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An  unpublished  opinion  of  the  North  Carolina  Court  of  Appeals  does  not  constitute
controlling  legal  authority .  Citation  is  disfavored ,  but  may  be  permitted  in
accordance  with  the  provisions  of  Rule  3 0(e)(3)  of  the  North  Carolina  Rules  of
A                                                                                               p                  p          e   l   l   a   t   e   P   r   o   c   e   d   u   r   e
NO. COA12-1412
NORTH CAROLINA COURT OF APPEALS
Filed:  2 July  2013
TD BANK, N.A.,
Plaintiff,
v.                                                                                              Henderson County
                                                                                                No.  11 CVS  923
WALTER T. MCGEE,
Defendant.
Appeal  by  defendant  from  judgment  entered                                                  23  July           2012  by
Judge  Mark  E.  Powell  in  Henderson  County  Superior  Court.    Heard
in the Court of Appeals  22 April  2013.
Ward  and  Smith,  P.A.,  by  Lance  P.  Martin,  Benjamin  E.  F.  B.
Waller, and Norman J. Leonard, for plaintiff-appellee.
David  R.  Payne,  P.A.,  by  David  R.  Payne,  for  defendant-
appellant.
MARTIN, Chief Judge.
Defendant  Walter  T.  McGee  appeals  from  summary  judgment  in
favor   of   plaintiff   T.D.   Bank,   N.A.   ordering   defendant,   as
guarantor  of  four  past-due  promissory  notes,  to  pay  plaintiff
the sums due on each note, plus interest and attorney’s fees.
Defendant  is  the  president  of  two  North  Carolina  companies:




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Asheville  Downtown  Holdings,  Ltd.,  and  Biltmore  Investments,
Ltd.    These  companies  operate  a  series  of  trailer  parks  in  North
Carolina  and  South  Carolina.                                                Between                                                     2005   and      2006   these
companies  executed  and  delivered  a  total  of  four  commercial
promissory  notes  to  Carolina  First  Bank.    Plaintiff  is  successor
by merger to, and is formerly known as, Carolina First Bank.
Note                                                                           1,  Note                                                    2,  and  Note   4  were  all  accompanied  by  a
guaranty  agreement  executed  by  defendant  and  are  undisputed  on
appeal.     Note                                                               3  was  also  accompanied  by  a  guaranty  agreement
executed  by  defendant.    However,  unlike  the  other  notes,  on           28
April  2008,  Carolina  First  Bank  and  Biltmore  Investments  entered
into  an  agreement  that  modified  and  renewed  Note  3.    As  part  of
the  Note  3  renewal,  Biltmore  Investments  and  Carolina  First  Bank
executed  an  Assignment  of  Leases  and  Rents  (“Rent  Assignment”).
The  purpose  of  the  Rent  Assignment  was  to  reduce  the  risk  of  the
loan  by  assigning  certain  rental  units  of  Biltmore  Investments’
trailer park operation as security for the Note  3 renewal.
All   four   notes   provide   that   non-payment   of   monthly
installments,   non-payment   of   the   outstanding   balance   upon
maturity,  or  the  insolvency  or  bankruptcy  of  the  notemaker
constitute  events  of  default.                                               All  four  of  the  guaranties
provide,                                                                       “[defendant]  absolutely  and  unconditionally”  promises
to  “pay  and  guaranty  the  full  and  prompt  payment”  of  the  notes.




