Davis Adv. Sh. No. 31
In The Supreme Court
Crestwood Golf Club,
Partnership, John Boyd,
Claude McCain, Walter
Bryant and George
Harry H. Potter,
Marguerite Potter and
Kevin E. Potter, Appellants.
Crestwood Golf Club, Inc.
John Boyd, Claude
McCain, Walter Bryant
and George McCain, Respondents,
Theodore Potter, Dale
Potter, South Carolina
National Bank, the
Crestwood County Club,
Inc. And Kevin E. Potter
Of which Theodore, Dale and
Kevin Potter are Appellants.
Appeal From Bamberg County
Thomas J. Ervin, Judge
O. Davie Burgdorf, Master-in-Equity
Heard June 17, 1997 - Filed November 10, 1997
Kevin, Theodore, Harry, Dale. and Marguerite
Potter, all of Millville, N.J., Pro Se Appellants.
James Mosteller, III, of Blackville; and James
Nance, of Henderson & Salley, of Aiken, for
TOAL, A.J.: This dispute stems from the sale of a golf course. The
appellants raise numerous issues on appeal. We affirm.
The facts in this case are somewhat complicated. A summary of
relevant facts, parties, and transactions follows:
A. Underlying Transaction (Sale OF CRESTWOOD GOLF COURSE)
On April 3, 1991, Theodore and Dale Potter ("Purchasers") entered into
an agreement with Crestwood Partnership ("Partnership") and Crestwood Golf
Club, Inc. ("Golf Club")(collectively "Sellers") to purchase certain real property
and improvements ("Golf Course") in Bamberg County, as well as machinery,
equipment, membership lists, and golf carts. A golf course and country club
(restaurant and bar) were located on the property. According to the sales
agreement, the total sales price for Golf Course was $412,315.22. 1
An addendum to the sales agreement stated that of the purchase price,
$60,000 represented the price for the land itself, and $250,000 represented
the price for buildings and improvements. The sales agreement itself did not
state the price for the personalty at issue, which included, among other
things, equipment, membership lists, and golf carts. However, the bill of sale
$417,516.48, which consisted of the contract price plus various closing costs.
for the personalty stated the purchase price was $102,305.22. The total of
these figures is $412,305.22, ten dollars less than the total purchase price.
However, the sales agreement separately valued the membership lists at ten
dollars, and we assume that accounts for the discrepancy in the figures and
the purchase price.
At closing, Purchasers paid Sellers $125,201.26, leaving a balance of
$292,315.22. Purchasers obtained financing and other credits for the rest of
the amount. The various sources of the financing will be discussed below.
Although the sales agreement was between Purchasers, Partnership,
and Golf Club, subsequent instruments clarify what portion of the property
Partnership had owned and what portion Golf Club had owned. The deed of
the real property and improvements was executed on April 3, 1991.
Specifically, Partnership alone deeded the real property and improvements
to Purchasers. Golf Club apparently never owned any portion of the real
property and improvements. In contrast, the Bill of Sale for the personalty,
including equipment and golf carts, reflected that Purchasers bought the
personalty from Golf Club alone; Partnership did not own the personalty that
was the subject of the transaction.
B. Financing of Sale of Golf Course
1. Notes and Mortgages
Purchasers financed the transaction through a variety of means. First,
they borrowed $205,836.25 from South Carolina National ("Bank").2 This
debt was secured by Purchasers' mortgage ("Bank Mortgage") of Golf Course,
as well as a security interest in assets owned by Purchasers in connection
this amount. The sales agreement as originally drafted required Purchasers
to assume certain Partnership and individual partners' obligations to Bank.
Purchasers would have assumed four individual promissory notes to Bank.
The amount owed on each of those notes was $27,161.25. Purchasers would
also have had to assume a debt of Partnership to Bank in the amount of
$98,657.27. These five obligations totalled $207,302.27, only slightly more
than the $205,836.25 note Purchasers executed to Bank.
Ultimately, however, instead of assuming the five debts, Purchasers
simply executed a promissory note to Bank in the total amount owed by
Partnership and the individual partners. Partnership and the partners then
guaranteed Purchasers' obligation to Bank.
with Golf Course. Sellers executed to Bank a continuing guaranty of
Purchasers' debt to Bank.
