Buffalo Creek Invs. v. Pettus
| Decision Date | 11 May 2023 |
| Docket Number | 5985,Appellate Case 2020-000952 |
| Parties | Buffalo Creek Investments, Inc., Plaintiff, v. Stephen H. Pettus a/k/a Stephen Pettus and Christopher Gravley, Respondents, and Edwin Young and Barrett Maners, Intervenors, Of whom Edwin Young and Barrett Maners are the Appellants. |
| Court | South Carolina Court of Appeals |
Submitted December 1, 2022
Appeal From Lancaster County Wilson Davis, Special Referee
Walter Keith Martens, of Hamilton Martens, LLC, of Rock Hill, for Appellants.
Stephen H. Pettus, of Lancaster, pro se.
Christopher Gravley, of Lancaster, pro se.
LOCKEMY, A.J.
In this foreclosure action, Edwin Young and Barrett Maners (collectively, Buyers) allege the special referee erred by granting Stephen H. Pettus's and Christopher Gravely's (collectively, Mortgagors') motion to vacate a foreclosure and set aside a judicial sale. We reverse.
FACTS/PROCEDURAL HISTORY
Mortgagors executed a promissory note payable to Buffalo Creek Investments, Inc. (Mortgagee) for $50,000.00, together with a twelve percent interest rate and a balloon payment provision. Mortgagors secured the note with a real estate mortgage for their residence (Subject Property) in Lancaster County.
Mortgagee commenced this foreclosure action by filing a lis pendens, summons, and complaint against Mortgagors. The complaint alleged that between July 2018 and December 2018, Mortgagors missed four monthly payments towards the note and there were no subsequent payments after December. Mortgagee stated that as of May 10, 2019, Mortgagors owed $58,442.75 plus interest towards their promissory note obligations. Mortgagee also claimed the Subject Property was not owner-occupied and was not subject to the terms of the May 2, 2011 administrative order of the supreme court (2011-05-02-01)[1] (2011 Administrative Order) because "the mortgage was granted to allow [Mortgagors] to invest in a business." Mortgagee filed affidavits of service, stating that Mortgagors had been served with Mortgagee's pleadings by delivering and leaving a copy of the pleadings at the Subject Property. Mortgagee subsequently filed an affidavit of default, stating Mortgagors had not provided any pleadings in response and were in default. The circuit court referred this matter to the special referee.
An initial foreclosure hearing was scheduled but was rescheduled to allow Mortgagee to appear and testify. At the second foreclosure hearing, Mortgagee appeared but Mortgagors did not; the special referee commenced the hearing and at its conclusion, issued a decree of foreclosure on September 20, 2019. The special referee specifically found the 2011 Administrative Order did not apply because the mortgage was a business line of credit. The referee determined (1) Mortgagee was entitled to foreclose its real estate mortgage because Mortgagors were in default of the promissory note; (2) Mortgagee had made a proper demand against Mortgagors; and (3) the Subject Property was to be sold at a public auction. Mortgagee served Mortgagors copies of the decree of foreclosure, notice of sale, and record of sale.
At the public auction, Buyers purchased the property for $78,750 and satisfied their bid in full on November 15, 2019. The special referee subsequently issued a deed to Buyers and filed an order and report confirming the sale. Mortgagors did not file a motion for reconsideration or an appeal of the decree of foreclosure or the order and report confirming the sale.
Mortgagors subsequently filed a motion to vacate the foreclosure and set aside the judicial sale. Buyers intervened to oppose the motion.
The same special referee held a hearing on Mortgagors' motion to vacate the foreclosure sale. First, Mortgagors argued Buyers were not bona fide purchasers for value and not protected under section 15-39-870 of the South Carolina Code (2005) because Buyers were on notice of defects in the service process and the failure to properly serve them removed this matter from the court's jurisdiction. Second, they contended the 2011 Administrative Order was applicable because the property was owner-occupied and the status of the property was available through public tax records and through the public records related to the case, such as Mortgagee's process of service affidavit, which stated Mortgagors were served by leaving copies of the pleadings at their "usual place of abode," i.e. the Subject Property. Third, according to Mortgagors, if the special referee did not vacate the foreclosure sale, they would stand to lose $242,500, the full amount they paid for the property, while Buyers would be returned the amount they paid at the sale if the special referee vacated the foreclosure. Mortgagors therefore contended the equities weighed in favor of vacating the foreclosure sale.
