Foreclosure jury demand trumps rule on referrals

The South Carolina Court of Appeals ruled that a Richland County clerk of court overstepped his authority when he approved a request to send a foreclosure case to a master, despite the defendant’s demand for a jury trial.

In an April 26 opinion in South Carolina Community Bank v. Salon Proz, the appeals court determined that the rule allowing clerks of court to refer cases to masters only applies when a party has not yet made a jury demand.

Under Civil Procedure Rule 53(b), in a foreclosure action “some or all of the causes of action in a case may be referred to a master or special referee by order of a circuit judge or the clerk of court.” But as Judge Stephanie McDonald said in the appeals court’s opinion in Salon Proz, it is “nonsensical” to think a clerk maintains the power to refer a case when a valid jury demand had already been made.

“To hold otherwise would give the clerk the power to disregard a demand made in the pleadings and require a party seeking a jury trial to file a second jury demand once the party’s case was referred without the party’s consent,” McDonald said.

Salon Proz filed its appeal in 2015, after the master overseeing the foreclosure action brought by South Carolina Community Bank denied the hair salon’s request to move the case back to the Richland County Circuit Court’s general jury docket.

South Carolina Community Bank’s Oct. 26, 2011 foreclosure complaint claimed Salon Proz defaulted on an $883,634 note and mortgage. Salon Proz fired back with an answer that raised several counterclaims against the bank. Importantly, the answer included a demand for a jury trial in the case.

The bank then asked for the case to be referred to the master under Rule 53, and the clerk of court signed off on the move, authorizing the master to take testimony, determine the issues, report the findings of fact and conclusions of law and “enter final judgment.”

In August 2012, Salon Proz hired a new lawyer and filed a motion to move the case back to the general jury docket, arguing that it had never waived its right to a jury trial. Salon Proz also argued there was nothing in the record to suggest that its former attorney had ever received the order to transfer the case or any notice of its filing.

Salon Proz’s appeal noted the master denied a motion to transfer the case back to the general jury docket without explanation.

The Court of Appeals largely agreed with Salon Proz’s position. The court held that there was no dispositive evidence showing that Salon Proz had received a notice of entry of the order or reference. Based on that finding, the appeals court held that there was no waiver of the right to a jury trial after Salon Proz made a timely jury demand.

“We decline to presume a waiver occurred when any evidence supporting such is sparse and ambiguous,” McDonald said.

That said, the appeals court said the clerks of court in South Carolina retain the right to refer foreclosure cases to masters. But only when a Rule 38 demand for a jury trial has not been made, the three-judge panel said.

“Because Salon demanded a jury trial in its initial answer, the clerk should not have referred the case, and the master erred in denying Salon’s motion to transfer the case to the jury docket,” the opinion said.

The appeals court also addressed whether Salon Proz’s counterclaims should be allowed to proceed.

The company alleged separate claims of violations of the Unfair and Deceptive Trade Practices Act, breach of contract and the covenant of good faith and fair dealing, breach of contract with fraudulent intent, slander of title, libel and negligent misrepresentation.

Citing the South Carolina Supreme Court’s 2015 decision in Carolina First Bank v. BADD, L.L.C., McDonald said that in foreclosure actions, a counterclaim can proceed if it arose out of the same foreclosure transaction and is thus “compulsory.”

McDonald said Salon Proz’s amended answer raised at least one compulsory counterclaim, meaning the hair salon is entitled to a jury trial.

The appeals court reversed the master’s underlying ruling and ordered that the case be returned to the general jury docket. The appeals court also said the circuit court should hold a hearing on the nature of the remaining counterclaims.

McDonald’s opinion was joined by Chief Judge James Lockemy and Judge Aphrodite Konduros.

Charles Webb of Richardson Plowden & Robinson in Columbia, who is representing the bank, declined to comment on the decision.

But Salon Proz’s attorney, Andrew Radeker of Harrison & Radeker in Columbia said he has seen some foreclosure cases referred to a master almost as a matter of routine. He said he hopes this decision “will cause clerks of court to check before simply referring a case to a master.”

The seven-page decision is South Carolina Community Bank v. Salon Proz, LLC (Lawyers Weekly No. 011-028-17). An opinion digest is available at sclawyersweekly.com.

Follow Jeff Jeffrey on Twitter @SCLWJeffrey