Purchasers also borrowed $72,135.76 ("Crestwood Note") from Sellers
in order to finance the purchase of Golf Course. This debt was secured by
Purchasers' mortgage ("Crestwood Mortgage") of Golf Course to Sellers. In
addition to securing the $72,135.76 debt to Sellers, the Crestwood Mortgage
secured, among other things, "all contingent liability which the Mortgagor
[Purchasers] has to the Mortgagee [Sellers] pursuant to indebtedness of
[Purchasers] to the South Carolina National Bank which is guaranteed by
certain of [Sellers] pursuant to Agreement for Purchase and Sale of Assets
by [Purchasers] . . . for a total principal sum not to exceed $290,534.29. . .3
plus interest at the same rate as in the Note and any other costs payable
hereunder...." Purchasers also gave Sellers a security interest in assets
owned by Purchasers in connection with Golf Course.
As a condition of the sale of Golf Course, Sellers and Bank required
Theodore Potter's4 parents ("Guarantors") to guarantee all Purchasers'
indebtedness to Bank and to Sellers. Therefore, Guarantors executed two
separate guarantees. First, they guaranteed Purchasers' indebtedness to
Bank ("Bank Guaranty"). They also guaranteed Purchasers' indebtedness to
Sellers ("Crestwood Guaranty"), including the $290,534.29 contingent liability
referenced in the Crestwood Mortgage.
3. Assignment of Financial Documents
As holders of the Crestwood Note and mortgagees of the Crestwood
Mortgage, Sellers assigned to Bank their interest in the Crestwood Note,
$205,836.25 Note to Bank, and a $12,562.28 obligation of Golf Club to Sellers
that Purchasers had assumed. Because Partnership, Golf Club, and certain
individuals had guaranteed the Bank Note, they wanted Purchasers to
provide security for the entire amount for which Partnership could be liable
as a guarantor.
4 As noted above, Theodore Potter was one of the purchasers of Golf
Course. He and his wife Dale Potter (when referred to individually, "Wife")
both signed the sales agreement and all promissory notes, mortgages, and
Crestwood Mortgage, Crestwood Guaranty, and various leases (assignment
hereinafter referred to as "Collateral Assignment"). The Collateral
Assignment document gave Sellers the "right to receive and use and enjoy the
property which is the subject" of the assignment, as long as Sellers did not
default under the terms of the Collateral Assignment. Paragraph 4(a) of the
Collateral Assignment required Sellers to:
(i) give prompt notice to the Lender [Bank] of any default under
the Assigned Documents which is not timely cured as provided
therein; (ii) at the sole cost and expense of the Assignor [Sellers],
enforce the payment and observance of each and every covenant
and condition of the Assigned Documents, and (iii) appear in and
defend any action growing out of or in any manner connected
with, the Assigned Documents.
C. Lawsuits Relating to Sale of Golf Course
By June 1, 1992, Purchasers ceased making payments on the Bank
Note. They informed Bank "that they did not intend to pay the bill, and for
[Bank] to go to [Sellers] for payment." As guarantors of Purchasers' debt to
Bank, Sellers began making payments to Bank in order to avoid defaulting
on their continuing guaranty.
Purchasers made interest payments on the Crestwood Note from
approximately April 3, 1991 until November 3, 1991. Purchasers then ceased
making any payments. Sellers demanded Guarantors fulfill the terms of the
Crestwood Guaranty by satisfying the amount of Purchasers' indebtedness,
but Guarantors failed to do so. It is clear from the Record that Purchasers
were dissatisfied with the condition of Golf Course and felt that Sellers
committed material misrepresentations in the process of selling Golf Course
Several lawsuits stemmed from this dispute between Purchasers and
Sellers, but only three are particularly relevant to this appeal.
1. Foreclosure Action against Purchasers
On May 29, 1992, Sellers filed a complaint against Purchasers. The
complaint primarily sought foreclosure of the Crestwood Mortgage and
security agreement. Purchasers' answer was filed June 26, 1992. It
contained several defenses and counterclaims, including counterclaims for
fraud, breach of contract, and racketeering.
