THE STATE OF SOUTH CAROLINA
In The Supreme Court
Reather B. Tilley, Willis
E. Wood, Owena R.
Wood, Louise Williams,
on behalf of themselves
and all others similarly
including but not
limited to its division
known as Federal
Diversified Services, Appellant.
Appeal From Barnwell County
Henry F. Floyd, Judge
Rodney A. Peeples, Judge
Opinion No. 24848
Heard June 16, 1998 - Filed October 26, 1998
AFFIRMED IN RESULT
Desa Ballard, of West Columbia; Miles Loadholt, of
Ness, Motley, Loadholt, Richardson & Poole, of
Barnwell; Daryl L. Williams, of Jeter & Williams,
of Columbia, and Richard Sinkfield, of Rogers &
Hardin, of Atlanta, Ga., for appellant.
Steven W. Hamm and Mary S. League, both of
Richardson, Plowden, Carpenter & Robinson, PA, of
Columbia; T. Alexander Beard, of Beard Law
Offices, of Charleston; Bradford P. Simpson and
Randall P. Dong, both of Simpson, Dong &
Wingate, LLC, of Columbia; Daniel W. Williams, of
Bedingfield & Williams, of Barnwell, for
David W. Robinson, II, and J. Kershaw Spong, both
of Robinson, McFadden & Moore, of Columbia;
William C. Hubbard, John T. Moore, C. Mitchell
Brown, B. Rush Smith, III, and Jeffrey A. Jacobs,
all of Nelson, Mullins, Riley & Scarborough, of
Columbia, for Amici Curiae South Carolina Bankers
Association and South Carolina Financial Services.
PER CURIAM: This is a class action in which the trial court granted
respondents (hereafter Buyers) summary judgment. The court ruled that
appellant, Pacesetter Corporation, failed to comply with the attorney and
insurance agent preference provisions of the South Carolina Consumer
Protection Code (CPC). We affirm.
Pacesetter is a Nebraska Corporation which sells aluminum windows,
awnings, and doors, in South Carolina. Buyers in this case each entered into
a "Retail Installment Sales Contract and Mortgage" to purchase products from
Pacesetter, which was to be secured by a mortgage on their homes. The
contracts contain the following provision:
OBLIGATIONS PERTAINING TO PROPERTY INSURANCE
AND MY REAL ESTATE: 1. I promise to keep my house in good
repair and keep it insured for at least 80% of its replacement
value by buying fire and extended coverage insurance policy. The
insurance company must be approved by you, and the policy must
agree that it will not cancel my policy without telling you. I
authorize the insurance company to pay you directly for any loss.
You can choose to use this insurance payment to either repay any
amounts I owe you or to repair my house. I have the option of
providing property insurance through an existing policy or
through a policy independently obtained and paid for by me ... 5.
If I do not insure my house or fulfill my obligations to my real
estate, then you can do it for me (but you do not have to). If you
do pay any of these obligations for me, I agree to pay you back
on demand plus interest. Until I pay you back, these amounts
will be added to my debt to you which is secured by my real
estate and house. I know that if you decide to buy insurance for
me you do not have to obtain any homeowner or liability
Subsequent to entering the contracts, Buyers instituted this action
pursuant to S.C. Code Ann. § 37-2-413, contending Pacesetter failed to
ascertain their preference of attorney and insurance agent, in violation of S.C.
Code Ann. § 37-10-102.1 They sought damages pursuant to S.C. Code Ann.
§37-10-105,2 and requested class certification. Pacesetter moved to dismiss,
With respect to a consumer credit sale that is secured in whole
or in part by a lien on real estate the provisions of § 37-10-102(a)
apply whenever the seller requires the debtor to purchase
insurance or pay any attorney's fees in connection with
examining the title and closing the transaction. (Emphasis
Section 37-10-102(a) provides, in pertinent part:
Whenever the primary purpose of a loan that is secured in whole
or in part by a lien on real estate is for a personal, family or
household purpose -
(a) The creditor must ascertain prior to closing the
preference of the borrower as to the legal counsel that
is employed to represent the debtor in all matters of the
transaction relating to the closing of the transaction and ...
the insurance agent to furnish required hazard and
flood property insurance in connection with the mortgage
and comply with such preference. (Emphasis supplied).