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Additionally,   the   guaranties   state   if   the   notemaker   files
bankruptcy                                                                    “the  maturity  of  the  Debt,  so  far  as                          [defendant’s]
liability  is  concerned,  shall  be  accelerated  and  the  Debt  shall
be immediately payable by  [defendant].”
                                                                                                                                                                                                             Subsequently,  all  four  of  the  notes  went  into  default.
Note                                                                          1  and  Note                                                                                                                   2  matured  on                                                                                                                       17  March   2010  and  were  not  paid.
                                                                                                                                                                                                             Payments  for  Note  3  and  Note  4  ceased  after  February  2010.    In
                                                                                                                                                                                                             addition,  Biltmore  Investments  filed  Chapter  11  bankruptcy  on  26
                                                                                                                                                   January  2011  and  Asheville  Downtown  filed  Chapter                                                                                                                                                                                  11  bankruptcy
on  1 April  2011.
                                                                                                                                                                                                             In  their  bankruptcy  petitions,  Biltmore  Investments  and
                                                                                                                                                                                                             Asheville  Downtown  scheduled  their  debts  pursuant  to  all  four  of
                                                                              the  notes  in  question  as  undisputed.                                                                                                                                                                                                                                       Defendant,  acting  as
                                                                                                                                                                                                             president  of  the  companies,  declared  the  bankruptcy  petitions  as
“true and correct.”
                                                                              On                                                                   16  May                                                                                                                                2011,  plaintiff  filed  suit  against  defendant  to
                                                                                                                                                   recover  on  each  of  the  four  notes.     Then,  on                                                                                                                                                                                   22  May          2011,
plaintiff  filed  a  motion  for  summary  judgment  on  all  four  of  its
claims for relief, one claim for each loan.
In  response  to  plaintiff’s  motion  for  summary  judgment
defendant  alleged  the  Rent  Assignment,  executed  as  part  of  the
Note                                                                          3  renewal,  was  altered  after  he  signed  it.    Specifically,
defendant  alleged  the  Rent  Assignment  was  altered  to  include  a




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mark  appearing  on  the  lower  left-hand  corner  of  the  first  page
and  a  different  legal  description  of  the  encumbered  property
than  defendant  had  intended.    Defendant  entered  an  affidavit  and
investigative   report   by   Theresa   Dean,                               “a   forensic   document
examiner,”  which  avers  the  initialing  marks  appearing  on  the
first  page  of  the  Rent  Assignment                                      “are  not  authentic  and  were
not  signed  by                                                             [defendant].”                                                                                                                                                                                Defendant  argued  the  allegedly
                                                                                                                                        altered  Rent  Assignment  raised  a  genuine  issue  of  material  fact
                                                                            as to the enforceability of defendant’s Note  3 guaranty.
On                                                                          9  July                                                                                                                                2012,  the  trial  court  held  a  hearing  on  the
motion  for  summary  judgment.    On                                                                                                                                                                                                                                    23  July                            2012,  the  trial  court
granted  plaintiff’s  motion  for  summary  judgment  and  ordered
defendant  to  pay  plaintiff  the  amount  remaining  on  each  loan,
including interest and attorney’s fees.    Defendant appeals.
Initially,   we   note   that   on   appeal   defendant   does   not
dispute   that   he   is   a   guarantor   of   payment   on   Biltmore
Investments’  Promissory  Note                                              3,  nor  that  Note                                         3  is  in  default.
Additionally,    defendant    does    not    contend    that    Biltmore
Investments  did  not  consent  to  the  alterations  in  the  Rent
Assignment   as   included   in   the   Note                                3   renewal.                                                In   fact,
defendant,  acting  as  president  of  Biltmore  Investments,  and
under   the   penalty   of   perjury,   declared   in   the   company’s




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bankruptcy  petitions  that  Note                                              3  was                                                        “undisputed,  true,  and
correct.”    Rather,  defendant  contends  the  trial  court  erred  in
granting  summary  judgment  in  favor  of  plaintiff  because  evidence
that  defendant,  as  guarantor,  did  not  consent  to  the  alteration
of  the  Rent  Assignment  was  sufficient  to  raise  a  genuine  issue
as   to   whether   Note                                                       3   had   been                                                “materially   altered.”    We
disagree.
“Our  standard  of  review  of  an  appeal  from  summary  judgment
is  de  novo;  such  judgment  is  appropriate  only  when  the  record
shows  that                                                                    ‘there  is  no  genuine  issue  as  to  any  material  fact
and  that  any  party  is  entitled  to  a  judgment  as  a  matter  of
law.’”    In  re  Will  of  Jones,  362  N.C.  569,  573,  669  S.E.2d  572,
576                                                                            (2008)                                                                                   (quoting   Forbis   v.   Neal,   361   N.C.                            519,   524,
649 S.E.2d                                                                     382,                                                          385                        (2007)).                         “[A]n  issue  is  material  if  the
facts  alleged  would  constitute  a  legal  defense,  or  would  affect
the  result  of  the  action,  or  if  its  resolution  would  prevent  the
party   against   whom   it   is   resolved   from   prevailing   in   the
action.”     Merritt,  Flebotte,  Wilson,  Webb  &  Caruso,  PLLC  v.
Hemmings,                                                                      196  N.C.  App.                                               600,                       604,                             676  S.E.2d                           79,    83     (citations
and  internal  quotation  marks  omitted),  disc.  review  denied,
363 N.C.  655,  686 S.E.2d  518  (2009).
“‘[A]  material  alteration  of  a  contract  between  a  principal
debtor   and   creditor   without   the   consent   of   the   guarantor




