Aaron v. Mahl

• Citation: 674 S.E.2d 482
• Decision Date: 02 March 2009
• Docket Number: No. 26607.,26607.
• Court: United States State Supreme Court of South Carolina
• Parties: Jim AARON, Appellant, v. Susan J. MAHL, a/k/a Susan J. Scott and Elizabeth M. Smith, Clerk of Court for Beaufort County, South Carolina, Defendants, Of Whom Susan J. Mahl, a/k/a Susan J. Scott is the Respondent, and Susan J. Scott, Respondent, v. Rehon & Roberts, a Professional Corporation, Peter M. Rehon and Ronald D. Foster, Additional Plaintiffs on the Counterclaim.

674 S.E.2d 482

Jim AARON, Appellant, v. Susan J. MAHL, a/k/a Susan J. Scott and Elizabeth M. Smith, Clerk of Court for Beaufort County, South Carolina, Defendants, Of Whom Susan J. Mahl, a/k/a Susan J. Scott is the Respondent, and Susan J. Scott, Respondent, v. Rehon & Roberts, a Professional Corporation, Peter M. Rehon and Ronald D. Foster, Additional Plaintiffs on the Counterclaim.

No. 26607.

Supreme Court of South Carolina.

Heard December 4, 2008.

Decided March 2, 2009.

Rehearing Denied April 10, 2009.

Brian C. Pitts, of Smoot, Pitts, Elliott & Biel, of Hilton Head Island, for Appellant.

Robert V. Mathison, Jr., of Mathison & Mathison, of Hilton Head Island, for Respondent.

Justice WALLER.

This is a direct appeal from the trial court's dismissal of appellant Jim Aaron's action to enforce California and Indiana judgments against respondent Susan Mahl (a/k/a Susan Scott). We certified the appeal pursuant to Rule 204(b), SCACR, and now reverse.

FACTS/PROCEDURAL HISTORY

Respondent was a California attorney.¹ Between 1996 and 1999, respondent was a civil litigator and managing partner with the law firm now known as Rehon & Roberts ("R & R").² Respondent left the firm in November 1999 to start her own firm. In January 2000, R & R brought a California lawsuit against respondent for fraud and deceit, breach of fiduciary duty, conversion, and other causes of action.

In February 2001, she closed her practice, moved out of California, and then traveled with appellant, who was her boyfriend at the time. Eventually, she moved to Bluffton, South Carolina. In July 2001, respondent bought a house in Bluffton for $234,918 in cash, although the Bluffton house originally was titled in appellant's name. According to appellant, respondent titled the house in his name in order to secure it from judgment.³ Moreover, in August 2001, respondent petitioned the South Carolina family court to legally change her name from Susan J. Mahl to Susan J. Scott.⁴

R & R's case against respondent went to trial on September 17, 2001. By this time, the California trial court had struck respondent's answer and cross complaint due to discovery abuse. Respondent did not appear at trial, and judgment was entered in R & R's favor. The California court granted general damages in the amount of $749,572.37, plus $150,000 in punitive damages ("the California judgment").

After trial, respondent moved to have both the California judgment, and the sanction order which had struck her answer, set aside. Respondent represented that after she moved out of California, she received her mail through a mailing service located in South Dakota. Respondent claimed that although she had been aware her trial originally had been set for September 10, 2001, she never received notice that the case was scheduled for September 17, 2001, and did not know her attorney had withdrawn on September 7, 2001. She also alleged that her mental condition — major depression — impaired her ability to participate in the litigation.

The California trial court denied her motion to set aside the judgment.⁵ Respondent appealed, but the California Court of Appeal affirmed. Rehon & Roberts v. Mahl, 2003 WL 22810438, *1 (Cal.Ct.App. Nov. 25, 2003). The California Supreme Court denied review on February 18, 2004.

In November or December of 2001, R & R assigned the California judgment for collection to appellant ("the Assignment").⁶ There was also a collection agreement between R & R and appellant. This document stated, inter alia, that R & R retained appellant as a collector, and thereby assigned the California judgment to him.⁷ Appellant was to receive 50% of the proceeds he collected.

In December 2001, appellant filed suit against respondent in both Indiana and South Carolina to enforce the California judgment. The lawsuit filed in South Carolina is the subject of the instant appeal.

On October 24, 2002, the Indiana circuit court granted appellant summary judgment in favor of appellant ("the Indiana judgment"). The Indiana court specifically rejected respondent's argument that R & R's assignment to appellant was an invalid partial assignment. Respondent did not appeal the Indiana judgment. In January 2003, the Indiana court barred respondent from disposing, transferring or removing any of her assets, and specifically ordered respondent not to transfer any interest in her Bluffton house.