Because of the outcome of a federal lawsuit involving identical claims,
the trial court dismissed Purchasers' counterclaims and referred the
foreclosure portion of the action to a master in equity. The master in equity
found Sellers entitled to foreclose except as to Theodore Potter's half interest
in the real estate and improvements.5
Purchasers appeal the trial court's order dismissing the counterclaims
and the master's order requiring foreclosure.
2. Lawsuit against Guarantors
On May 26, 1992, Sellers filed a complaint against Guarantors. The
complaint alleged that Purchasers had defaulted under the terms of the
Crestwood Note and Crestwood Mortgage and that Sellers had accelerated the
amount due because of such default. The complaint also alleged that
Guarantors were liable for the full amount of Purchasers' indebtedness to
Sellers by reason of Guarantors' unconditional guaranty of Purchasers'
obligations to Sellers.
Guarantors answered the complaint on June 26, 1992. The answer
contained several defenses and counterclaims.6 Specifically, Guarantors
alleged Sellers had engaged in fraud, breach of contract, and racketeering.
The trial court dismissed Guarantors' counterclaims and referred the
cause of action concerning the Crestwood Guaranty to the master in equity.
The master in equity ruled Sellers had a right to recover under the terms of
the Crestwood Guaranty. Guarantors appeal the dismissal of the
counterclaim and the ultimate ruling of the master in equity.
the deed for the real estate and improvements, but not for the bill of sale for
the personalty. Stated another way, Theodore obtained a judgment against
Partnership, which had sold him the real estate, but not against Golf Club,
which had sold him the personalty. Because he continued to have an interest
in the personalty covered in the security agreement, Theodore Potter
remained a party to this action.
6 They later filed an amended answer alleging additional defenses.
3. Federal Court Litigation
Theodore Potter, Kevin Potter,7 and Guarantors brought an action
against Sellers in the summer of 1993 in the United States District Court for
the District of South Carolina. Dale Potter, Theodore Potter's wife, was not
a party to the federal action. This lawsuit concerned the agreement to sell
Golf Course and all its equipment and improvements. The Potters alleged
fraud, breach of contract, and certain other causes of action.
The district court judge dismissed the fraud claims and directed a
verdict in favor of Sellers as to Guarantors' claims. Theodore and Kevin
Potter's claims regarding negligent misrepresentation were sent to the jury,
and the jury found negligent misrepresentation in the sale of the real estate
and improvements. Accordingly, the Potters obtained judgment against
Partnership, which had sold them the real property. Theodore and Kevin
Potter elected the remedy of rescission of the contract as to the real estate
and improvements rather than simply collecting damages for breach of
contract. As to personalty, the judgment was in favor of Golf Club, which
had sold Purchasers the personalty; accordingly, Theodore Potter or his
assignee remained responsible for his agreement to purchase equipment and
other personalty from Sellers.
Purchasers and Guarantors have raised a number of issues on appeal.
We shall first address the Dale Potter appeal, then the Theodore and Kevin
Potter appeal, then the appeal by Guarantors.
A. Dale Potter Appeal
1. Dismissal of Counterclaim
Kevin Potter, who allegedly is appearing as assignee of Dale Potter's
interests, raises several issues concerning the dismissal of Dale Potter's
of his relationship to these lawsuits is not entirely clear, Kevin appears to
have been the assignee of Theodore Potter's interests. He further asserts he
is the assignee of Dale Potter's interests.
counterclaims.8 Because Dale Potter did not appeal the rulings of the trial
court, the issues raised by Kevin Potter concerning Dale Potter are not
properly before this Court. Accordingly, we affirm the dismissal of Dale
The basis for the trial court's dismissal of Dale Potter's counterclaims
is unclear. Portions of the order dismissing the counterclaims suggest the
dismissal resulted from Dale Potter's failure to appear and defend in the
lawsuit. Other portions of the order suggest her counterclaims were
dismissed based on res judicata and collateral estoppel. In either case, there
is no reversible error.
