Constitutional – Jury Trial – Waiver – Real Property – Foreclosure — Mortgages — Promissory Note – Counterclaims – Tort/Negligence

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Wachovia Bank, N.A. v. Blackburn (Lawyers Weekly No. 011-138-11, 7 pp.) (James E. Lockemy, J.) Appealed from Georgetown County Circuit Court. (Larry B. Hyman Jr., J.) S.C. App. Click here for the full-text opinion.

Holding: Although the prominent jury trial waiver in defendants’ promissory notes is valid and binding, it does not apply to defendants’ counterclaims, which are based on their allegations that the bank partnered with a developer and made misrepresentations about the properties being sold and the construction of amenities.

We affirm the trial court’s ruling that defendants waived their right to a jury trial in matters related to the promissory notes and other loan documents. We reverse the trial court’s ruling that defendants’ counterclaims are encompassed by the waiver.

The waivers are conspicuous and unambiguous. They are printed in all capital letters with the bold heading, “WAIVER OF JURY TRIAL.”

Furthermore, the note and guaranty are not lengthy documents, and the waivers contained therein are not buried within the language of other provisions. Rather, the waivers are contained in separate paragraphs located just above the signature lines. By signing the note and guaranty, defendants are charged with having read their contents; therefore, they cannot avoid their effects by arguing they were unaware of the inclusion of the waivers. Accordingly, we find the jury trial waivers are enforceable.

Pursuant to the note and guaranty, the waivers apply to “any litigation based on, or arising out of, under or in connection with [the] note, the loan documents or any agreement contemplated to be executed in connection with [the] note.”

First, we find defendants’ counterclaims are not based on nor do they arise out of the note. Defendants’ claims are based on the sales contract, the promotional literature regarding the development, the lottery procedure, and the promises made regarding amenities.

Second, we find defendants’ claims are not based on or arise out of the loan documents. The definition of “loan documents” does not include sales documents, and the sales documents were not “executed in connection with or related to the loan” as required by the definition.

Third, we find the sales contract was not an “agreement contemplated to be executed in connection with [the] note,” as it was executed months prior to the note.

Finally, we find the waivers do not apply to “any course of conduct, course of dealing, statements (whether verbal or written) or actions of any party with respect [to the note].” We note this clause refers to conduct and actions with respect to the note and does not refer to the sales transaction.

Furthermore, we find a reasonable buyer would not contemplate that a bank would partner with a developer/seller and make misrepresentations about a property and the construction of amenities. Defendants’ counterclaims arise out of the alleged pre-sale misrepresentations and fraud of the bank, and not out of the note.

Although the waivers are enforceable with regard to claims arising from the note, we find defendants’ allegations of sales misrepresentations and pre-purchase fraud are not within the scope of the waivers. Accordingly, applying a strict construction of the language of the waivers, we find they are unenforceable with regard to defendants’ counterclaims.

Affirmed in part and reversed in part.