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2011-UP-007 - Barrett v. Flowers

THIS OPINION HAS NO PRECEDENTIAL VALUE.  IT SHOULD NOT BE CITED OR RELIED ON AS PRECEDENT IN ANY PROCEEDING EXCEPT AS PROVIDED BY RULE 268(d)(2), SCACR.

THE STATE OF SOUTH CAROLINA
In The Court of Appeals

Leslie P. Barrett, Respondent,

v.

Charlie Floyd Flowers, Emanule Flowers and Countrywide Home Loans, Inc., Defendants,

Of Whom Countrywide Home Loans, Inc. is Appellant.


Appeal From Horry County
Nate Fata, Special Referee


Unpublished Opinion No.  2011-UP-007
Heard November 4, 2010 – Filed January 20, 2011
Withdrawn, Submitted and Refiled June 2, 2011


AFFIRMED


Richard M. Smith, of Georgetown, and Robert L. Widener, of Columbia, for Appellant.

William A. Bryan, of Surfside Beach, for Respondent.

PER CURIAM: Leslie P. Barrett filed this action against Charlie Floyd Flowers, Emanule Flowers, and Deutsche Bank National Trust Co. (Deutsche) alleging a one-half interest in property titled to Charlie, and subject to a mortgage interest.  Barrett also alleged battery, intentional infliction of emotional distress, and outrage against Emanule.  Charlie and Emanule defaulted, and the matter was referred to the special referee.

The referee granted Deutsche's motion to dismiss because the mortgage it serviced for Lumina Mortgage Company, Inc. (Lumina) had been satisfied.  The special referee denied Charlie and Emanule's motion to set aside entry of default, awarded Barrett $105,000 in actual and $20,000 in punitive damages, and found Barrett was entitled to a one-half interest in the subject property.  The referee granted Countrywide Home Loans, Inc.'s (Countrywide) motion to intervene, and ruled Countrywide had no claim or lien against the property.  Countrywide appeals.  We affirm.

FACTS

Barrett and Emanule lived together from 1994 until March 2007.  Two children were born of the relationship.  Barrett was a stay-at-home mom for much of the time the parties were together, but she worked outside the home for the last years of their cohabitation.

Barrett and Emanule purchased the subject property in 2005, using funds obtained from a purchase money mortgage given to Lumina.  Barrett provided the down payment and funds necessary to close, using gifts from her mother and a personal loan from her mother's husband.  Barrett also made some mortgage payments.  Because Barrett was unemployed at the time of the purchase, Barrett and Emanule agreed that Emanule would apply for the Lumina loan, and the property would be deeded solely in his name.  Although Emanule allegedly agreed to convey a one-half interest in the property to Barrett, he never did.

Barrett testified Emanule mentally and physically abused her beginning in 1994 and continuing throughout the relationship.  Barrett suffered black eyes, being pulled up and down stairs, permanent scarring to her face, beatings in front of the children, a fractured shoulder, a broken nose, broken teeth, jaw and ear injuries, death threats, and other physical and mental abuse.  Emanule forced Barrett and the children from the house on March 2, 2007.

On March 29, 2007, Emanule's father, Charlie Flowers, applied to Countrywide for a refinance loan on the property, indicating he had owned the property since 2005.  Countrywide hired Edward McDonnell to handle the closing.  McDonnell testified his office received Countrywide's request for a title search on March 30, 2007.  By deed dated April 2, 2007, and recorded April 3, 2007, Emanule conveyed the property to Charlie for a stated consideration of $5.00.  McDonnell and Countrywide received copies of the deed.  McDonnell received the title search report on April 6, 2007, showing Charlie as the owner, and reporting the Lumina mortgage.

Barrett filed a lis pendens on April 18, 2007, and this action on May 8, 2007.  On May 10, 2007, Countrywide recorded a mortgage on the property that secured a loan to Charlie for $167,250.  Another title search was completed on May 15, 2007.  McDonnell testified the search was certified as of April 24, 2007, and indicated "[n]o updates to title."  The search report failed to reflect Barrett's April 18, 2007 lis pendens.  The Lumina mortgage of $125,771.37 was satisfied of record on May 18, 2007, from the Countrywide loan disbursement funds.

By order filed September 24, 2007, the special referee awarded Barrett actual and punitive damages, a one-half interest in the property, and set aside the deed conveying the property to Charlie.  The referee deferred the execution of the deed back to Barrett pending a hearing on Countrywide's claims.

After the hearing on Countrywide's claims, including entitlement to an equitable lien, the special referee found Countrywide had no lien against the property.  The referee issued deeds setting aside the Flowers' deed effective April 2, 2007, and deeded a one-half interest to Barrett effective the date the lis pendens was filed, April 18, 2007.  Countrywide moved to reconsider.  After a hearing, the referee denied the motion.  This appeal follows.