If the trial court dismissed Dale Potter's counterclaims based on her
repeated failure during the litigation to appear and to prosecute and defend
the action, there was no error. Rule 41(c), SCRCP, allows a trial judge to
dismiss an action, upon a party's motion, for the other party's failure to
prosecute a counterclaim, cross-claim, or third-party claim. Here, that rule
would not apply; any dismissal was accomplished by the judge sua sponte.
However, this Court has held that trial judges possess the inherent power to
dismiss actions sua sponte for a party's failure to prosecute the relevant
claims. See, e.g., Small v. Mungo, 254 S.C. 438, 442, 175 S.E.2d 802, 803
(1970)(noting that "it is within the inherent power of the court to dismiss an
action for failure to prosecute."); see also 24 Am. Jur. 2d Dismissal,
Discontinuance, and Nonsuit 48 (1983)("Provision is made in federal and
state statutes or rules of practice for dismissal of civil actions for failure of
prosecution by the plaintiff. However, the power of trial courts to dismiss a
case for failure to prosecute with due diligence is generally considered
actually dismissed by the trial court. Their argument concerning the
dismissal of the counterclaims is a "fallback" position. Based on the language
in the order dismissing the counterclaims, as well as statements made by the
trial judge at the hearing on the motion to dismiss the counterclaims, we
conclude Dale Potter's counterclaims were dismissed at the same time that
Theodore Potter's counterclaims were dismissed.
When he dismissed the counterclaims, the trial judge referred all
remaining issues to the master in equity. If he had not intended to dismiss
Dale Potter's counterclaims, then they were referred to the master in equity,
and Dale Potter should have appealed the order of reference. Given that
neither she nor anyone else appealed that order, we conclude the parties
agreed that Dale Potter's counterclaims had been dismissed by the trial
inherent and independent of any statute or rule of court. Such power is
deemed to be necessarily vested in trial courts to manage their own affairs
so as to achieve orderly and expeditious disposition of cases."); cf. Collins v.
Sigmon, 299 S.C. 464, 385 S.E.2d 835 (1989)(finding that federal court's
exercise of inherent power to dismiss a case sua sponte for lack of
prosecution operated as an adjudication on the merits just as would a
dismissal pursuant to Rule 41, FRCP.). Nevertheless, as will be explained
below, there is no reversible error even if the judge should not have
dismissed Dale Potter's counterclaims for failure to prosecute.
If the trial court dismissed Dale Potter's counterclaims based on the
doctrines of res judicata or collateral estoppel, the dismissal was error. For
a claim to be barred by the doctrine of res judicata, identity of parties is
necessary. No one disputes that Dale Potter was not a party to the federal
court action. Accordingly, res judicata cannot apply to her counterclaims in
the state court foreclosure action.
Nevertheless, such error is not reversible because Dale Potter has not
appealed the dismissal of her counterclaims. The Potters claim Kevin Potter
has appealed as assignee of Dale Potter. However, the Record contains
insufficient evidence of any such assignment. The transcript of the hearing
before the master in equity references an inadequate deed from Dale to
Theodore Potter; the deed lacks a sufficient number of witnesses and also is
not recorded. Additionally, although the Record contains an assignment of
Dale Potter's interest, it does not appear this assignment was presented
either to the trial court that dismissed the counterclaims or to the master in
equity who ordered the foreclosure. Given the lack of evidence regarding an
assignment, Dale Potter herself was required to appeal the dismissal of her
counterclaims. Because she failed to do so, the dismissal of her
counterclaims is affirmed in its entirety.
2. Foreclosure Order Against Dale Potter
Even assuming Kevin or Theodore Potter received an assignment of
Dale Potter's interest in time for them to appeal the foreclosure order, we
affirm the order of foreclosure against Dale Potter's half interest in Golf
Course and the improvements and personalty located thereon. The legal
issues raised regarding foreclosure against Dale Potter mirror those raised
by Theodore and Kevin Potter, which are discussed below.
B. Theodore and Kevin Potter Appeal
Purchasers first argue the master in equity erred in finding Sellers
entitled to enforce the Crestwood Guaranty and Crestwood Mortgage. They
specifically claim Sellers lack standing to enforce these instruments because
Sellers assigned all rights in the instruments to Bank. We disagree.