2 At the time this action was instituted, section 37-10-105 provided, in
pertinent part, as follows:
§ 37-10-105. Penalties for violations.
contending the remedies provided by section 37-10-105 were not applicable
to the "Consumer Credit Sales" in question, and that two of the causes of
action (those of the Woods and Tilley) were barred by the statute of
limitations. Judge Henry Floyd denied Pacesetter's motion to dismiss and
granted plaintiffs' motion for class certification.
Thereafter, Judge Rodney Peeples granted Buyers summary judgment
on the issue of liability, finding Pacesetter had failed to obtain Buyers'
preference as to attorney and insurance agent, in violation of section 37-2-
1. Did the circuit court err in finding Pacesetter liable, as a
matter of law, under S.C. Code Ann. § 37-2-413(2)?
2. Did the court err in finding Buyers were entitled to seek the
remedies provided under S.C. Code Ann. § 37-10-105?
3. Did the court err in applying the statute of limitations found
in S.C. Code Ann. § 37-5-202?
4. Did the court err in certifying the class?
1. APPLICABILITY OF SECTION 37-2-413
Pacesetter contends section 37-2-413(2) is inapplicable to this case. We
this chapter, any person who shall receive or contract to receive
a loan finance charge, or other charge or fee in violation of this
chapter shall forfeit-
(a) the total amount of the loan finance charge and the costs of
the action; and the unpaid balance of the loan shall be repayable
without any loan finance charge;
(b) double the amount of the excess loan finance charge or other
charges or fees actually received by the creditor or paid by the
This section was amended effective June, 1997; the amendments are not at
issue in this appeal.
Whenever a consumer credit sale is secured in whole or in part by a
lien on real estate, section 37-2-413(2) makes the attorney and insurance
preference provisions of section 37-10-102(a) applicable if the seller requires
the debtor to purchase insurance or pay any attorney's fees in connection
with examining the title and closing the transaction.
Essentially, Pacesetter contends section 37-2-413(2) does not require the
preference notice where, as here, buyers are permitted to provide insurance
themselves through an existing policy, and are not charged a premium by the
lender. We disagree.
If a statute's language is plain and unambiguous, and conveys a clear
and definite meaning, there is no occasion for employing rules of statutory
interpretation and the court has no right to look for or impose another
meaning. Paschal v. State Election Comm'n, 317 S.C. 434, 454 S.E.2d 890
(1995); Carolina Power & Light Co. v. City of Bennettsville, 314 S.C. 137, 442
S.E.2d 177 (1994).
It is undisputed that Pacesetter's contracts contain a provision in which
the buyer promises to "buy... a fire and extended coverage insurance policy,"
and which permits Pacesetter to do so if the buyer fails to do so. Buyers are
contractually required to purchase insurance on their homes.3 The trial
court correctly ruled there was no genuine issue of material fact concerning
Pacesetter next contends the court erred in finding that once the
preference provisions were triggered with regard to insurance notification,
the seller was also required to give notice of an attorney preference,
regardless of whether an attorney was actually employed in connection with
the transaction, and regardless of whether the debtor was required to pay
any attorneys fees. It contends the attorney preference notice is required
only if the debtor is actually required to pay an attorney's fee. We disagree.
of its employees that it never enforced the insurance provision of its contract.
Given the fact that buyers were contractually required to purchase insurance,
it is simply irrelevant whether or not Pacesetter chose to enforce its contract.
This is particularly true in light of Pacesetter's contractual non-waiver of
claims clause, permitting Pacesetter, at any time it chose, to foreclose by
virtue of a buyer's failure to obtain insurance.