Buyers argued the special referee should not vacate the foreclosure sale. Buyers asserted (1) they were bona fide purchasers for value without notice protected under section 15-39-870; (2) issues raised by Mortgagors, regarding service and applicability of the 2011 Administrative Order, did not affect their status as bona fide purchasers because they were in no way responsible for "irregularities in the proceedings or even an error in the judgment under which the sale [was] made" and there were no accompanying circumstances to vacate the sale; and (3) the purchase price at the foreclosure sale was not so low as to shock the conscience and set aside the sale.
Following the hearing, the special referee vacated the foreclosure and set aside the judicial sale. First, it determined Buyers were not bona fide purchasers for value without notice because they had notice that the Subject Property was owner-occupied and the 2011 Administrative Order applied. Second, the special referee concluded it was just and equitable to vacate the foreclosure and set aside the judicial sale because Buyers would be refunded their purchase price amount if the sale was vacated, while Mortgagors stood to lose $242,500 if the sale was not vacated. Third, the special referee determined a vacation of the foreclosure and sale was necessary because the sale was so gross as to shock the court's conscience. The referee ordered Mortgagee refund Buyers $78,750. It also ordered the Register of Deeds of Lancaster County to void the title conveying the Subject Property to Buyers.
Buyers filed a motion to reconsider, which the special referee denied. This appeal followed.
ISSUES ON APPEAL
1. Did the special referee abuse its discretion in setting aside a valid foreclosure sale when it failed to recognize that the purchasers were "bona fide purchasers for value without notice" who should have been protected from Mortgagors' post-sale challenge by the provisions of section 15-39-870?
2. Did the special referee abuse its discretion in setting aside a valid foreclosure sale when it applied the incorrect standard of consideration to the Mortgagors' motion to vacate, focusing on alleged irregularities in the underlying foreclosure action and the "equities," rather than the absence of any evidence of irregularity in the conduct of the sale?
3. Did the special referee abuse its discretion in setting aside a valid foreclosure sale when it ignored long-standing precedent and found that Buyers' bid "shocked the court's conscience" even though Buyers bid more than three times the amount our courts have typically required as a minimum threshold?
STANDARD OF REVIEW
"A mortgage foreclosure is an action in equity." Hayne Fed. Credit Union v. Bailey, 327 S.C. 242, 248, 489 S.E.2d 472, 475 (1997). "In actions in equity referred to a special referee with finality, the appellate court may view the evidence to determine the facts in accordance with its own view of the preponderance of the evidence, though it is not required to disregard the findings of the special referee." Florence Cnty. Sch. Dist. No. 2 v. Interkal, Inc., 348 S.C. 446, 450, 559 S.E.2d 866, 868 (Ct. App. 2002). "However, the determination of whether a judicial sale should be set aside is a matter left to the sound discretion of the [special referee]." Wells Fargo Bank, NA v. Turner, 378 S.C. 147, 150, 662 S.E.2d 424, 425 (Ct. App. 2008). "An abuse of discretion occurs when the conclusions of the [special referee] are either controlled by an error of law or are based on unsupported factual conclusions." Belle Hall Plantation Homeowner's Ass'n, Inc. v. Murray, 419 S.C. 605, 615, 799 S.E.2d 310, 315 (Ct. App. 2017).
LAW/ANALYSIS
As an initial matter, we address Buyers' argument that the special referee ignored its prior determination that the 2011 Administrative Order did not apply and failed to consider that Mortgagors did not appeal the decree of foreclosure. Buyers contend Mortgagors lost their opportunity to challenge this finding when they failed to appeal and it became the law of the case. We agree.
Pursuant to the law of the case doctrine, the special referee's determination in the decree of foreclosure that the 2011 Administrative Order did not apply bound the parties to this holding because no party appealed the decree. See Judy v Martin, 381 S.C. 455, 458, 674 S.E.2d 151, 153 (2009) (determining that a party may not seek relief from an order not appealed "because the order has become the law of the case"); In re Morrison, 321 S.C. 370, 372 n.2, 468 S.E.2d 651, 652 n.2 (1996) (); Bartles v. Livingston, 282 S.C. 448, 461-62, 319 S.E.2d 707, 715 (Ct. App. 1984) (); Atl. Coast Builders & Contractors, LLC v. Lewis, 398 S.C. 323, 329, 730 S.E.2d 282, 285 (2012) (...
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