Ordinarily, an assignment "vests the legal title in the assignee and
places the property beyond the control of the assignor . . . ." 6 Am. Jur. 2d
Assignments for Benefit of Creditors 75 (1963). When the assignee retains
no rights to the assigned property, the assignee lacks standing to enforce
any agreements regarding the assigned property.
Unlike a traditional assignment, however, the Collateral Assignment
makes clear that Sellers retained both the right and the obligation to enforce
the assigned documents. Although the Collateral Assignment does contain
language assigning to Bank "all of the right, title and interest of [Sellers] to"
the Crestwood Note, Crestwood Mortgage, Crestwood Guaranty, and certain
leases, later language clarifies the nature of the assignment. Paragraph 2(a)
of the Collateral Assignment gives Sellers the right "to receive and use and
enjoy the property which is the subject of this Assignment" as long as Sellers
do not default on any guaranty obligations to Bank and comply with the
terms of the Collateral Assignment. Paragraph 2(b) provides that the
Collateral Assignment shall "become and be void and of no effect" after
Sellers satisfy all indebtedness the Collateral Assignment is intended to
secure. This language and other language in the Collateral Assignment
indicates the sole purpose of the assignment is to provide additional security
for Sellers' guaranty of Purchasers' debt to Bank.
Paragraph 4 of the Collateral Assignment directly addresses Sellers'
right to enforce the assigned documents. As quoted above, paragraph 4(a)
requires Sellers to bring actions to enforce the assigned documents:
The Assignor will: (i) give prompt notice to the Lender of
any default under the Assigned Documents which is not timely
cured as provided therein; (ii) at the sole cost and expense of the
Assignor, enforce the performance and observance of each and
every covenant and condition of the Assigned Documents, and (iii)
appear in and defend any action growing out of or in any manner
connected with, the Assigned Documents.
(emphasis added). As provided by paragraph 4(c), Bank will enforce the
assigned documents only if Sellers default on their guaranty obligation to
Bank or fail to comply with the conditions of the Collateral Assignment.
Therefore, Sellers had both the right and the duty to bring actions to
foreclose the Crestwood Mortgage. Given the language of the Collateral
Assignment, Appellants' argument regarding standing or real party in
interest lacks merit.
2. CLAIM SPLITTING
Purchasers next argue that the trial court and/or master in equity erred
in allowing the Crestwood foreclosure action and the action on the Crestwood
Guaranty to be tried as separate lawsuits. In essence, they suggest the
Crestwood Mortgage and Crestwood Guaranty arose from the same
transaction and that, therefore, Sellers were obliged to try the foreclosure and
guaranty as one action.
Purchasers' argument fails for three reasons. First, none of the
relevant orders address this issue, so even if the issue was raised,9
Purchasers had a duty to move pursuant to Rule 59(e), SCRCP, for a ruling
on the issue. Second, Sellers moved to consolidate the cases, but Purchasers
opposed consolidation. Third, the hearing in the foreclosure and guaranty
actions was, in fact, consolidated,, even though technically the cases
themselves were not. Under these circumstances, this issue lacks merit.
3. Adjudication of Equitable Claims Prior to Final Decision on Counterclaims
Purchasers next argue the master in equity erred in failing to stay the
equitable proceedings until the appeal of the dismissal of the legal
counterclaims. We need not reach this issue.
Given our affirmance of the dismissal of Theodore Potter's
counterclaims, Theodore and Kevin Potter have suffered no harm from the
trial of the foreclosure action prior to the final appellate disposition of the
would be best if the foreclosure and guaranty actions were tried together.
Sellers had no objection to this, and it appears from the Record that the
parties actually consented to the procedure that ultimately was followed.
Given those facts, it is unclear exactly what Purchasers are appealing here.
4. Theodore's Counterclaims - Effect of Stipulation
Theodore Potter next argues that the trial court erred in dismissing his
counterclaims because Sellers had consented through stipulation of counsel
to litigating certain of the counterclaims after the federal trial. We disagree.
The Record contains no such stipulation, and we are aware of none.