The literal terms of the statute require that whenever the seller
requires the debtor to purchase. insurance or pay any attorney's fees, the
seller must comply with the preference provisions. Construing this provision
liberally, as we must,4 we find the statute unambiguously requires the
preference notice as to both attorney and insurance agent whenever the seller
requires either the purchase of insurance or the payment of any attorney's
Finally, Pacesetter contends it substantially complied with the notice
requirements of 37-10-102(a), as required by this Court's recent opinion in
Davis v. Nationscredit Financial Services Corp., ___ S.C. ___ 484 S.E.2d 471
(1997). We disagree.
Davis was a certified question which addressed the lender's use of a
separate piece of paper to ascertain a borrower's preferences of legal counsel.
and hazard insurance, rather than including a preference statement on the
first page of the credit application. Here, there is no separate statement,
nor any attorney/insurance preference statement. The mere fact that
Pacesetter's contracts gave debtors the "option of providing property
insurance through an existing policy or through a policy independently
obtained" simply does not meet section 37-10-102(a)'s requirement that the
seller "must ascertain the preference of the borrower as to the ... insurance
agent to furnish required hazard and flood property insurance... "
Accordingly, the trial court properly ruled Pacesetter had not substantially
complied with the statute.
2. REMEDIES UNDER SECTION 37-10-105
Pacesetter contends the remedies found in section 37-5-202 are the
construed and applied to promote its underlying purposes and policies."
5 In light of our holding, it is unnecessary to decide whether the fees
charged by Pacesetter in connection with its closing were, in fact, "attorneys
fees." But see State v. Buyer's Service Co., 292 S.C. 426, 317 S.E.2d 15
(19871)(preparation of deeds, notes, and other legal instruments related to
mortgage loans and transfers of real property by a commercial title company
constitutes the unauthorized practice of law).
exclusive remedy for a violation of the attorney preference provisions in
regard to consumer credit sales. We disagree. Construing the statutes
liberally, as required by section 37-1-102,6 we find Buyers may seek the
remedies set forth insection 37-10-105.
Section 37-10-101 states that "unless otherwise provided," Chapter 10
of title 37 applies only to designated loan transactions other than consumer
loan transactions. Section 37-2-413(2) "otherwise provides," making section
37-10-102(a) applicable whenever the sale is secured by a lien on real estate,
and the seller requires the debtor to purchase insurance or pay any attorney's
fees in connection with closing-the transaction.
Pacesetter contends that, in providing a specific remedy in 37-5-2027 for
violations of section 37-2-413, the legislature intended 5-202 as the exclusive
remedy. We disagree. Had the Legislature so intended, it could have
specifically provided that section 37-5-202 was the exclusive remedy. Accord
Hainer v. American Medical International, ___ S.C.___, 492 S.E.2d 103
(1997)(if legislature had intended certain result in a statue, it would have
said so). Under a liberal construction of the CPC, we find the section 37-10-
105 remedies are available.8
nature such that the statute should be strictly construed against the
purchasers. As Judge Floyd noted, however, strict construction of penal
statutes may be modified by affirmative legislative action. 2B Singer,
Sutherland Statutory Construction, section 59.06. Further, this Court has
held that recognized rules of statutory construction must give way to the
cardinal rule of legislative intent. Gardner v. Biggart, 308 S.C. 331, 417
S.E.2d 858 (1992). See also Bell Finance Co. v. S.C. Dept. Of Consumer
Affairs, 297 S.C. 111, 374 S.E.2d 918 (Ct. App. 1988)(penal statutes should
not be subjected to strained interpretation in order to exclude from their
operation cases which would otherwise be encompassed). In light of section
37-1-102's requirement of liberal construction of the CPC, a strict construction
7 Section 37-5-202 provides that, for violations of section 37-2-413, a
consumer has a right to recover actual damages and also a right, in an action
other than a class action, to recover a penalty between $100.00-$1000.00.
8Additionally, in Camp v. Springs Mortgage Corp., 310 S.C. 514, 49-6
S.E.2d 304 (1993), this Court clearly implied that, in light of the purpose of
the CPC to protect consumers, the remedies available under 37-10-105 were
3. STATUTE OF LIMITATIONS
There is no statute of limitations set forth in Chapter 10 of Title 37 for
violations of section 37-10-105.9 Judge Floyd ruled the statute of limitations
set forth in section 37-5-202 applied (no action pursuant to this subsection
may be brought more than one year after the scheduled or accelerated
maturity of the debt). We disagree.
