Dedes v. Strickland, 23569
| Decision Date | 06 March 1991 |
| Docket Number | No. 23569,23569 |
| Court | South Carolina Supreme Court |
| Parties | George P. DEDES, Respondent, v. Bobby W. STRICKLAND, Northwoods Auto Sales, Inc., BWS Enterprises, a South Carolina General Partnership, First Federal Savings & Loan Association of South Carolina and Georgia-Pacific Investment Company, Defendants, of whom First Federal Savings and Loan Association of South Carolina is Appellant-Respondent, and Bobby W. Strickland is Respondent-Appellant. . Heard |
John R. Chase, Florence, for appellant-respondent.
Joseph F. Kent, Charleston, for respondent-appellant.
Lawrence E. Richter, Jr. and Thad H. Vincent, Charleston, for respondent.
Appellant-Respondent First Federal Savings and Loan Association of South Carolina (First Federal) appeals from the master-in-equity's finding that a real estate mortgage of Respondent George P. Dedes held priority over First Federal's mortgage on the same property. We affirm in part and remand in part.
On February 27, 1986, First Federal loaned $175,000 to Respondent-Appellant Bobby W. Strickland secured by a mortgage on several parcels of real estate, including the 1.72 acre tract which is the subject of this controversy. First Federal's mortgage was recorded March 3, 1986.
On August 10, 1987, Dedes loaned $275,000 to Strickland and BWS Enterprises, a General Partnership, of which Strickland was a general partner. The loan was secured by a mortgage on real estate, including the same 1.72 acre tract. Dedes' mortgage was recorded August 25, 1987. Concurrent with the execution of the note and mortgage, Strickland, as President of Northwoods Auto Sales, Inc., entered an agreement to execute and deliver within six months a mortgage on another parcel of land as additional security for the loan.
On February 5, 1988, First Federal refinanced the balance of approximately $167,512 remaining on the loan Strickland obtained February 27, 1986, satisfied the mortgage, and recorded the satisfaction. Strickland executed a new note dated February 5, 1988, and another mortgage of even date on the identical properties, including the 1.72 acres. The mortgage was recorded February 10, 1988.
On December 19, 1988, Dedes instituted this foreclosure action against Strickland, First Federal, and the other named defendants seeking foreclosure on real estate securing debts owed him by Strickland, including the 1.72 acre tract in question.
First Federal answered, and subsequently moved to amend its Answer to assert as a second and affirmative defense the doctrine of equitable subrogation as to its mortgage on the 1.72 acre tract. The trial court ruled that First Federal's Answer should be treated in all respects as if the affirmative defense of equitable subrogation had been asserted ab initio "if First Federal shall prove to the satisfaction of the court that it is entitled to assert such defense ..." This and other issues were referred with finality to the master-in-equity.
The master held a hearing and found that First Federal had failed to meet the four elements required to invoke the doctrine of equitable subrogation. As a result, the master (a) awarded attorneys' fees to Dedes in the amount of $103,710.52; (b) determined that Dedes' mortgage on the 1.72 acre tract was superior in priority to First Federal's mortgage; (c) held that Dedes was entitled to foreclosure; and (d) directed a sale of the security properties, including the 1.72 acre tract.
First Federal and Strickland appealed. A supersedeas bond for the appeal of First Federal was approved and the sale of the 1.72 acre tract was stayed pending disposition of the appeal.
On appeal, First Federal alleges the master erred in the following particulars:
1. In failing to hold that First Federal was entitled to be equitably subrogated to a first mortgage position superior to Dedes on the 1.72 acre tract.
2. In determining that unusual procedure was utilized by First Federal in refinancing Strickland's debt.
3. In awarding Dedes attorneys' fees of $103,710.52.
We disagree.
In Pee Dee State Bank v. Prosser, 295 S.C. 229, 367 S.E.2d 708, 712 (App.1988), our Court of Appeals cited the elements necessary to establish the right to be equitably subrogated. They are as follows:
1. The party claiming subrogation has paid the debt.
2. The party was not a volunteer but had a direct interest in the discharge of the debt or lien.
3. The party was secondarily liable for the debt or for the discharge of the lien.
4. No injustice will be done to the other party by the allowance of the equity.
Additionally, the party asserting the doctrine must not have had actual notice of the prior mortgage. Id.
We conclude that this record supports the master's finding that First Federal's proof fails to meet the test for entitlement to equitable subrogation. First Federal paid itself Strickland's outstanding debt by refinancing the balance owed. There is no showing of any direct interest necessitating discharge of the debt or lien. The record is silent as to what secondary liability First Federal could have had for Strickland's debt secured by its own first mortgage lien. Dedes could reasonably anticipate that once First Federal's 1986 note was paid and the mortgage satisfied, his mortgage would become a first lien superior to any subsequent mortgage. In our view, Dedes would suffer a grave injustice if First Federal were restored to priority lienholder under these circumstances.
First Federal asserts that its 1988 loan to Strickland was made upon the strength of...
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