STANDARD OF REVIEW

An action to establish an equitable lien and lien priorities is an action in equity.  Fibkins v. Fibkins, 303 S.C. 112, 115, 399 S.E.2d 158, 160 (Ct. App. 1990).  In reviewing equitable matters, this court may review based on its own view of the preponderance of the evidence.  Williams v. Wilson, 349 S.C. 336, 339-40, 563 S.E.2d 320, 322 (2002).  However, we should not disregard the findings of the special referee, who was in a better position to weigh the credibility of witnesses.  Tiger, Inc. v. Fisher Agro, Inc., 301 S.C. 229, 237, 391 S.E.2d 538, 543 (1989) (affording deference to the master in an equitable action).

LAW/ANALYSIS

I.  Equitable Lien[1]

Countrywide argues the special referee erred in refusing to grant it an equitable lien to the extent of the Lumina mortgage, thereby granting Barrett a windfall.  We disagree.

"For an equitable lien to arise, there must be a debt owing from one person to another, specific property to which the debt attaches, and an intent, expressed or implied, that the property will serve as security for the payment of the debt."  Doe v. Roe, 323 S.C. 445, 453, 475 S.E.2d 783, 787 (Ct. App. 1996).  In this case, there is no debt owed by Barrett or Emanule to Countrywide, only a debt owed to Countrywide by Charlie, who by virtue of the referee's deed setting aside the April 2, 2007 deed, had no interest in the property.  See 59 C.J.S. Mortgages § 228 (2009) (stating a mortgagee cannot acquire any greater interest in property than the mortgagor possesses).  Furthermore, there was no evidence of intent by Barrett or Emanule that the property would serve as security for the payment of the debt.  See Carolina Attractions, Inc. v. Courtney, 287 S.C. 140, 146, 337 S.E.2d 244, 247 (Ct. App. 1985) (finding no entitlement to an equitable lien where there was no allegation that it was the parties' intent, expressed or implied, that note proceeds would serve as security).  Because Countrywide cannot prove the requirements necessary to establish an equitable lien, we affirm the special referee. 

Furthermore, "hornbook law [provides] that equity will not impose an equitable lien where there is an adequate remedy at law."  Id.; see Georgia-Carolina Gravel Co. v. Blassingame, 129 S.C. 18, 24-25, 123 S.E. 324, 326 (1924) (finding where no facts were alleged showing plaintiff's remedy at law was inadequate, equity would not assume jurisdiction on the theory of an equitable lien).  Our supreme court recently reiterated that "[t]he court will reserve its equitable powers for situations when there is no adequate remedy at law."  Strategic Res. Co. v. BCS Life Ins. Co., 367 S.C. 540, 544, 627 S.E.2d 687, 689 (2006).  

"An 'adequate' remedy at law is one which is as certain, practical, complete and efficient to attain the ends of justice and its administration as the remedy in equity."  Santee Cooper Resort, Inc. v. S.C. Pub. Serv. Comm'n, 298 S.C. 179, 185, 379 S.E.2d 119, 123 (1989).  To be entitled to an equitable lien, it was incumbent upon Countrywide to allege and prove the lack of an otherwise adequate remedy.  See Strategic Res. Co., 367 S.C. at 544, 627 S.E.2d at 689 (stating the party in an equitable action for injunction has the burden of proving the lack of an adequate remedy at law).  We conclude Countrywide's rights under its contract with Charlie provide Countrywide with an adequate remedy at law. 

We find no support in the cases Countrywide relies on.  In arguing it is entitled to an equitable lien because otherwise Barrett receives a windfall, Countrywide cites Edwards v. Columbia, S.C. Teachers Fed. Credit Union, 276 S.C. 89, 275 S.E.2d 879 (1981).  In Edwards, Mrs. Smith owned property subject to a note and second mortgage of the credit union, of which Mr. Smith was a member.  276 S.C. at 90, 275 S.E.2d at 880.  The credit union provided a life insurance policy as a fringe benefit of membership, which would satisfy the loan upon the death of the member.  Id.  Mrs. Smith sold the property to Edwards, who assumed the mortgages on the property, including the second mortgage.  Id.  Upon Mr. Smith's death, the credit union satisfied the second note and mortgage, and assigned them to Mr. Smith's estate.  Id.  Edwards sought a determination that the note and mortgage were satisfied, and Mrs. Smith had no right of subrogation.  Id.  The supreme court found Mr. Smith would have been entitled to subrogation to enforce the second mortgage as if he had paid the loan to the credit union from his own funds.  Id. at 91, 275 S.E.2d at 881.  The court found that to give Edwards credit for the payment of the second mortgage would give her a windfall, to which she was not entitled.  Id. at 91, 275 S.E.2d at 880.  Edwards, however, is an equitable subrogation case.[2]  We find no application of Edwards to this action seeking an equitable lien.

