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South Carolina: Appellate Decision may Increase Jury Trial Demands by Borrowers

Posted By USFN, Tuesday, October 10, 2017
Updated: Tuesday, October 3, 2017

October 10, 2017

by Ronald Scott and Reginald Corley
Scott & Corley, P.A. – USFN Member (South Carolina)

A case from the South Carolina Court of Appeals may lead to a dramatic increase of jury trial demands by borrowers in foreclosure cases. [South Carolina Community Bank v. Salon Proz, LLC (S.C. Ct. App. Apr. 26, 2017)]. The issue presented by the appellant, Salon Proz, LLC (Salon), was whether the master-in-equity judge was correct in denying Salon’s motion to transfer the case to the general jury trial docket.

Salon contended that: (1) it did not waive its demand for a jury trial; (2) the clerk of court lacked the authority to refer the case to the master-in-equity judge; (3) if the clerk of court had the authority to refer the case, the clerk of court erred in doing so; and (4) a return to the circuit court jury docket is required.

Background
On October 26, 2011, South Carolina Community Bank (Bank) filed a foreclosure complaint against Salon. On November 23, 2011, Salon answered the complaint, raising several counterclaims and demanding a jury trial. In January 2012, Bank filed a motion to dismiss Salon’s counterclaims (pursuant to Rule 12(b)(6), SCRCP); and, in February 2012, Bank moved to refer the case to the master-in-equity judge pursuant to Rule 53, SCRCP. Per the order of reference, the master-in-equity judge was duly authorized to determine the issues, report the findings of fact, and thereafter enter a final judgment. Salon did not initially appeal the order of reference.

In August 2012, Salon filed a motion to transfer the case back to the general jury docket from the equity court. Salon asserted that it did not waive its right to a jury trial by failing to initially appeal the order of reference. Salon argued that it did not receive notice of the order of reference, whereby Bank countered that the court would have mailed such an order and Salon’s counsel took no action to object to the order. Salon attempted to file a motion to transfer the case back to the general jury trial docket which, like its motion to reconsider, failed.

Appellate Review
The Court of Appeals determined that Salon did not waive its right to a jury trial by failing to appeal the order of reference because the record did not reflect that Salon received notice of the order of reference’s entry, and the record did not reflect that Salon otherwise voluntarily relinquished the right to a jury trial. The court found that the right to a jury trial is highly favored and waiver of such a right cannot be lightly inferred. “In the absence of an express agreement or consent, a waiver of the right to a jury trial will not be presumed.” Given the lack of evidence indicating that Salon’s counsel received the order of reference, the court found that the right to a jury trial had not been waived by Salon.

The court also agreed with Salon’s second argument that the clerk of court lacked the authority to refer the case to the master-in-equity judge. Since Salon had already made a valid jury trial demand, the clerk of court was incorrect to refer the case to the master-in-equity judge under Rule 53(b), SCRCP.

As for Salon’s counterclaims, the court looked to supreme court precedent [Carolina First Bank v. BADD, LLC, 414 S.C. 289, 295 (2015)]: “In a foreclosure action, a counterclaim arises out of the same transaction or occurrence and is thus compulsory, when there is a ‘logical relationship’ between the counterclaim and the enforceability of the guaranty agreement” and should therefore be heard and decided by a jury.

Closing
This case was reversed by the Court of Appeals and remanded with instructions that it be returned to the general jury trial docket for further proceedings. These include a hearing before the circuit court to determine the nature and proceedings of any remaining counterclaims and any request for an order of reference to the master-in-equity judge for the other equitable matters.

As stated above, it is possible that this case may lead to an increase in jury trial demands by borrowers in foreclosure matters in South Carolina.

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