantor, Terry expressly and unambiguously waived
“presentment, demand for payment, notice of dishonor or nonpayment, and protest of any
instrument evidencing indebtedness.”

Guaranty ¶ 11.

Moreover, Terry expressly and

unambiguously waived all defenses of the Borrower, except the defense of discharge by payment
in full.4 Under Georgia law, if the trial court determines that the contract language is clear and
unambiguous, “the court simply enforces the contract according to its clear terms; the contract
alone is looked to for its meaning.” City of Baldwin v. Woodard & Curran, Inc., 743 S.E.2d 381,
389 (Ga. 2013). Moreover, “Georgia law is clear that creditors are entitled to summary judgment
in a suit on an unconditional guaranty when the guarantor has waived all of his defenses. It is
also axiomatic that competent parties are free to choose, insert, and agree to whatever provisions
they desire in a contract unless prohibited by statute or public policy.” Core LaVista, LLC v.
Cumming, 709 S.E.2d 336, 340-41 (Ga. Ct. App. 2011) (quotations and citations omitted)
4

Paragraph 7 of the Guaranty Agreements provides:
The Undersigned waives any and all defenses, claims and discharges of Borrower, or any other
obligor, pertaining to Indebtedness, except the defense of discharge of payment in full. Without
limiting the generality of the foregoing, the Undersigned will not assert, plead or enforce against
Lender any defense of waiver, release, statute of limitations, res judicata, statute of frauds, fraud,
incapacity, minority, usury, illegality or unenforceability which may be available to Borrower or
any other person liable in respect of any indebtedness, or any setoff available against Lender to
Borrower or any such other person, whether or not on account of a related transaction. The
Undersigned expressly agrees that the Undersigned shall be and remain liable, to the fullest extent
permitted by applicable law, for any deficiency remaining after foreclosure of any mortgage or
security interest securing indebtedness, whether or not the liability of Borrower or any other
obligor for such deficiency is discharged pursuant to statute or judicial decision. The undersigned
shall remain obligated, to the fullest extent permitted by law, to pay such amounts as though the
Borrower’s obligations had not been discharged.

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(holding that guarantor was bound by the broad waiver of defenses in the Guaranty where the
waiver was plain, unambiguous, and capable of only one interpretation).

Therefore, even

assuming arguendo that CresCom’s claims against CCT would be barred for failure to give
notice of default and an opportunity to cure, such failure has no effect on CresCom’s claims
against Terry as guarantor because he waived this defense.5 Accordingly, the Court concludes
that Terry’s obligations under the Guaranty Agreements have not been discharged as a matter of
law and denies Terry’s motion with respect to this issue.
C. CresCom’s recovery is not limited to a maximum of $1,121,029.00
Terry contends that CresCom’s recovery under the Guaranty Agreements is limited to
$1,121,029.000, which is the amount of CresCom’s remaining unsecured or deficiency claim
against CCT as determined by the Order of the Bankruptcy Court. This amount appears to be the
difference between the total principal payments due on the notes ($3,672,029.00) minus the
bankruptcy valuation of the land conveyed to CresCom pursuant to its secured claim against
CCT ($2,551,000.00). Terry maintains that the Bankruptcy Court’s determination that CCT’s
remaining debt is $1,121,029.000 is binding upon CresCom under the principles of collateral
estoppel and res judicata.

CresCom responds that under well-established bankruptcy law

principles as well as the express terms of the Guaranty Agreements, the order of the Bankruptcy
Court did not limit Terry’s liability to a maximum of $1,121,029.00. The Court agrees with
CresCom.

5

The Court notes that although Terry cites Georgia law for the purposes of interpreting the Loan Agreements, the
express and unambiguous language of the promissory notes and the mortgages provide that South Carolina governs
those documents. See, e.g., June 25, 2009 Note 3572, Dkt. 51-29 (“The law of the state of South Carolina will
govern this note.”); June 25, 2009 Mortgage ¶ 25, Dkt. 51-36 (“The Mortgage is governed by the laws of the
jurisdiction in which Lender is located, except to the extent otherwise required by the laws of the jurisdiction where
the Property is located.”).