As the appellant, Theodore Potter bore the burden of providing this Court
with a sufficient Record to review his assertions of error. See, e.g., Hamilton
v. Greyhound Lines East, 281 S.C. 442, 316 S.E.2d 368 (1984); see also Rule
209(h), SCACR ("Except as provided by Rule 211 and Rule 207(b)(1)(D) and
(2), the appellate court will not consider any fact which does not appear in
the Record on Appeal.").
Moreover, as Sellers note, at the state court hearing on Sellers' motion
to dismiss the counterclaims, Potter did not argue or introduce the stipulation
to which he now refers. In short, this issue was not raised to the trial court.
Accordingly, this Court need not address the issue. See, e.g., Schofield v.
Richland County School Dist., 316 S.C. 78, 447 S.E.2d 189 (1994)(an issue
may not be raised for the first time on appeal, but must have been raised to
the trial judge to be preserved for appellate review).
5. Lack of Consent to Litigate Mortgage Issues After Federal Trial
Purchasers next argue that if the parties did not consent to litigating
the validity of the Crestwood mortgages after the federal trial, then the
doctrines of res judicata and collateral estoppel bar any action on the
foreclosure because the validity of the mortgage could and should have been
litigated as part of the federal action. We disagree.
The precise issue here is whether Sellers should have been barred from
asserting their claims in state court since they could and should have
asserted such claims as counterclaims in federal court.
In resolving whether res judicata applies, the discussion must be
divided between permissive and compulsory counterclaims. However, even
before reaching these subjects, it must first be decided if federal or state law
controls. In the instant case, the prior litigation occurred in federal court.
In Kirven v. Virginia-Carolina Chemical Co., 77 S.C. 493, 498, 58 S.E. 424,
425 (1907), the South Carolina Supreme Court held that "When the [federal]
judgment was urged as a bar to the action in the State Court, a Federal
question was presented, and must be determined in accordance with the
decisions of the United States Supreme Court." Thus, federal law controls
in this case.
The term res judicata encompasses two types of preclusion: claim
preclusion and issue preclusion. See Pedrina v. Chun, 906 F. Supp. 1377 (D.
Hawaii 1995). "Issue preclusion and claim preclusion have historically been
called collateral estoppel and bar or merger respectively." Id. at 1399. For
the sake of simplicity, this Court will use the terms issue preclusion and
claim preclusion. "Issue preclusion only bars relitigation of particular issues
actually litigated and decided in the prior suit." Id. "Claim preclusion ...
bars plaintiffs from pursuing successive suits where the claim was litigated
or could have been litigated." Id. Issue preclusion is inapplicable to the
instant case because Purchasers are arguing that Sellers should have
litigated issues in federal court, not that such issues were actually litigated.
The application of claim preclusion turns on whether a counterclaim is
permissive or compulsory. If a counterclaim is permissive, but not raised in
the first case, a defendant is not precluded from asserting the claim in a
later action. See Kirven v. Virginia-Carolina Chemical Co., 77 S.C. 493, 58
S.E. 424 (1907), aff'd, 215 U.S. 252, 30 S. Ct. 78, 54 L. Ed. 179 (1909); 50
C.J.S. Judgments 777(c) (1997). On the other hand, if a counterclaim is
compulsory, but not raised in the first action, a defendant is precluded from
asserting the claim in a subsequent action. See Baker v. Gold Seal Liquors,
Inc., 417 U.S. 467, 469 n. 1, 94 S. Ct. 2504, 2506 n. 1, 41 L. Ed. 2d 243, 247
n. 1 (1974); Dillard v. Security Pacific Brokers, Inc., 835 F.2d 607, 609 (5th
Cir. 1988); In re Phillips, 124 B.R. 712, 716 (Bkrtcy. W.D. Tex. 1991).
Therefore, in the instant case, the pivotal issue is whether Sellers'
potential counterclaims in the federal case were compulsory or permissive.
