Bankers Trust of South Carolina v. Bruce

• Decision Date: 04 September 1984
• Docket Number: No. 0249,0249
• Citation: 283 S.C. 408,323 S.E.2d 523
• Court: South Carolina Court of Appeals
• Parties: BANKERS TRUST OF SOUTH CAROLINA, Plaintiff-Respondent, v. Thomas S. BRUCE and Mary E. Bruce, Appellants, v. LEATHERWOOD, WALKER, TODD AND MANN, Intervenors-Respondents.

Page 523

323 S.E.2d 523

283 S.C. 408

BANKERS TRUST OF SOUTH CAROLINA, Plaintiff-Respondent, v. Thomas S. BRUCE and Mary E. Bruce, Appellants, v. LEATHERWOOD, WALKER, TODD AND MANN, Intervenors-Respondents.

No. 0249.

Court of Appeals of South Carolina.

Sept. 4, 1984.

A. Camden Lewis, of Austin & Lewis, Columbia, for appellants.

John H. Lumpkin, Jr., Paul B. Nix, Jr., and Robert W. Dibble, Jr., Columbia, for plaintiff-respondent.

Richard J. Foster and Eugene C. Covington, Jr., Greenville, for intervenors-respondents.

SHAW, Judge:

This is an appeal from an order finding no conflict of interest of a law firm requiring the reopening of a deficiency judgment entered against the appellants--Mr. and Mrs. Thomas S. Bruce. The lawsuit giving rise to this appeal grew out of a lawsuit contesting the qualifications of real estate appraisers under Section 29-3-700, 1976 South Carolina Code of Laws. After finding the appraisers to be unqualified, the Supreme Court ordered a remand for the appointment of new appraisers. The trial court was also ordered to "conduct a full hearing on appellants' allegation their counsel during the foreclosure proceedings was subject to a conflict of interest and determine whether the conflict, if any, requires reopening the deficiency judgment". Bankers Trust of South Carolina v. Bruce, et al., 275 S.C. 35, 38, 267 S.E.2d 424, 425 (1980). We affirm the trial court's holding that no conflict of interest existed.

On February 11, 1974, Dan Bruce, Tom Bruce, and Jimmy Jones, as individuals, borrowed $750,000 from Bankers Trust for which they were severally liable. Tom Bruce's and Jones' wives co-signed the note. This loan was secured by certain real property owned individually by the three borrowers above, but held in trust by them for two limited partnerships in which all three were general partners.

Harvey G. Sanders of the law firm of Leatherwood, Walker, Todd & Mann was not involved in the loan negotiation process; however, he handled the closing. Sanders and Dan Bruce had an attorney-client relationship for many years. Sanders represented Dan in many past business ventures involving corporations, partnerships, and real estate, and helped him obtain financing in some of them; the two also had a business relationship at one time.

Through Dan, Sanders met Dan's father Tom in the early 1970's. Their acquaintance resulted in Sanders representing Tom's company, the P.L. Bruce Company in several matters. Sanders also represented Tom Bruce in transactions involving the mortgaged real property herein. Sanders drafted the partnership agreement and the declaration of trust concerning the realty. He also drew up an agreement modifying the note, which extended the maturity date and provided for a fixed, lower interest rate among other things. The two wives were not parties to the modification agreement.

In January of 1977, the loan went into default. Bankers Trust sent a demand letter to the Bruces and Jones on March 1, 1977. Thereafter, Tom Bruce and Sanders entered into a series of face-to-face and telephone conversations during the spring of 1977 concerning whether Sanders could represent them at the foreclosure proceeding. Bankers Trust had a retainer relationship with the Leatherwood firm whereby, for the payment of a periodic, quarterly fee, the Leatherwood firm provided legal advice to Bankers Trust in seven specific areas. Litigation matters were specifically excluded. Julian Turner, President of Bankers Trust, testified the retainer did not cover loan closings nor foreclosures.

Sanders testified he told Dan and Tom Bruce his firm had a retainer relationship with Bankers Trust whereby the firm was paid periodic fees. He admits the amount of the fees and the areas encompassed by the retainer were not disclosed. While Tom Bruce claims he had no knowledge the Leatherwood firm had ever represented Bankers Trust, he concedes having conversations with Sanders concerning whether or not Sanders would be able to represent them in the foreclosure proceedings.

The Bruces and Jones were served with a complaint dated May 4, 1977. The complaint and following letter dated May 6, 1977, were hand delivered to Sanders.

Dear Harvey,

Herewith is a request on behalf of myself, Jimmy Jones and Dan. The request is that you represent us in the matter concerning our 291 Project and Bankers Trust Land Mortgage.

The reasons for this request is as follows:

1. You have represented us in all matters relating to this project from the beginning (involving many complicated transactions).

2. We have more faith in your ability to adequately represent us than anyone else.

3. If Tommy Wyche, whom we consider has a "direct" conflict of interest, could represent Bankers Trust, we feel you could surely represent us.