Various pretrial orders were also issued by the South Carolina court in the instant case. For example, on October 8, 2003, Judge Kemmerlin (the first Master in Equity assigned to this case) entered an order which directed the Beaufort Clerk of Court to enroll and index the California judgment, but delayed execution until the California appellate process had finalized.

Appellant moved for summary judgment in the instant action after the California judgment became final. The trial court, however, denied the motion and ordered appellant to produce the collection agreement. In July 2004, respondent amended her complaint to assert various counterclaims and defenses, including fraud on the court and the affirmative defense of unclean hands.

On March 20, 2006, the case went to trial before Master-in-Equity Coltrane acting as a special circuit court judge. Ultimately, the trial court issued a written order of judgment which found that appellant could not enforce the California judgment. The trial court found various aspects of the collection agreement "troubling," and specifically found that the Assignment from R & R to appellant was invalid. Additionally, the trial court decided that appellant's hands were unclean because his actions were "rendered possible only through his personal relationship with" respondent. Accordingly, the trial court dismissed appellant's complaint.⁸

Both parties moved to alter or amend the judgment order. In its amended order, the trial court ruled on the issue of whether R & R should have been joined as a plaintiff at trial. The trial court found that because appellant had previously objected to respondent's pretrial attempts to join R & R, he was estopped from seeking to join the firm as a party. Moreover, the trial court found joinder of R & R would not be just under Rule 21, SCRCP.

ISSUES

1. Did the trial court err in failing to find that respondent could not collaterally attack the California and Indiana judgments and by not giving full, faith and credit to both the California and Indiana judgments?

2. Did the trial court err in ruling that appellant had unclean hands?

STANDARD OF REVIEW

An action to enforce a judgment is an action at law. Minorplanet Sys. USA Ltd. v. American Aire, Inc., 368 S.C. 146, 149, 628 S.E.2d 43, 45 (2006). In an action at law, tried by a judge without a jury, the findings of the trial court must be affirmed if there is any evidence to support them. Townes Assocs., Ltd. v. City of Greenville, 266 S.C. 81, 221 S.E.2d 773 (1976).

DISCUSSION

1. Full Faith and Credit / Collateral Estoppel

Appellant argues the trial court erred by not granting full faith and credit to the California judgment and the Indiana judgment, both of which are final judgments. In addition, appellant contends the trial court should not have allowed respondent to collaterally attack those judgments at the South Carolina trial. We agree.

The Full Faith and Credit Clause of the United States Constitution provides that "Full Faith and Credit shall be given in each state to the ... judicial proceedings of every other state." U.S. Const. art. IV, § 1. Generally, full faith and credit "`requires every State to give to a judgment at least the res judicata effect which the judgment would be accorded in the State which rendered it.'" Hospitality Mgmt. Assocs. v. Shell Oil Co., 356 S.C. 644, 653, 591 S.E.2d 611, 616 (2004) (quoting Durfee v. Duke, 375 U.S. 106, 109, 84 S.Ct. 242, 11 L.Ed.2d 186 (1963)). Therefore, "a foreign judgment which is regular on its face generally may not be collaterally attacked." Bankers Trust Co. v. Braten, 317 S.C. 547, 550, 455 S.E.2d 199, 200 (Ct.App.1995).

In other words, "the judgment of a state court should have the same credit, validity and effect, in every other court of the United States, which it had in the state where it was pronounced." Id.; see also Hamilton v. Patterson, 236 S.C. 487, 115 S.E.2d 68, 70 (1960) (a defendant may not a second time challenge the validity of a plaintiff's right which has ripened into a judgment) (citation omitted).

We find the trial court erred by not enforcing the California judgment in South Carolina. This judgment resulted from a trial at which respondent did not appear. She subsequently attempted to set aside the judgment, but all her attempts at appeal were denied by the California courts. Thus, the trial court should have followed the general principles of Full Faith and Credit in the instant case and given effect to R & R's valid foreign judgment.

Moreover, the basic principles of res judicata and collateral estoppel also apply. Res judicata bars subsequent actions by the same parties when the claims arise out of the same occurrence that was the subject of a prior action between those parties. E.g., Riedman Corp. v. Greenville Steel Structures, Inc., 308 S.C. 467, 469, 419 S.E.2d 217, 218 (1992). Collateral estoppel prevents a party from re-litigating an issue in a subsequent suit which was actually and necessarily litigated and determined in a prior action. E.g., Jinks v. Richland County, 355 S.C. 341, 349, 585 S.E.2d 281, 285 (2003).

Here, respondent expressly raised the issue about the validity of the Assignment to the circuit court in Indiana.⁹ The circuit court in Indiana granted appellant summary judgment and specifically rejected respondent's attack on the Assignment. Respondent did not appeal from that order. Thus, the Indiana judgment, like the California judgment before it, became final and is entitled to Full Faith and Credit. Clearly, respondent should have been collaterally estopped...