Davis Adv. Sh. No. 5
THE STATE OF SOUTH CAROLINA
In The Supreme Court
Radalytic Labs, Inc.,
Radon, Inc., Parker
Wriglht and Brickford
David A. Culver and
Janice L. Culver, Petitioners.
ON WRIT OF CERTIORARI TO THE COURT OF
Appeal From York County
J. Buford Grier, Master-in-Equity
Opinion No. 24756
Heard December 16, 1997 - Filed January 26, 1998
REVERSED AND REMANDED
WALLER, A.J.: We granted certiorari to consider the Court of
Appeals' opinion in Radalytic Labs, Inc. et al. v. Culver, 96-UP-194 (S.C. Ct.
App. filed July 9, 1996). We reverse.
David and Janice Culver ("Sellers") owned one hundred percent of the
common stock in Radalytic Labs, Inc. (David owning sixty per cent and
Janice owning forty per cent). On June 2, 1989, they entered into an
agreement to sell eighty percent of the stock (David and Janice each selling,
forty per cent) to Radon, Inc. ("Purchaser"). The total purchase price was
$190,000. Purchaser agreed to make a cash down payment of $25,000, and
to execute a promissory note for the remaining balance of $165,000, such note
to be repaid according to the terms of the agreement. Purchaser also agreed
to place its newly-purchased shares in escrow as security for full payment.
A separate "Pledge and Escrow Agreement" was executed by the parties.
Finally, David was to continue working for Radalytic Labs, Inc. as a
corporate officer for five years under terms as set forth in the agreement.
On February 18, 1993, David's employment was terminated. Radalytic
Labs, Inc. and Purchaser subsequently filed suit against Sellers alleging,
inter alia, misappropriation of corporate assets and breach of contract.
Sellers counterclaimed alleging breach of contract on several grounds, the one
pertinent here being default under the purchase agreement in that the
required note payments had not been made.1 The case was referred to a
master-in-equity with direct appeal to this Court.
At the hearing, Purchaser and Radalytic Labs, Inc. represented they
were no longer pursuing their claims against Sellers; thus the trial issues
concerned only Sellers' counterclaims and third-party claims. Specifically,
both sides requested the master to rule on "whether or not the tendering of
all the stock of Radalytic Labs, Inc. to [Sellers] would satisfy any debt owing
from the Plaintiffs and the third-party defendants to [Sellers] in full." The
master ruled the tender of stock so satisfied Purchaser's obligations and
ordered the conveyance of stock to Sellers. The Court of Appeals affirmed in
an unpublished opinion. Radalytic Labs, Inc. et al. v. Culver, 96-UP-194
(S.C. Ct. App. filed July 9, 1996).
Brickford Faucette, Purchaser's owners, seeking to hold them individually
This Court granted certiorari to consider this aspect of the master's
The focal point of contention centers around the following language in
the Pledge and Escrow Agreement concerning the rights of the parties upon
It is essentially uncontested that this agreement gave Sellers the option, upon
default, of either (1) keeping the stock, in which case all obligations of
Purchaser would be deemed satisfied, or (2) selling the stock.3 The
ruling Sellers were barred from recovery because they had unclean hands.
See Culver, 96-UP-294, at 3.
3In interpreting the contractual language, the master found:
determinative issue is whether, should Sellers exercise the second option,
they would be entitled to seek a deficiency judgment if the stock were to sell
at a loss.4 In finding Sellers did not have this right, the Court of Appeals
found, "Should [Sellers] sell the stock at a private sale, there is no provision
in the contract allowing [Sellers] to seek a deficiency judgment against
[Purchaser] in the event the stock sells at a loss." Culver, 96-UP-194, at 3.
The Court of Appeals is correct that there is no contract provision addressing
any right to a deficiency judgment. However, Sellers argue they are entitled
to seek a deficiency judgment as a matter of law under Title 36 of the South
Carolina Code. We agree.
Section 36-9-504(2) states, "If the security interest secures an
indebtedness, the secured party shall account to the debtor for any surplus,
and, unless otherwise agreed, the debtor is liable for any deficiency."
(emphasis supplied). We interpret this language to give a secured party the
right to seek a deficiency judgment unless such right is specifically refused
by agreement. Because the contract here is silent on this issue, we find
Sellers had this statutory right. See Blakeley v. Rabon, 266 S.C. 68, 72, 22l
S.E.2d 767, 769 (1976) ("Words cannot be read into a contract which impart
intent wholly unexpressed when the contract was executed"). Therefore, the
Court of Appeals erred in affirming the master's ruling.5 This case is
Apparently the master was under the impression it was the Purchaser's
choice as to which option Sellers would take. This was an erroneous
interpretation of the agreement.
4If Sellers cannot seek a deficiency judgment, the master's ruling would,
as a practical matter, be correct, at least regarding Sellers' rights. In other
words, if Sellers cannot seek any deficiency, it would not matter whether they
exercise option one or two because they could sell it regardless of which
option they technically exercised.
5We summarily reject Purchaser's argument Sellers have not preserved
this issue because they failed to argue it to the master. The record clearly
shows otherwise. Additionally, we find Purchaser's arguments that section
36-9-504 does not apply to the security interest in this case, and that Sellers
did not have rights in the collateral as required before a security interest can
attach, see S.C. Code Ann. § 36-9-203(1)(c) (Supp. 1996), to be without merit.
therefore remanded for any further proceeding consistent with this opinion.
REVERSED AND REMANDED.
FINNEY, C.J., TOAL, MOORE and BURNETT, JJ., concur.
deficiency judgment because they did not take adequate care of the collateral,.
see S.C. Code Ann. § 36-9-207 (Supp. 1996), we find this argument would be
better addressed on remand should Sellers actually seek a deficiency
judgment in this case.