## Facts

- Swinton Creek Nursery, operated by James M. Futch III, ran a wholesale azalea business supplying large retailers.
- Futch borrowed $30,000 in 1989 to expand the nursery; after a lender merger in 1991, the loan was serviced by Edisto Farm Credit, ACA (EFC) through its Summerville branch manager/loan officer.
- Futch became delinquent, received a renewal/extension, defaulted again, and agreed to pay $8,000 and pursue liquidation of nursery assets to satisfy the debt.
- Futch negotiated a partial sale of nursery assets and equipment to a prospective buyer for $97,500; the buyer sought financing from EFC to fund the purchase.
- Futch claimed EFC personnel represented that the buyer’s loan would be approved/made, causing Futch to stop pursuing other debt-resolution options and to continue operating in reliance on that financing.
- EFC ultimately declined to make the buyer’s loan, proceeded to foreclose on Futch’s collateral, and purchased the collateral at the foreclosure sale.
- Swinton Creek and Futch sued, and a jury found for them on negligent misrepresentation and on a claim labeled breach of the implied covenant of good faith and fair dealing, awarding actual and punitive damages.
- The Court of Appeals reversed in part; the Supreme Court of South Carolina granted certiorari.

## Issues

1. Whether the evidence supported liability for negligent misrepresentation based on EFC’s statements about financing the buyer’s purchase.
2. Whether South Carolina recognizes an independent tort cause of action for breach of the implied covenant of good faith and fair dealing in an ordinary lender-borrower relationship, and whether EFC was liable on that theory.
3. How damages should be limited to losses proximately caused by any actionable misrepresentation rather than losses attributable solely to a lawful foreclosure after default.

## Decision

- The Supreme Court affirmed in part, reversed in part, and remanded.
- The Court reinstated the jury’s verdict on negligent misrepresentation, holding the evidence was sufficient for a reasonable jury to find the elements satisfied.
- The Court rejected an independent tort claim for breach of the implied covenant of good faith and fair dealing in the commercial lending context, declining to extend insurance-style bad-faith tort principles to lenders.
- The Court held that a lender’s exercise of contractual foreclosure rights after default, by itself, is not bad faith.
- The Court remanded for further proceedings, including aligning damages with the claims that remained viable and limiting recovery to losses proximately caused by the misrepresentation.

## Legal Principles

- Negligent misrepresentation requires proof of: (1) a false representation; (2) the speaker’s pecuniary interest; (3) a duty of care in communicating information; (4) breach of that duty by lack of due care; (5) justifiable reliance; and (6) pecuniary loss proximately caused by the reliance.
- In lender-related negotiations, assurances framed as present facts about loan approval (not merely statements of future intent) can support negligent misrepresentation if reasonably relied upon to the borrower’s detriment.
- Every contract includes an implied covenant of good faith and fair dealing, but, in ordinary commercial lending, breach of that covenant does not create a separate tort claim analogous to insurance bad faith.
- A lender generally may enforce contractual remedies, including foreclosure after default; liability may arise from independent tortious conduct in related communications or negotiations.
- Damages must be tied to the losses proximately caused by the actionable conduct (e.g., lost opportunity for an orderly liquidation) and not merely to the economic consequences of a lawful foreclosure.

## Conclusion

The court held that a borrower may recover for a lender’s negligent misrepresentations made in connection with third-party financing discussions when the borrower reasonably relies and suffers loss, but it refused to recognize a standalone tort for breach of the implied covenant of good faith and fair dealing in routine lender-borrower relations, remanding to ensure damages matched the surviving legal theory.


Swinton Creek Nursery v. Edisto Farm Credit, ACA, 334 S.C. 469, 514 S.E.2d 126 (S.C. 1999)