                               UNPUBLISHED

                    UNITED STATES COURT OF APPEALS
                        FOR THE FOURTH CIRCUIT


                               No. 12-2154


FIRST SOUTH BANK,

                Plaintiff – Appellee,

           v.

BANK OF THE OZARKS,

                Defendant – Appellant.



                               No. 12-2185


FIRST SOUTH BANK,

                Plaintiff – Appellee,

           v.

BANK OF THE OZARKS,

                Defendant – Appellant.



Appeals from the United States District Court for the District
of South Carolina, at Beaufort.    Richard M. Gergel, District
Judge. (9:11-cv-02587-RMG)


Argued:   September 17, 2013             Decided:    October 18, 2013


Before KING, SHEDD, and THACKER, Circuit Judges.
Affirmed by unpublished per curiam opinion.


ARGUED: John Coffman Lindley, III, JOHNSTON, ALLISON & HORD, PA,
Charlotte, North Carolina, for Appellant.      Alice F. Paylor,
ROSEN, ROSEN & HAGOOD, LLC, Charleston, South Carolina, for
Appellee. ON BRIEF: Elizabeth J. Palmer, ROSEN, ROSEN & HAGOOD,
LLC, Charleston, South Carolina, for Appellee.


Unpublished opinions are not binding precedent in this circuit.




                                2
PER CURIAM:

     Bank of the Ozarks appeals the district court’s judgment in

favor of First South Bank in this breach of contract action.

For the following reasons, we affirm.

                                     I.

     In June 2010, Woodlands Bank agreed to issue a $7.1 million

development loan to Lakeside Development, LLC (the Borrower or

Lakeside).       Seeking   another    bank    to   help   fund    the    loan,

Woodlands approached First South Bank, and the banks eventually

entered into a Participation Agreement (the Agreement), whereby

First South Bank agreed to fund up to $4.15 million of the

development      loan.     During    negotiations,    First      South   Bank

demanded that Woodlands be responsible for all expenses arising

from servicing the loan and would not have entered into the

Agreement without this promise.

     To   that    end,   the   Agreement     specifically   discussed     the

handling of expenses, providing as follows in Paragraph 4:

     4. EXPENSES. Seller [Woodlands] may at its discretion
     make additional advances for taxes, insurance premiums
     and other items deemed necessary by [Woodlands] to
     collect, enforce, or protect the Loan and any Property
     securing the Loan including, but not limited to,
     attorneys’   fees,   court   costs   and   disbursements
     (Expenses).      Purchaser’s    [First   South   Bank’s]
     percentage of Expenses is:

     A. {X} No Shared Expenses.           [Woodlands] will bear all
     expenses.




                                     3
       B.   {} Shared Expenses. _______ percent of Expenses,
       or if no percentage is indicated, that percentage of
       Expenses which [First South Bank’s] unreimbursed
       investment is of the principal amount of the Loan
       outstanding on the date Expenses are incurred.     All
       Expenses will be shared in the proportion indicated on
       the date Expenses are incurred.     [First South Bank]
       will pay to [Woodlands] on demand [First South Bank’s]
       share of Expenses.   [Woodlands] will remit to [First
       South   Bank’s]  share   of   Expenses   recovered  by
       [Woodlands].

(J.A. 25).       The banks selected option A, indicating by marking

with an X that Woodlands was responsible for all expenses.

       In    addition    to    expenses,       the   Agreement        also    addressed

“Payments,”      providing      in   Paragraph       3   that    “[Woodlands]      will

receive all Payments and apply them to Borrower’s account,” and

that “[First South Bank’s] percentage of all Payments is . . .

[First South Bank] First Out: 100 percent of Payments before

Default      until   such     time   as   [First     South      Bank]   has    received

[First South Bank’s] Investment plus interest thereon.”                           (J.A.

25).        “Payments”   are    defined    in    Paragraph        9   as     “principal,

interest, and other charges received by [Woodlands] with respect

to the Loan from whatever source derived.”                   (J.A. 26).

       Finally, Paragraph 19 addressed what would happen in the

event Lakeside defaulted on the underlying development loan:

       19. DEFAULT AND LIQUIDATION OF LOAN. Notwithstanding
       any payment terms to the contrary, in the event of
       default, or if [Woodlands] in its sole discretion
       should otherwise accelerate and liquidate the Loan,
       all Payments collected and received by [Woodlands]
       will be applied ratably as follows: first, to
       Expenses; second, to the unpaid principal amount of

                                           4
      the Loan in proportion to the respective unpaid
      investments of [Woodlands] and [First South Bank] in
      the Loan at the time of Default; and third, to the
      respective accrued interest and other charges of
      [Woodlands] and [First South Bank].    Upon Borrower’s
      Default, all Payments and Borrower Fees received from
      Borrower, whether designated for repayment of the loan
      or undesignated, will be deemed intended for the
      repayment of the Loan in accordance with this
      Agreement.

(J.A.    26).         Paragraph        19    does    not    define     “payment    terms,”

“Payments,” or “Expenses.”

      Shortly         after     signing       the    Agreement,       Woodlands     entered

receivership          under    the    Federal       Deposit    Insurance      Corporation,

and     Bank     of     the        Ozarks    purchased        the     loan    to   Lakeside

Development and became Woodlands’ successor in interest to the

Agreement.       Thereafter, Lakeside defaulted on the loan.                       Bank of

the Ozarks began collecting the loan from Lakeside’s assets,

including liquidating one of Lakeside’s trust accounts that had

secured the initial loan.                   Bank of the Ozarks then deducted all

of its expenses—$81,452.39—before paying First South Bank its

58.041% share of the remaining assets.