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                                                                                                                          discharges   the   guarantor   of                                                                                                                                                             [his]   obligation.’”                                                                                               Sherwin-
                                                                                                                                                                                                                                          Williams  Co.  v.  ASBN,  Inc.,  163  N.C.  App.  547,  550,  594  S.E.2d.
135,                                                                           137                                        (2004)                                                                                                                                                                                        (second   alteration   in   original)                                                                               (quoting
                                                                                                                                                              Devereux  Props.,  Inc.  v.  BBM&W,  Inc.,                                                                                                                                                                          114  N.C.  App.                         621,              623,
                                                                               442   S.E.2d                               555,                                                                                                            556,   disc.   review   denied,                                                                                                                                                 337   N.C.        690,
                                                                               448 S.E.2d                                 519                                 (1994)).                                     A                                                                                                                                                                      “material  alteration”  is  one  that
                                                                               results  in                                                                                                                                                                                                                              “a  material  deviation  from  the  original  agreement
                                                                                                                                                                                                                                          upon  which  the  guaranty  was  based.”    Nationsbank  of  N.C.,  N.A.
                                                                               v.  Brown,                                 118  N.C.  App.                                                                  576,                           579,                                                                          455  S.E.2d                                               890,                                    892               (1995).
                                                                                                                                                                                                                                          However,  “[t]he  general  rule  does  not  state  that  there  can  be  no
                                                                                                                                                                                                                                          modifications  to  the  original  contract;  it  simply  states  that
                                                                                                                                                                                                                                          there  can  be  no  material  alterations  without  a  guarantor’s
                                                                               consent                                                                                                                     .”     Kirkhart  v.  Saieed,                                                                                                                                           98  N.C.  App.                          49,               54-55,
                                                                               389   S.E.2d                               837,                                840                                          (1990).                                                                                                      Additionally,                                                                                     “[c]onsent   to
modification  [is]  not  necessary  if  the  modification  would  serve
to  benefit  the  guarantor.”    Devereux  Props.,  Inc.,  114  N.C.  App.
at  624,  442  S.E.2d  at  557  (citing  First  Union  Nat’l  Bank  of  N.C.
v.  King,  63  N.C.  App.  757,  759-60,  306  S.E.2d  508,  510  (1983)).
“[T]he  policy  behind  these  rules  is  to  protect  a  guarantor  from
alterations   to   the   underlying   contract   which   increase   the
guarantor’s  risk  over  that  which  was  assumed  in  the  original
agreement.”    Id.                                                             (citing  U.S.  Shoe  Corp.  v.  Hackett,   793  F.2d
161,  162-63  (7th Cir.  1986)).




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In  Kirkhart  v.  Saieed,  following  the  primary  obligor’s
initial  default,  the  noteholder  and  primary  obligor  agreed  to  a
loan  modification  whereby,  among  other  things,  certain  property
units  would  be  released  as  security  for  the  loan.     Kirkhart,
98 N.C.  App.  at  51,  389  S.E.2d  at  838.    The  property  would  then
be  sold  and  part  of  the  proceeds  from  the  sale  would  be  applied
to  the  principal  balance  of  the  original  loan.     Id.     However,
before  the  property  could  be  sold,  the  primary  obligor  filed  for
bankruptcy  and  the  noteholder  attempted  to  enforce  the  note’s
                                                                                                        guaranty  agreements  made  by  the  defendants.     Id.  at                51,                                                             54,
389 S.E.2d  at                                                                838,                      840.                                                                        At  trial,  and  on  appeal,  defendants
asserted  the  loan  modifications  between  the  primary  obligor  and
the  noteholder  constituted  a  material  alteration  that  released
them  from  their  guaranty  obligations.    Id.  at  54,  389  S.E.2d  at
840.
This   Court   held   the   modification   was   not   a   material
                                                                              alteration.     Id.  at   54-55,                                                                      389  S.E.2d  at                                                 840.   We  found  it
                                                                                                        significant  that  the  modification  of  the  loan                                                                                                “did  not  change
                                                                                                        the  terms  of  the  original  note,”  only  involved  a  single  change,
                                                                                                        and  ultimately  benefited  the  guarantor.    Id.  at                                                                                      54,    389  S.E.2d
at                                                                            840                                                                                                   (“The  only  thing  that  changed  under  the  agreement  was
that  a  portion  of  the  sales  from  certain  units  would  be  applied
to  reduce  the  principal  of  the  note.     Had  this  occurred




