By Reggie Corley, Esq.

Scott &Corley, PA

USFN Member (SC)

On August 9, 2023, the South Carolina Supreme Court filed its opinion in Deutsche Bank v. Houck. The issue that came before the Supreme Court was whether a bank’s subsequent foreclosure claim was barred because the bank did not assert this claim as a counterclaim in prior litigation between the parties.

The prior litigation between the parties (for which the bank prevailed in full) was for conversion, violations of the South Carolina Attorney Preference Statute, and violations of the South Carolina Unfair Trade Practices Act. The Master-in-Equity found that the bank failed to assert the foreclosure counterclaim in the prior litigation; and, as a result, ruled in favor of the defendant and ordered the bank to record a satisfaction of the mortgage. The court of appeals reversed the Master’s decision.

Ultimately, the Supreme Court affirmed the result reached by the Court of Appeals, relying on the “logical relationship test;” however, the Supreme Court held that in cases commenced on or after the effective date of this opinion (August 9, 2023), the question of whether a counterclaim is compulsory is governed by the plain language of Rule 13(a) of the South Carolina Rules of Civil Procedure, abolishing the logical relationship test.

Rule 13(a), SCRCP plainly provides that a counterclaim is compulsory “if it arises out of the transaction or occurrence that is the subject matter of the opposing party's claim and does not require for its adjudication the presence of third parties of whom the court cannot acquire jurisdiction.”   The Supreme Court concluded its opinion stating, “[j]udges and lawyers are well-equipped to determine whether a claim is compulsory under the plain language of this rule.”

See the below link to read the full case cited above:

https://www.sccourts.org/opinions/HTMLFiles/SC/28169.pdf

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USFN e-Update - October

By John S. Kay, Esq.

Hutchens Law Firm*

USFN Member (NC, SC)

     On May 17, 2023, the South Carolina Supreme Court issued an Order rescinding the requirements and obligations established by the Court’s previous Administrative Order issued on May 22, 2009, and the revised Order issued by the Court on May 11, 2011.  This new Order affects all loss mitigation activities in foreclosure actions in the state.  

     In response to the foreclosure crisis at the time, the South Carolina Supreme Court issued an Order in 2009 to ensure compliance with the new Home Affordable Modification Program (HAMP) initiated by the U.S. Treasury. The Order developed procedures to establish uniformity in how loss mitigation activity would be handled in the foreclosure process throughout the state. The 2009 Order was amended in 2011 to include provisions and adjustments designed to ensure loss mitigation was occurring in foreclosure cases where required by law.

     Because the HAMP program has now ended, the S.C. Supreme Court has issued its new Loss Mitigation directive stating that the 2009 and 2011 Orders, and their procedures, are no longer necessary. However, the Court has also noted that the 2023 Order is not meant to indicate that lenders and their counsel do not have to comply with all federal regulations regarding loss mitigation.

     In the current Order, the Court made it clear that the Order does not prevent any judge from “…inquiring about the status of loss mitigation or requiring that counsel for a Mortgagor confirm or certify there are no loss mitigation efforts underway, that a Mortgagor has failed to qualify for a program, or a Mortgagor defaulted under a loss mitigation agreement prior to scheduling a final hearing, entering a final order of foreclosure, or conducting a sale.” We expect that some lower courts may establish various procedures or certification requirements regarding the completion or failure of loss mitigation activities in pending cases.      

     At this time, the Masters in Equity and Special Referees that hear foreclosure cases in South Carolina are working on their procedures eliminating the requirements established by the 2009 and 2011 Administrative Orders and establishing what, if any, certification that lender’s counsel will need to provide to the Court to comply with the Supreme Court’s language stated above.

      USFN members in South Carolina will follow these developments closely and will issue further statements once any new rules or procedures by local courts are established.

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USFNews - May 31, 2023

* Denotes firm is a 2022 USFN Award of Excellence recipient.