      First South Bank responded by suing Bank of the Ozarks in

federal        district       court,        alleging       breach     of     contract    for

deducting expenses before paying First South Bank’s share of the

recovery.         Bank        of    the     Ozarks    moved     for    judgment    on     the

pleadings, attaching the Agreement and arguing that Paragraph 19

permitted it to deduct expenses incurred after a default.                               First


                                                5
South Bank filed a cross-motion for summary judgment, arguing

that Paragraph 4 unambiguously required Bank of the Ozarks to

bear   all    expenses.       The   district    court   denied   both   motions,

concluding “as a matter of law that the Participation Agreement

is ambiguous with regard to the issue raised in this action.”

(J.A. 53-54).         Thereafter, the court held a bench trial during

which both parties presented extrinsic evidence regarding their

understanding of the Agreement.               At the close of evidence, the

court ruled in favor of First South Bank and ordered Bank of the

Ozarks to pay $47,275.78.              First South Bank v. Bank of the

Ozarks,      2012    WL   3597665   (D.S.C.    Aug.   12,   2012).   The   court

expounded upon its earlier ruling concerning the ambiguity of

the Agreement, explaining that “[w]hile Paragraph 4 plainly and

without qualification states that [Bank of the Ozarks] is to

bear all Expenses, paragraph 19 appears to permit [Bank of the

Ozarks], after default, to pay Expenses out of the proceeds that

it receives.”         Id. at *6.      The court found that it could not

“reconcile these two provisions” and that the Agreement was thus

ambiguous.          Id.    By separate order, the court later granted

attorneys’ fees and costs in the amount of $41,668.95.




                                         6
                                            II.

       Bank of the Ozarks now appeals, contending that the court

erred in denying its motion for judgment on the pleadings. *                               We

review this ruling de novo, Butler v. United States, 702 F.3d

749, 751-52 (4th Cir. 2012).                 Under South Carolina law, which

applies here, an agreement is ambiguous if it is “susceptible to

more than one interpretation or its meaning is unclear.”                             Miles

v. Miles, 711 S.E.2d 880, 883 (S.C. 2011).                     “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   (S.C.   1975).       A    contract        may   be

ambiguous        because    of     “indefiniteness     of   expression,”           internal

inconsistency,         or    inclusion      of    “words    that        have   a    double

meaning.”          Crystal       Pines    Homeowners   Ass’n       v.    Phillips,        716

S.E.2d 682, 685 (S.C. Ct. App. 2011) (internal quotation marks

omitted).

       Bank of the Ozarks argues that the Agreement, specifically

Paragraph        19,   unambiguously        provides    that,       in    event      of     a

       *
       Because Bank of the Ozarks is only appealing this pretrial
order, we requested that the parties file supplemental briefs
addressing whether, under Varghese v. Honeywell Int’l, Inc., 424
F.3d 411, 420-23 (4th Cir. 2005), Bank of the Ozarks was
precluded from arguing that the contract was unambiguous.
Having reviewed the supplemental briefs and the responses of the
parties at oral argument, we are satisfied that, under the
particular facts of this case, Bank of the Ozarks preserved its
argument.



                                             7
default, expenses are shared.                     Bank of the Ozarks rests its

argument on the first sentence of Paragraph 19, which provides

“[n]otwithstanding any payment terms to the contrary, in the

event of default” Bank of the Ozarks could apply all “Payments”

first to “Expenses.”              (J.A. 26).         In Bank of the Ozarks’ view,

Paragraph 4, which defines expenses, is a “payment term” swept

aside by Paragraph 19.              And, because Paragraph 19 permits Bank

of the Ozarks to apply recovered sums first to expenses, Bank of

the    Ozarks     contends        that   it      was    authorized        to    deduct      its

expenses prior to paying First South’s share.

       In response, First South Bank contends that “payment terms”

in    Paragraph     19    refer     only    to      Paragraph     3,   which         addresses

“Payments.”       First South Bank notes that, while Paragraph 4 has

no    limiting      language       suggesting          that    expenses        are     handled

differently in the event of a default, Paragraph 3 specifically

mentions that First South Bank is entitled to “100 percent of

Payments before default.”                  (J.A. 25).           Thus, in First South

Bank’s view, Paragraph 19 simply reaffirms what is stated in

Paragraph 3 regarding what occurs to “payments” after default

and has no impact on Paragraph 4 and Bank of the Ozarks’ duty to

shoulder all expenses.

       We   agree    with    the     district        court     that    the     contract     is

ambiguous.        As      First    South      Bank      notes,    “payment         terms”    in

Paragraph    19     are    not    defined      by      the    contract,      and     they   can

                                              8
reasonably      be    read     as    limited      to     Paragraph      3.         Under   that

reading, Paragraph 19 simply reinforces the reference to default

in Paragraph 3.             “Payment terms” certainly could encompass a

broader section of the Agreement, but, critically, the fact that

the phrase could be read in such a way confirms its ambiguity.

Because    “payment         terms”    could       be    read    in    several       different

manners,       Bank    of    the     Ozarks       is    incorrect      that    the     phrase

unambiguously         sweeps    aside    Paragraph          4’s      rule    for    expenses.

Accordingly, we agree with the district court that the Agreement

is internally inconsistent and thus ambiguous.

                                          III.

     For the foregoing reasons, we affirm the district court’s

denial    of    Bank    of     the    Ozarks’          motion   for    judgment       on    the

pleadings.

                                                                                     AFFIRMED




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