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Under the Bankruptcy Code, the “discharge of a debt of the debtor does not affect the
liability of any other entity on, or the property of any other entity for, such debt.” 11 U.S.C.
§ 524(e); see In re Hayden, 477 B.R. 260, 264 (Bankr. N.D. Ga. 2012) (“A discharge in
bankruptcy does not extinguish the debt itself, but merely releases the debtor from personal
liability for the debt.”). Thus, the discharge of a debtor in bankruptcy proceedings does not
affect a guarantor’s liability. NCNB Tex. Nat’l Bank v. Johnson, 11 F.3d 1260, 1266 (5th Cir.
1994).
Courts routinely reject guarantors’ arguments that creditors are barred by the doctrines of
res judicata or collateral estoppel from seeking the full amount of debt secured by the guaranty
agreement where a bankruptcy court’s order reduced or discharged the debtor’s debt. See C.F.
Trust, Inc. v. Peterson, 13 F. App’x 161, 165-66 (4th Cir. July 10, 2001) (affirming district
court’s decision not to give res judicata effect to the bankruptcy court’s final report order, which
allowed a reduction of creditor’s unsecured claims against debtor, where district court found that
the reduction had no effect on guarantor’s independent obligation as guarantor to pay the entire
debt); United States v. Stribling Flying Serv., Inc., 734 F.2d 221, 223 (5th Cir. 1984) (rejecting
guarantors’ argument that the bankruptcy court’s confirmation order reducing debtor’s liability
acted as collateral estoppel or res judicata as to a claim against the guarantor on the original
debt); Wells Fargo Bank, N.A. v. Young, No. 6:1-cv-1130-Orl-31DAB, 2011 WL 4054786, at *3
(M.D. Fla. Sept. 13, 2011) (where the guaranteed debt was adjudicated fully satisfied in the
bankruptcy proceeding, court rejected guarantors’ argument that res judicata barred creditor’s
claims against guarantors because guarantors had failed to show that the amount due on the
guaranties was determined by the bankruptcy court). Unless “the bankruptcy court makes a
specific finding regarding the release of a third party’s claim,” the liability on an unconditional

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guaranty is unaffected by a Chapter 11 plan restructuring the guaranteed debt. Wells Fargo
Bank, 2011 WL 4054786, at *2.
Nowhere in the Bankruptcy Court’s orders is there a specific finding regarding the
release or reduction of CresCom’s guaranty claim against Terry. Moreover, pursuant to the
terms of the Guaranty Agreements, Terry “waive[d] any and all defenses, claims and discharges
of Borrower, . . . pertaining to Indebtedness, except the defense of discharge by payment in full,”
and he expressly agreed not to assert against CresCom any defense of res judicata. Guaranty ¶ 7.
Additionally, Terry agreed that he “shall be and remain obligated to pay Indebtedness 6 even
though any other person obligated to pay Indebtedness, including Borrower, has such obligation
discharged in bankruptcy or otherwise discharged by law.”

Id. ¶ 8.

Thus, because the

Bankruptcy Court’s orders did not specifically discharge Terry’s liability under the Guaranty
Agreement, and because Terry waived the defenses of res judicata and collateral estoppel while
agreeing to remain obligated to pay Indebtedness, the Court finds that CresCom’s claim is not
limited to a maximum of $1,121,029.00. Accordingly, the Court denies Terry’s motion with
respect to this issue.
D. Under Georgia law, CresCom is barred from recovering attorneys’ fees
In its motion for summary judgment, CresCom seeks $150,000 in attorneys’ fees. The
terms of the Guaranty requires the guarantor to “pay or reimburse [CresCom] for all costs and
expenses (including reasonable attorneys’ fees and legal expense) incurred by Lender in
connection with the protection, defense, or enforcement of” the guaranty. Guaranty ¶ 5. Terry,
however, argues that CresCom should be barred from recovering any attorneys’ fees because of

6

“‘Indebtedness’ shall include post-bankruptcy petition interest and attorneys’ fees and any other amounts which
Borrower is discharged from paying or which do not otherwise accrue to Indebtedness due to Borrower’s discharge,
and the Undersigned shall remain obligated to pay such amounts as though Borrower’s obligations had not been
discharged.” Guaranty ¶ 8.