Section 37-5-202 provides, in pertinent part, as follows:
(1) If a creditor has violated any provisions of this title
applying to ... attorney's fees (§§ 37-2-413 and 37-3-404), ...
the consumer has a cause of action to recover actual damages
and also a right in an action other than a class action, to
recover from the person violating this title a penalty in an
amount determined by the court not less than one hundred
dollars nor more than one thousand dollars. With respect to
violations arising from sales or loans made pursuant to a
revolving charge or a revolving loan account no action pursuant
to this subsection may be brought more than two years after the
violation occurred. With respect to violations arising from other
consumer credit transactions, no action pursuant to this
subsection may be brought more than one year after the
scheduled or accelerated maturity of the debt.
Clearly, the one year statute of limitations period applies to actions
pursuant to 37-5-202. As section 37-5-202 specifically prohibits class
actions, plaintiffs could not have brought their action pursuant to that
subsection. Accordingly, the statute of limitations in 5-202 does not apply to
We find the applicable statute of limitations is three years pursuant to
S.C. Code Ann. § 15-3-540(2)(an action upon a liability created by statute
upon a penalty or forfeiture). Without section 37-10-105, Buyers would have
9As amended in 1997, section 37-10-105 now provides for a three year
statute of limitations. The amendments specifically note, however, that no
inference should be drawn as to the applicable statute of limitations for
no claim here, as their sole remedy would be under 5-202 which prohibits
class actions. Accord Sauls-Baker Co. V. Atlantic Coast Line R.R., 109 S.C.
285, 289, 96 S.E. 118, 119 (1917)(where action is allowed only by virtue of
statute for penalty, it is an "action upon a statute for a penalty"). However,
we disagree with Pacesetter's assertion that two of the present claims are
barred by this three year limitations period. We find the limitations period
set forth in section 15-3-540(2) begins to run each time a payment is made.
Section 37-10-105 recodifies the penalty for usury in former S.C.Code
Ann. § 34-31-50. Haynsworth and Smith, South Carolina Consumer
Protection Code and Comments, 399, Comment I (S.C. Bar-CLE Div. 3rd Ed.
1996). The statute of limitations for an action seeking the remedies
recoverable for usury begins to run at the time each payment is made on the
loan. Stewart v. Fowler, 16 S.C.L. (1 Harper 403) (1824). Accordingly,
although we find the three year statute of limitations applicable, it begins to
run from each payment,10 such that plaintiffs' claims are not barred.
4. CLASS CERTIFICATION
Finally, Pacesetter contends the circuit court erred in certifying the
class in this case. We disagree.
A trial judge's ruling on whether an action is properly maintainable as
a class action is within his discretion. Waller v. Seabrook Island Property
seeks recovery under section 37-10-105 pursuant to a counterclaim, the three
year statute of limitations is clearly inapplicable. See Earle v Owings, 72 SC
362, 51 SE 980 (1905)(statute imposing penalty for usury and providing
recovery thereof by counterclaim, by plain implication indicates that the
counterclaim is available and is effective as long as the right of action exists
on the principal sum; the counterclaim follows the main contract, and is not
barred within the three years). See also Section 37-10-105, as amended by
1997 Act No. 99 (subsection does not bar a debtor from asserting a violation
of this chapter in an action to collect a debt which was brought more than
three years from the date of the occurrence of the violation as a matter of
defense by recoupment or set-off in such action).
Owners, 300 S.C. 465, 388 S.E.2d 799 (1990). A court may not look to the
merits when determining whether to certify a class. Curley v. Cumberland
Farms Dairy, 728 F.Supp 1123 (D.N.J.1990) (citing Eisen v. Carlisle &
Jacquelin, 417 U.S. 156, 177-78, 94 S.Ct. 2140, 2152-53, 40 L.Ed.2d 732
We find no error in the circuit court's certification of the class in this
The judgment below is
AFFIRMED IN RESULT.