Rule 13(a), FRCP, states, "A pleading shall state as a counterclaim any claim
which at the time of serving the pleading the pleader has against any
opposing party, if it arises out of the transaction or occurrence that is the
subject matter of the opposing party's claim . . . ." However, there is a
significant exception to this rule: "the pleader need not state the claim if (1)
at the time the action was commenced the claim was the subject of another
pending action . . . ." Rule 13(a), FRCP. In this case, Sellers filed their
action against Harry and Marguerite Potter in state circuit court on May 26,
1992. Three days later, Sellers filed their action against Theodore and Dale
Potter in state circuit court. It was not until the summer of 1993 that
Theodore, Harry, and Marguerite Potter filed their action in federal district
court. Clearly, the state court actions were pending at the time the federal
action was commenced. Therefore, Sellers' potential counterclaims in the
federal case were not compulsory because such claims were the subject of
pending litigation in state court. Consequently, claim preclusion is not a bar
to Sellers' claims in state court.
6. Consent to Litigating Mortgage and Guaranty in Separate Action
Purchasers next argue that because Sellers consented to litigating all
issues concerning the Crestwood Mortgages in a separate action,10 dismissal
of the counterclaims was inappropriate under Rule 12(b)(8), SCRCP. This
argument is simply a restatement of Potters' other arguments concerning
dismissal of the counterclaims, and we find it lacks merit.
7. Sellers' Motion to Amend Pleadings
Purchasers next argue the trial court erred in allowing Sellers to
amend their pleadings to allege res judicata and collateral estoppel as
defenses to Purchasers' counterclaims. We disagree.
At the hearing on Sellers' motion to amend their pleadings to allege
these defenses and on Sellers' motion to dismiss the counterclaims,
Purchasers simply addressed the substance of the res judicata and collateral
estoppel issues without arguing that Sellers should not be allowed to amend
their pleadings to include res judicata and collateral estoppel. Given this
fact, we hold Purchasers impliedly waived any objection they had to
amendment of the pleadings, and that, therefore, such amendment was
appropriate under Rule 15, SCRCP. Moreover, Rule 15 provides that "leave
[to amend pleadings] shall be freely given when justice so requires and does
not prejudice any other party." We find no abuse of discretion here. See,
e.g., Foggie v. CSX Transportation, Inc., 313 S.C. 98, 431 S.E.2d 587 (decision
on motion to amend pleadings rests within sound discretion of trial judge).
8. Discovery Abuse
Purchasers next argue the trial court erred in refusing to grant their
in the Record.
motion for discovery relief because of Sellers' failure to answer any discovery.
In the motion for sanctions, Purchasers asked for the following relief:
(1) dismissal of Sellers' complaints and judgment in favor of the Purchasers
on the Purchasers' counterclaims; or (2) striking of Sellers' answers to
counterclaims and refusing to allow Sellers to "support or oppose designated
claims and defenses"; or (3) continuance of trial until Sellers fully complied
with Purchasers' discovery requests. Attached to the motion are
interrogatories, requests for production of documents, and requests for
admission. The motion also describes alleged discovery abuse occurring
during certain depositions noticed by Purchasers.
The master in equity heard arguments and testimony on this motion.11
Appellant Kevin Potter requested the judge deem admitted all the
Purchasers' requests for admission because of Sellers' failure to respond. One
of Sellers' attorneys stated to the Court that he had never received the
requests for admission.12 Bank's attorney stated to the Court that he had no
memory of the delivery and service of the requests for admission. One of
Sellers' attorneys also denied having received a letter from Kevin Potter
questioning him about the status of the requests. Ultimately, the master in
equity allowed Sellers to respond to the requests for admission, and Sellers
admitted four of the requests and denied the rest. The master in equity did
not abuse his discretion by refusing to deem admitted the requests for
admission, particularly in light of the lack of hard proof that Sellers actually
received the requests.
As to the interrogatories and document requests, one of Sellers' lawyers
stated to the master in equity that he answered Purchasers' interrogatories
and request for production of documents. The lawyer apparently then
introduced the certificate of mailing for the answers to the interrogatories
and request for production of documents, which certificate has been included
in the Record on Appeal. We find that the master in equity had sufficient
discovery motions, would be referred to the master in equity as part of the
foreclosure and guaranty actions.
12 Kevin Potter asserted that he hand-served the requests for admission
at the deposition of Marguerite Potter, a guarantor.
evidence before him to conclude that sanctions were inappropriate.13 Kevin
Potter seems to complain that he never received the discovery, but the
certificate of service suggests Sellers did all that they were obligated to do.