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its failure to comply with the notice provisions of Ga. Code Ann. § 13-1-11(a)(3). That statute
provides, in relevant part:
(a) Obligations to pay attorney’s fees upon any note or other evidence of
indebtedness, in addition to the rate of interest specified therein, shall be valid and
enforceable and collectable as a part of such debt if such note or other evidence of
indebtedness is collected by or through an attorney after maturity, subject to
subsection (b) of this Code section and to the following provisions: . . .
(3) The holder of the note or other evidence of indebtedness or his
or her attorney at law 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 maker, endorser, or party sought to be held on said obligation
has ten days from the receipt of such notice to pay the principal
and interest without the attorney’s fees. If the maker, endorser, or
party sought to be held on any such obligation shall pay the
principal and interest in full before the expiration of such time,
then the obligation to pay the attorney’s fees shall be void and no
court shall enforce the agreement. . . .
Ga. Code Ann. § 13-1-11(a)(3).
The Georgia Court of Appeals recently held that “§ 13–1–11(a)(3) creates a mandatory
condition precedent to the debtor’s obligation to pay attorney fees expended by the lender while
collecting on a note.” Core LaVista, 709 S.E.2d at 342-43. Georgia case law requires only
substantial compliance with § 13–1–11(a)(3). Id. at 343. Thus, “[s]o long as a debtor is
informed that he has 10 days from receipt of the notice within which to pay principal and interest
without incurring any liability for attorney fees, the legislative intent behind the enactment of
OCGA § 13–1–11(a)(3) has been fulfilled.” Id. (emphasis in original).
In Core LaVista, the guarantor agreed to pay the lender all costs of collection (including
reasonable attorneys’ fees actually incurred and litigation expenses) if an attorney assisted in
collecting on the note. Id. at 342. After the borrower defaulted on the note, the lender sent the
guarantor a letter notifying him of the default and requesting that the default “be cured
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immediately.” Id. The letter further advised the guarantor that the lender “intends to avail
himself of all remedies available to him under the terms of the Note, the Security Deed, as well
as the Unconditional Guaranty of Payment and Performance signed by you in connection with
the extension of credit by Lender to Borrower.” Id. The court held that the lender was not
entitled to attorneys’ fees because the demand letter sent to the guarantor did not state that the
guarantor could avoid his obligation to pay attorneys’ fees by curing the default within ten days
of the notice. Id. at 343. Moreover, the court found that the debt instruments themselves,
including the personal guaranty, did not satisfy the notice requirement because “the statute
plainly requires a separate notice in writing after maturity.” Id. (emphasis added). Accordingly,
the court concluded that the trial court erred by awarding attorneys’ fees. Id.
In the present case, CresCom has produced no evidence showing—nor has it alleged—
that it provided written notice to Terry advising him that the provisions of the Guaranty
Agreements relating to attorneys’ fees would be enforced if Terry failed to pay the outstanding
principal and interest within ten days from his receipt of such notice. Because such notice is a
mandatory condition precedent to the recovery of attorneys’ fees related to the collection of a
note under Georgia law, CresCom is barred from collecting attorneys’ fees in this matter. See id.
Accordingly, the Court grants Terry’s motion for summary judgment as to attorneys’ fees.
III.

CresCom’s Motion for Summary Judgment
CresCom moves for summary judgment on its breach of contract claim against Terry

based on the Guaranty Agreements. To prevail on its claim for breach of contract, CresCom
must show a (1) breach and the (2) resultant damages (3) to the party who has the right to
complain about the contract being broken. Kuritzky v. Emory Univ., 669 S.E.2d 179, 181 (Ga.
Ct. App. 2008). It is undisputed that neither Terry, as Guarantor, nor the Borrowers paid the

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sums due on the loans when the loans matured on June 18, 2011. Thus, CresCom has established
a breach of the Guaranty Agreements. Moreover, no one disputes that CresCom has the right to
complain about the contract being broken. Accordingly, as a matter of law, CresCom has
established the first and third elements of its claim.
CresCom requests an award of damages totaling $2,142,861.25 for all four loans, plus per
diem interest at the rate of $355.67 per diem or 11% per annum. 7 In support of its request,
CresCom filed an “affidavit of indebtedness” from its Executive Vice President in which he
asserts that in addition to principal, the sum includes, inter alia, interest totaling $846,728.57 and
“charges and fees” totaling $175,102.90 for all four loans. Terry objects to the evidence because
the affidavit attaches no bank records to support the debt, interest, charges, or fees allegedly
owed. Terry further complains that the affidavit indicates that CresCom used an interest rate of
11% for each loan even though the loan documents require different interest rates for different
periods of time. Terry maintains that the evidence before the Court is not sufficient to prove
damages. In its reply memorandum, CresCom did not address Terry’s concerns.
The Court concludes that under the terms of the Guaranties, CresCom is entitled to
damages resulting from the defaults at issue in this case and thus should be granted summary
judgment. However, from the evidence presently available to the Court, the Court is unable to
verify that the amount of damages described in the affidavit of indebtedness is the proper amount
that should be awarded. See Hanna v. First Citizens Bank & Trust Co., 744 S.E.2d 894, 899 (Ga.
Ct. App. 2013) (holding that affidavit of the bank’s senior vice president along with a printout
reflecting the current amount owed were insufficient to support an award amount because the
underlying business records were not in the case record).
7

Accordingly, the Court orders

CresCom has credited the outstanding balances of the respective loans in the amounts set forth in the Bankruptcy
Court’s Order entered March 14, 2013. Those amounts were credited on June 8, 2013, the date the deeds to the
properties were received by CresCom’s counsel in recordable form.

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CresCom to file a brief supplemental memorandum with supporting evidence to document the
basis for its calculation of damages. Terry will have five days from the date of CresCom’s
supplemental memorandum to file objections. Following review of the parties’ supplemental
submissions, the Court will issue an order determining the proper award of damages.
CONCLUSION
For the foregoing reasons, it is ORDERED that Defendant Terry’s Motion for Summary

Judgment is DENIED IN PART and GRANTED IN PART. It is further ORDERED that
Plaintiff CresCom’s Motion for Summary Judgment is GRANTED in an amount to be
determined after receipt of CresCom’s supplemental memorandum, submitted to the Court
within 10 days from the date of this Order.
AND IT IS SO ORDERED.

October 1, 2013
Charleston, SC

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