Countrywide contends the special referee should have granted it an equitable lien because the remedy for fraud is to place the injured party in the same position he would have enjoyed absent the fraud.  In support of this argument, Countrywide relies on Gilbert v. Mid-South Machinery Co., 267 S.C. 211, 227 S.E.2d 189 (1976).  In Gilbert, the plaintiff filed a fraud action for damages based on the sale and purchase of a business.  267 S.C. at 217, 227 S.E.2d at 191.  The supreme court affirmed a jury verdict of actual and punitive damages, citing the general rule that an injured party in a fraud action is entitled to recover such damages as will place him in the same position he occupied prior to the fraud.  Id. at 223, 227 S.E.2d at 194.  We find the general law regarding damages in a fraud action does not apply in this case.

Countrywide next argues at a minimum, the special referee should have granted an equitable lien as to the amount of Emanule's interest in the property, because otherwise he is rewarded for his participation in the fraudulent transfer to Charlie.  Countrywide first raised this issue in its proposed order submitted to the referee after the hearing on the merits.  We find this issue is not preserved for our review.  See McGee v. Bruce Hosp. Sys., 321 S.C. 340, 347, 468 S.E.2d 633, 637 (1996) (finding an issue not timely raised is not preserved for appellate review); Beaufort Cnty. v. Butler, 316 S.C. 465, 468, 451 S.E.2d 386, 388 (1994) (finding an issue not raised at the hearing on the merits was not preserved for review).

Finally, Countrywide urges this court to utilize its equitable powers to invent a mode of relief, if necessary, to enable it to secure an equitable lien.  We decline, however, because the powers of equity are not unlimited.  See 27A Am.Jur.2d Equity § 76 (2008) ("The court must have a cognizable basis for granting equitable relief and is not authorized to take a particular course of action simply because it thinks such action is just and appropriate."); see generally Cagle v. Shaefer, 115 S.C. 35, 42, 104 S.E. 321, 323 (1920) (finding the court has the power in equity to grant specific performance but "the power is not unlimited, as seems to be supposed by some.  It is commensurate with, but it is limited by, the necessity which calls for the existence and exercise of it.").

II.  Lis Pendens

Countrywide argues the special referee erred in misapprehending the purpose, scope, and effect of the lis pendens filed by Barrett for the purpose of prioritizing liens on the property.  We need not address this issue based on our affirmation of the special referee's finding that Countrywide is not entitled to an equitable lien.  See Futch v. McAllister Towing of Georgetown, Inc., 335 S.C. 598, 613, 518 S.E.2d 591, 598 (1999) (stating an appellate court need not address an issue when a decision on a prior issue is dispositive).

III. Insurance

Countrywide argues the special referee erred in considering its title insurance policy.  We find no reversible error. 

At the hearing on Countrywide's counter and cross-claims, Countrywide moved in limine to bar the introduction of evidence of insurance.  The special referee reserved ruling on the issue.  When McDonnell was questioned during cross-examination about the title insurance policy, the special referee permitted the questioning, finding the policy relevant for purposes of notice.  In his order filed after the hearing on Countrywide's claims, the special referee stated:  "The evidence presented in the case showed that Countrywide was issued a policy of title insurance at the time its loan was closed.  Although Countrywide has objected to title insurance being considered, this is an equitable proceeding, and it would appear relevant."  In its motion for reconsideration, Countrywide argued the special referee erred in considering the existence of insurance.  At the hearing on the motion for reconsideration, the special referee stated:  "Your last point about the insurance, that's not part of my analysis when it comes to . . . reviewing the arguments and the Motion for Reconsideration."  In the order denying Countrywide's motion for reconsideration, the special referee concluded: "Although [insurance was] mentioned in this Court's previous order, whether or not Countrywide has title insurance protection is not part of this Court's analysis of the result it reached in this case."  The special referee specifically noted it did not rely on Countrywide's title insurance policy.  We, therefore, find no error.

IV.  Other Remedies

Countrywide contends the special referee erred in considering its possible recourse against Charlie.  We disagree.

As previously discussed, a court of equity will not impose a lien where there is an adequate remedy at law.  Carolina Attractions, Inc. v. Courtney, 287 S.C. 140, 146, 337 S.E.2d 244, 247 (Ct. App. 1985).  Because we find Countrywide's right to recourse against Charlie provides it an adequate remedy at law, we find no error by the special referee in considering Countrywide's recourse against Charlie. 

CONCLUSION

Based on the foregoing analysis, the order of the special referee is

AFFIRMED.

FEW, C.J., SHORT and WILLIAMS, JJ., concur. 


[1] We combine Countrywide's first, second, and fifth issues in this analysis.

[2] The elements of the doctrine of equitable subrogation are: (1) the party claiming subrogation has paid the debt; (2) the party was not a volunteer; (3) the party was secondarily liable for the debt or for the discharge of the lien; and (4) no injustice will be done to the other party by the allowance of the equity.  United Carolina Bank v. Caroprop, Ltd., 316 S.C. 1, 3, 446 S.E.2d 415, 416 (1994).