Moreover, as Sellers point out, although Sellers in the discovery answers
objected to certain information, Purchasers never moved to compel more
complete answers or more documents; rather, Purchasers simply denied
having received any discovery.
Under these circumstances, the master in equity did not err in refusing
to sanction Sellers. See, e.g., Rule 37, SCRCP (generally providing for motion
to compel discovery prior to any imposition of sanctions); Dunn v. Dunn, 298
S.C. 499, 502, 381 S.E.2d 734, 735 (1989)(stating that the "trial court judge's
ruling on discovery matters will not be reversed on appeal absent a clear
abuse of discretion.").
9. Attorneys' Fees
Finally, Purchasers argue the attorneys' fee award by the master in
equity was excessive and included costs associated with other actions. We
The master in equity made thorough findings regarding the factors to
consider in determining a reasonable attorneys' fee. See, e.g., Blumberg v.
Nealco, Inc., 310 S.C. 492, 427 S.E.2d 659 (1993)(delineating factors to
consider in attorneys' fee award and requiring judges to state findings
explicitly). Moreover, considerable evidence was presented at the hearing
regarding the time spent by the attorneys in attempting to represent their
clients' interests. The affidavit filed after the hearing had as its purpose the
segregation of attorneys' fees associated with the foreclosure from fees
associated with related proceedings. When the master in equity stated he
would require a post-hearing affidavit segregating attorneys' fees associated
with the foreclosure from those associated with other related actions,
Purchasers did not object. We find ample support for the attorneys' fee
discovery sanctions that the answers to interrogatories and document
requests were the same in the foreclosure action and in the action on the
C. Harry and Marguerite Potter Appeal
Guarantors have raised a number of issues on appeal. Nearly all the
issues are identical to those raised by Purchasers. Based on our rulings in
Purchasers' appeal, we affirm the following issues raised by Guarantors:
Issue 1 (standing/capacity to sue); Issue 2 (failure to join necessary parties);
Issue 3 (adjudication of equitable claims prior to final decision on
counterclaims); Issue 4 (disn-Lissal of Guarantors' counterclaims); Issue 5 (res
judicata/collateral estoppel as to Sellers' claims); Issue 6 (consent to litigating
mortgage and guaranty in separate action); Issue 7 (motion to amend answer
to counterclaims); Issue 8 (discovery abuse; importantly, the Record does not
reflect that Guarantors moved to compel discovery); Issue 10 (attorneys' fees).
Guarantors' Issue 9 is different from any issue raised by Purchasers.
Specifically, Guarantors argue the master erred by entering judgment against
them prior to assessment of Purchasers' default. They further argue the
judgment against them should not have exceeded the amount of Purchasers'
We find no error. There are several good reasons the judgment against
Guarantors exceeded the amount of Purchasers' default. First, Sellers
incurred greater attorneys' fees in the action against Guarantors. Second,
and more importantly, Guarantors guaranteed to Sellers Purchasers' payment
of $290,534.29. Purchasers did not actually owe Sellers that full amount;
part of that amount represented an obligation of Purchasers to Bank.
However, because Sellers had guaranteed Purchasers' obligation to Bank,
Sellers obtained from Guarantors an obligation to "cover" this amount should
Purchasers default in their obligation to Bank. In contrast, Sellers could only
obtain judgment against Purchasers in the amount of Purchasers' default to
Sellers plus any amount Sellers had actually paid on their guaranty of
Purchasers' debt to Bank. The difference in the amounts of the judgments
was well supported by the evidence and by the differing nature of the
Guarantors' and Purchasers' obligations to Sellers.
Moreover, we find no prejudice in the entry of judgment prior to
assessment of Purchasers' default. The amount of the judgment entered
against Guarantors finds full support in the Record.
judgment against Guarantors totalled $437,555.
For the foregoing reasons, the judgments of the trial court and of the
master in equity are AFFIRMED.
FINNEY, C.J., MOORE and WALLER, JJ., and Acting Associate
Justice L. Casey Manning, concur.