4. We personally know that Bankers Trust has every major law firm in town representing them, and that in the manner in which we feel you would handle this problem, would serve only to enhance whatever future possibilities your firm has of doing business with Bankers Trust.

5. You have represented us in all matters relating to closings and other matters concerning this same mortgage with Bankers Trust.

We certainly hope you understand our need for your help in this matter.

Sincerely,

Tom S. Bruce, Dan E. Bruce,

and James E. Jones, Jr.

On May 11, Sanders met with Tom Bruce. He told Bruce he needed to discuss his possible representation with Wesley Walker, the firm's senior member who did much of Bankers Trust's work. After discussing the matter with Bankers Trust officials, Walker informed Sanders there was no conflict of interest. On May 29, Sanders informed the Bruces and Jones he could represent them. Tom Bruce's notes of that conversation reflect he was told the matter was cleared with Wesley Walker, Sanders would handle the case, and there was no conflict.

After the foreclosure sale, a deficiency judgment of $448,017.75 was entered against the Bruces, Dan Bruce, and the Jones. (Jones and his wife have reached a settlement with Bankers Trust. Dan Bruce voluntarily filed for bankruptcy and was discharged from liability on the deficiency judgment. Thus, only Tom Bruce and his wife are presently involved). As Sanders prepared the appeal based on the qualifications of the appraisers, the Leatherwood firm received a letter from Tom Bruce dated May 1, 1978, in which he listed several complaints about the legal services he was receiving. One of Bruce's concerns was a possible conflict of interest affecting Sanders' zeal to represent him because of Leatherwood's retainer with Bankers Trust. Bruce's letter continued by stating he still desired to continue the relationship. However, after a meeting with the Bruces on May 3, 1978, the Leatherwood firm decided it was best not to continue the representation under these circumstances. The Bruces' current attorneys continued the appeal of the appraisers' qualifications which gave rise to the instant lawsuit.

This is truly a case of first impression. We are not aware of any other case in which a deficiency judgment was reopened due to an attorney's conflict of interest. A court of equity has the inherent power to set aside a judgment on the ground of fraud. Bryan v. Bryan, 220 S.C. 164, 66 S.E.2d 609 (1951); Center v. Center, 269 S.C. 367, 237 S.E.2d 491 (1977); Rycroft v. Tanguay, 279 S.C. 76, 302 S.E.2d 327 (1983). However, counsel for the Bruces concedes there is no direct evidence of any improper contact or fraudulent collusion between Bankers Trust and the Leatherwood firm during the entire foreclosure process. Therefore, the Bruces' exclusive remedy for relief from the deficiency judgment must be found in Section 15-27-130 of the 1976 South Carolina Code of Laws. S.C. DSS v. Scruggs, 278 S.C. 80, 292 S.E.2d 300 (1982); S.C. DSS v. Durham, 274 S.C. 222, 262 S.E.2d 49 (1980).

At the trial, the burden was upon the Bruces to prove to the satisfaction of the trial judge they were entitled to relief from the deficiency judgment. Jolley v. Jolly, 265 S.C. 594, 220 S.E.2d 882 (1975); Rajcich v. Rajcich, 256 S.C. 121, 181 S.E.2d 11 (1971). The motion to vacate or open a judgment is addressed to the sound discretion of the trial judge and his ruling will not be disturbed absent a clear showing of an abuse of discretion. Ledford v. Pennsylvania Life Ins. Co., 267 S.C. 671, 230 S.E.2d 900 (1976). An abuse of discretion arises in cases in which: (1) the judge issuing the order was controlled by some error of law; or (2) where the order, based upon factual, as distinguished from legal, conclusions, is without evidentiary support. Brown v. Weathers, 251 S.C. 67, 160 S.E.2d 133 (1968); Rochester v. Holiday Magic, Inc., 253 S.C. 147, 169 S.E.2d 387 (1969).

It is this scope of review that controls our consideration of the issues raised in this case. Of course, it is incumbent upon the Bruces, as appellants, to clearly show an abuse of discretion. Blakely v. Wright, 269 S.C. 6, 235 S.E.2d 803 (1977).

The first issue for our consideration is the scope of discovery and inquiry. In an order dated January 8, 1981, the trial judge stated "both parties may engage in discovery of matters occurring during the foreclosure proceedings, namely from May 4, 1977, the date foreclosure was commenced, to June 2, 1978, the date respondents' [the Bruces] prior counsel was removed as of record". The Bruces complain that at the hearing the trial judge improperly expanded the scope of the inquiry leaving them in the position of meeting testimonial evidence they were precluded from discovering.

Immediately after the trial began, prior to the taking of any witnesses' testimony, a question arose as to the introduction into the record of portions of depositions. Counsel for the Bruces introduced only portions of the deposition of Ian S. Walker, Vice-President of Bankers Trust, so as to comply with the January 8 order limiting the scope of inquiry. Opposing counsel objected on the grounds...