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defendants  would  have  benefited  by  a  reduction  in  the  principal
amount owed.”).
Here,  as  in  Kirkhart,  defendant  does  not  dispute  the  terms
of  the  note  in  question   or  that  he  authorized  a  personal
guaranty  agreement  for  that  note.     Instead,  defendant  contends
plaintiff   and   Biltmore   Investments   added   more   property   as
security  to  Note  3  without  his  consent  as  guarantor  of  the  loan.
However,  such  an  alteration  could  only  benefit  defendant.     By
adding  additional  Biltmore  Investments  property  as  security  for
Note  3,  defendant’s  liability  could  only  be  reduced.    With  more
properties  listed  as  security  for  the  loan,  plaintiff  would  have
more  assets  to  which  it  could  look  to  satisfy  Note                   3  before
seeking  payment  from  defendant.     Thus,  even  assuming  arguendo
defendant  could  prove  he  did  not  consent  to  the  alterations  in
the  Rent  Assignment,  such  an  alteration  would  still  fall  short
of  being                                                                     “material”  because  the  single  disputed  alteration  did
not  change  the  original  Note                                              3  terms  and  was  ultimately  to  the
benefit  of  defendant.    Therefore,  we  hold  the  alteration  was  not
material  and  defendant  is  not  released  from  his  obligation  under
the  Note  3  guaranty  agreement.    See  id.  at  54-55,  389  S.E.2d  at
840;  see  also  Devereux  Props.,  Inc.,                                     114  N.C.  App.  at                                           624-25,
442 S.E.2d at  556-57.
Defendant   asserts   that                                                    “an   irregularity   in   the   bank’s




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documentation  of  its  transactions  with  the  primary  debtor”  can
constitute  a  material  alteration  relieving  a  guarantor  from  his
obligation,  and  relies  on  O’Grady  v.  First  Union  National.  Bank
of  North  Carolina,                                                          296  N.C.   212,              250  S.E.2d   587                                     (1978),  to
support   this   assertion.                                                                                               In   O’Grady,   the   Supreme   Court
considered    whether    a    guaranty    agreement    that    expressly
guaranteed  the  joint  debts  of  three  primary  obligors  extended  to
a  promissory  note  legitimately  authorized  by  only  two  of  the
three  primary  obligors.     Id.  at                                         227-28,     250  S.E.2d  at   597-98.
However,  rather  than  holding  an  irregularity  may  discharge  a
guarantor  from  his  obligation,  the  Court  held  the  extension  was
impermissible   because   it   increased   the   liability   of   the
guarantor  “beyond  the  strict  terms  of  the  contract.”    Id.    Thus,
defendant’s reliance on O’Grady is misplaced.
Defendant’s  remaining  arguments  on  appeal  were  not  made  to
the  trial  court  and  are  raised  for  the  first  time  on  appeal.
“Only   those   pleadings   and   other   materials   that   have   been
considered  by  the  trial  court  for  purposes  of  summary  judgment
and  that  appear  in  the  record  on  appeal  are  subject  to  appellate
review.”    Rentenbach  Constructors,  Inc.  v.  CM  P’ship,                  181  N.C.
App.                                                                          268,        277,              639  S.E.2d   16,                                     22            (2007)   (internal  quotation
marks  omitted).    Furthermore,  “[our  Supreme  Court]  has  long  held
that  where  a  theory  argued  on  appeal  was  not  raised  before  the




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trial  court,  the  law  does  not  permit  parties  to                        ‘swap  horses
between  courts  in  order  to  get  a  better  mount’  in  the  [appellate
courts].”    State  v.  Sharpe,  344  N.C.  190,  194,  473  S.E.2d  3,  5-6
(1996)  (quoting  Weil  v.  Herring,  207  N.C.  6,  10,  175  S.E.2d  836,
838                                                                            (1934)).        Therefore,  defendant’s  remaining  arguments  are
dismissed.
Affirmed.
Judges BRYANT and DAVIS concur.
Report per Rule  30(e).

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