798 S.E.2d 161
Va.2017Background
- Chamberlain guaranteed a $950,000 promissory note Marshall gave Middleburg Bank and posted a $50,000 CD and a $1M life policy as collateral.
- Marshall defaulted on payments between 2009–2011; Middleburg withdrew $50,614.94 from Chamberlain’s CD pursuant to the guaranty.
- Chamberlain sued Marshall under Va. Code § 49-27 seeking reimbursement of the funds Middleburg took from his CD.
- Marshall admitted the note and guaranty but asserted as an affirmative defense that any payments by Chamberlain were gifts.
- The trial court found Chamberlain’s guaranty was a gift tied to a romantic relationship and entered judgment for Marshall; Chamberlain appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Code § 49-27 entitles an accommodation guarantor to reimbursement after the creditor draws on collateral | Chamberlain: § 49-27 entitles any guarantor who pays to recover the amount paid (plus interest and 5% damages) | Marshall: Chamberlain’s guaranty was a gift, so § 49-27 shouldn’t apply | Reversed: § 49-27 applies to any person liable as guarantor; no evidence of waiver or gift of the CD itself, so Chamberlain is entitled to relief |
Key Cases Cited
- McGrath v. Dockendorf, 292 Va. 834, 793 S.E.2d 336 (statutory interpretation reviewed de novo)
- Johnson v. Hart, 279 Va. 617, 692 S.E.2d 239 (application of law to undisputed facts reviewed de novo)
- Preferred Sys. Sols., Inc. v. GP Consulting, LLC, 284 Va. 382, 732 S.E.2d 676 (appellate review of factual findings)
- Southwood Builders, Inc. v. Peerless Ins. Co., 235 Va. 164, 366 S.E.2d 104 (defines accommodation surety and contrast with compensated surety)
- Dickenson v. Charles, 173 Va. 393, 4 S.E.2d 351 (historical principle that surety who satisfies creditor is entitled to reimbursement)