Hughes v. Bank of Am.

• Decision Date: 13 October 2021
• Docket Number: 2021-UP-354,Appellate Case 2018-001443
• Court: South Carolina Court of Appeals
• Parties: Phillip Francis Luke Hughes, on behalf of the Estate of Jane K. Hughes, Respondent, v. Bank of America National Association, Appellant.

Phillip Francis Luke Hughes, on behalf of the Estate of Jane K. Hughes, Respondent, v. Bank of America National Association, Appellant.

No. 2021-UP-354

Appellate Case No. 2018-001443

Court of Appeals of South Carolina

October 13, 2021

THIS OPINION HAS NO PRECEDENTIAL VALUE. IT SHOULD NOT BE CITED OR RELIED ON AS PRECEDENT IN ANY PROCEEDING EXCEPT AS PROVIDED BY RULE 268(d)(2), SCACR.

Submitted March 1, 2021

Appeal From Spartanburg County Grace Gilchrist Knie, Circuit Court Judge

Robert A. Muckenfuss, of Charlotte, North Carolina, and Elizabeth Marion Zwickert Timmermans, of Raleigh, North Carolina, both of McGuireWoods LLP, for Appellant.

D Michael Kelly and Bradley Davis Hewett, both of Mike Kelly Law Group, LLC, and Jamie Nicole Smith, all of Columbia, for Respondent.

PER CURIAM:

In 2015, Respondent Phillip Hughes, on behalf of the estate of his mother, Jane Hughes (Jane), filed suit in circuit court for alleged "fraudulent conduct" by Appellant Bank of America. Respondent alleged that his parents, John Hughes and Jane, declined an insurance product offered by Appellant when opening a line of credit there in 2006. According to Respondent, Appellant nonetheless at some point started charging $28.40 a month, purportedly to pay for the insurance. Respondent brought an array of claims, including inter alia, one under the federal Truth in Lending Act and state law claims for fraud, fraudulent concealment and breach of contract.^[1]

The case was removed to federal court on Appellant's motion. Later, Respondent sought "[d]ismissal [w]ithout [p]rejudice for its claims for fraud, fraudulent concealment and breach of contract accompanied by fraudulent acts" because "there is controlling precedent [from the South Carolina Supreme Court] that may bar recovery for these particular claims by virtue of Jane Hughes's death." The leftover claims against Appellant were dismissed by the federal district court in an order dated February 13, 2017.

Respondent then returned to state court with a state-law action including claims for fraud, fraudulent concealment, breach of contract accompanied by a fraudulent act, violation of the South Carolina Unfair Trade Practices Act (SCUTPA), breach of fiduciary duty, and conversion, as well as a survival action. At a hearing on Appellant's subsequent motion to dismiss, Respondent conceded that dismissal of the conversion and breach of fiduciary duty claims was likely proper. Respondent told the court that "the crux of this case is to challenge the state of the law on the fraud claims." Specifically, Respondent challenged the now 80-year-old and rarely-elaborated-upon decision by our supreme court in Mattison v. Palmetto State Life Ins. Co. that fraud "does not come within either of the instances where a cause of action survives" under the state's survival statute. 197 S.C. 256, 261-62, 15 S.E.2d 117, 118-19 (1941).

On March 20, 2018, Judge R. Keith Kelly issued an order "grant[ing Appellant's] Motion to Dismiss, with prejudice," holding that "the claims are barred by the doctrine of res judicata." The circuit court added: "In addition to res judicata, [Respondent]'s fraud-related claims are all barred as those claims did not survive the death of the [Respondent]'s parents; the SCUTPA statute itself does not allow [Respondent] to bring a claim in a representative capacity; and all of [Respondent]'s claims are barred by the applicable statutes of limitations." Respondent appealed. This court heard oral arguments in December 2020. Respondent requested and received permission to "argue against precedent" at oral arguments in that case.^[2]

On March 29, 2018, Appellant filed a Motion for Sanctions against Respondent and Respondent's counsel. Appellant argued that sanctions were appropriate under Rule 11, SCRCP, and the Frivolous Civil Proceedings Sanctions Act (FCPSA) because Respondent's claims were frivolous given the existence of the fraud exception and the other objections to the initial case that Appellant had raised.^[3] Respondent opposed the sanctions. Respondent argued that he "brought the action in good faith," because the effort was intended to change the law regarding the fraud exception.^[4]

Judge Grace Gilchrist Knie held a hearing on Appellant's motion on June 1, 2018. On July 3, the circuit court rejected Appellant's motion for sanctions, relying on the proceedings underway in this court. "This matter is currently pending before the South Carolina Court of Appeals . . . and has not yet been fully adjudicated. Accordingly, [Appellant]'s Motion for Sanctions is untimely and premature." This appeal followed.

ISSUES ON APPEAL

1. Did Appellant preserve for review its arguments that its motions for sanctions were not premature and untimely?

2. Are Appellant's arguments prohibited under the two-issue rule?

3. Did the circuit court err when it found the motion for sanctions under Rule 11 was premature and untimely?

4. Did the circuit court err when it found that the motion for sanctions under the FCPSA was premature and untimely?

5. Should the circuit court have granted the motions for sanctions?

STANDARD OF REVIEW

Appellant and Respondent disagree on the standard of review for this case. Appellant argues this court should review the case de novo. Respondent argues that the appropriate standard of review is for an abuse of discretion. We agree with Respondent.

As Respondent notes, South Carolina's appellate courts have repeatedly said that rulings regarding sanctions are equitable decisions. Recently, our supreme court reiterated the standard.

The decision to impose sanctions is one in equity, and thus the appellate court reviews the circuit court's factual findings de novo. If the appellate court agrees with the factual findings, then it reviews the circuit court's decision to impose sanctions and the amount of sanctions for an abuse of discretion. We also review an equity court's procedural rulings-such as a ruling on timeliness of a Rule 11 motion-for abuse of discretion.

Pee Dee Health Care, P.A. v. Estate of Thompson, 424 S.C. 520, 538 n.11, 818 S.E.2d 758, 768 n.11 (2018) (emphasis added) (citations omitted). See also id. at 537, 818 S.E.2d at 767 ("In light of all these considerations, we turn to the circuit court's decision to grant the Rule 11 motion in the face of Pee Dee Health's timeliness challenge. We review the decision for abuse of discretion." (emphasis added)); Ex parte Gregory, 378 S.C. 430, 437, 663 S.E.2d 46, 50 (2008) (pre-2005 statute^[5]) ("[W]here the appellate court agrees with the trial court's findings of fact, it reviews the decision to award sanctions, as well as the terms of those sanctions, under an abuse of discretion standard."); Russell v. Wachovia Bank, N.A., 370 S.C. 5, 19, 663 S.E.2d 722, 729 (2006) (pre-2005 statute) ("On appeal, the imposition of sanctions pursuant to this rule will not be disturbed absent an abuse of discretion.").

Appellant attempts to distinguish this case by highlighting the undisputed facts. Appellant then points to cases like Goldston v. State Farm Mutual Automobile Insurance Co.^[6], WDW Properties v. City of Sumter^[7], and Dreher v. Dreher^[8] for the proposition that in such cases, the appropriate standard of review is de novo. However, none of these cases involved motions for sanctions, which is a specific set of equitable remedies. See Goldston, 358 S.C. at 166, 594 S.E.2d at 516 ("In an action at law, tried without a jury, the appellate court will not disturb the trial court's findings of fact unless they are found to be without evidence that reasonably supports those findings. However, '[w]hen an appeal involves stipulated or undisputed facts, an appellate court is free to review whether the trial court properly applied the law to those facts.'" (emphasis added) (citation, alteration omitted) (quoting In re Estate of Boynton, 355 S.C. 299, 301, 584 S.E.2d 154, 155 (Ct. App. 2003)).

Practically, there is not a great deal of difference between the two standards in analyzing the current case. Under either benchmark, because the facts in this case are clear, this court is essentially attempting to determine if the court got the law wrong. See Gregory, 378 S.C. at 437, 663 S.E.2d at 50 ("An abuse of discretion occurs where the decision is controlled by an error of law or is based on unsupported factual conclusions."). In any event, the correct standard to use to analyze this case is to determine whether the circuit court abused its discretion.

Additionally, to the extent we must construe statutes, "[d]etermining the proper interpretation of a statute is a question of law, and th[e appellate c]ourt reviews questions of law de novo." Town of Summerville v. City of North Charleston, 378 S.C. 107, 110, 662 S.E.2d 40, 41 (2008).

LAW/ANALYSIS

We first decline the implicit invitation of both Appellant and Respondent to get involved in their feud over whether sanctions are or are not justified on the merits. The essence of the circuit court's ruling can be found in this paragraph of its order: "This matter is currently pending before the South Carolina Court of Appeals . . . and has not yet been fully adjudicated. Accordingly Defendant's Motion for Sanctions is untimely and premature." (Emphasis added). Furthermore, despite Appellant's arguments in its initial brief, it stated in its reply brief that it "requests that the [circuit] court be reversed on this point and the matter remanded for a determination on the merits." Therefore, the issue before this court is whether the circuit court was correct in its belief that ruling on Appellant's motion would be "untimely and premature," not whether the circuit court should have imposed sanctions if it had reached the merits.^[9] On the grounds of timeliness, the...