North Carolina Federal Sav. and Loan Ass'n v. DAV Corp., 23001

CourtUnited States State Supreme Court of South Carolina
Citation381 S.E.2d 903,298 S.C. 514
Decision Date23 January 1989
Docket NumberNo. 23001,23001
PartiesNORTH CAROLINA FEDERAL SAVINGS AND LOAN ASSOCIATION, Plaintiff, v. DAV CORP., Parasol Development Corporation and Carolina FinCorp., Inc., now by change of name NCF Financial Corporation, all d/b/a Parasol Inn Joint Venture, and Petite Paris, Inc., Defendants, of which DAV CORP. is Third-Party Plaintiff, v. PARASOL DEVELOPMENT CORPORATION, Carolina FinCorp., Inc., now NCF Financial Corporation, Roger Van Wie, Geoffrey Van Wie, and Resort Management Group, Inc., Third-Party Defendants, of which PARASOL DEVELOPMENT CORPORATION is Third-Party Plaintiff, v. Daniel A. VOGEL, Jr., Second Third-Party Defendant. NCF FINANCIAL CORPORATION, is the Third-Party Plaintiff, v. RESORT MANAGEMENT GROUP, INC., Roger Van Wie and Geoffrey Van Wie, Third-Party Defendants, OF WHOM North Carolina Federal Savings and Loan Association, Parasol Development Corporation, Carolina FinCorp., Inc., now by change of name NCF Financial Corporation, Roger Van Wie, Geoffrey Van Wie, and Resort Management Group, Inc. are Respondents, and DAV Corp., who is Petitioner. . Heard

John M. Leiter, of Leiter & Tall, Myrtle Beach, for petitioner DAV Corp.

J. Rutledge Young, Jr., and Stephen P. Groves, of Young, Clement, Rivers & Tisdale, Charleston, for respondents Parasol Development Corp., Roger Van Wie, Geoffrey Van Wie, and Resort Management Group, Inc.

Joel W. Collins, Jr., of Collins & Lacy, Columbia, for respondent Carolina FinCorp., Inc., now known as NCF Financial Corp.

Steven H. John, North Myrtle Beach, for respondent North Carolina Federal Sav. and Loan Ass'n.

H. Dave Whitener, Jr., Columbia, amicus curiae, for S.C. League of Savings Institutions, SC Bankers' Ass'n and the Mortgage Bankers of the Carolinas.

GREGORY, Chief Justice:

This case is before us on a writ of certiorari to the Court of Appeals to review its decision reported at 294 S.C. 27, 362 S.E.2d 308 (Ct.App.1987). We reverse in part and affirm in part.

Respondent North Carolina Federal Savings and Loan Association commenced this action to foreclose on a note and mortgage given by Parasol Inn Joint Venture to finance the purchase of real property for a hotel condominium project. The joint venture is composed of appellant DAV Corporation and respondents NCF Financial Corporation and Parasol Development Corporation. NCF is a wholly owned subsidiary of the mortgagee, respondent North Carolina Federal.

DAV counterclaimed against North Carolina Federal, cross-claimed against its codefendants, and impleaded third parties. DAV demanded a jury trial on these claims which the trial judge refused.

On appeal, the Court of Appeals held DAV's claims were permissive and therefore DAV had waived its right to a jury trial by asserting them in this equitable foreclosure action. The Court of Appeals concluded that because the trial judge's refusal to grant a jury trial did not deprive DAV of a mode of trial to which it was entitled, the order was not directly appealable. See C & S Real Estate Services, Inc. v. Massengale, 290 S.C. 299, 350 S.E.2d 191 (1986), modified, Johnson v. South Carolina National Bank, 292 S.C. 51, 354 S.E.2d 895 (1987). DAV's appeal was dismissed.

DAV first contends it is entitled to a jury trial on its counterclaims. We agree in part.

DAV asserted the following counterclaims against North Carolina Federal:

1) breach of a subsequent oral contract to arrange additional financing for interest payments and construction costs;

2) breach of the joint venture agreement as parent company of joint venturer NCF by bringing the foreclosure action;

3) breach of fiduciary duty to co-joint venturers 4) wrongful dissolution of the joint venture by failing to voluntarily refrain from foreclosure as agreed;

5) violation of the Unfair Trade Practices Act by breaching the oral agreement;

6) breach of two subsequent oral contracts to purchase DAV's interest in the joint venture.

DAV requested dismissal of the foreclosure action and damages for the alleged breaches of contract on these counterclaims.

A party does not waive its right to a jury trial on a counterclaim asserted in an equity action if the counterclaim is legal and compulsory in nature. Johnson v. South Carolina National Bank, supra. First, it must be determined that DAV's counterclaims are legal in nature. North Carolina Federal argues the counterclaims are equitable rather than legal because they rely on an equitable remedy of piercing the corporate veil. We reject this characterization. DAV alleges direct actions by North Carolina Federal in breaching the purported agreement to provide additional financing. We hold these counterclaims are legal in nature.

Next, it must be determined that the counterclaims are compulsory. By definition a counterclaim is compulsory only if it arises out of the same transaction or occurrence as the opposing party's claim. Rule 13(a), SCRCP. Courts have employed four tests 1 to determine whether a counterclaim is compulsory under this definition:

1) Are the issues of fact and law largely the same?

2) Would res judicata bar a subsequent suit on the counterclaim?

3) Does substantially the same evidence apply?

4) Is there any logical relationship between the claim and the counterclaim?

The fourth test, the "logical relationship test" is by far the most widely accepted because of its flexibility. See 6 C. Wright & A. Miller, Federal Practice & Procedure § 1410 (1971). The Court of Appeals applied both the "same issues of law and fact test" and the "logical relationship test" to determine DAV's counterclaims were permissive rather than compulsory.

We hereby adopt the logical relationship test. Applying this test to the facts at hand, we conclude that all but DAV's sixth...

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35 cases
  • Wells Fargo Bank, NA, v. Smith
    • United States
    • South Carolina Court of Appeals
    • 8 Agosto 2012
    ...the claim and the counterclaim. Mullinax v. Bates, 317 S.C. 394, 396, 453 S.E.2d 894, 895 (1995). In N.C. Fed. Sav. & Loan Ass'n v. DAV Corp., 298 S.C. 514, 518, 381 S.E.2d 903, 905 (1989), our supreme court adopted the “logical relationship” test and held DAV's counterclaim was compulsory ......
  • Doherty v. Mortgage
    • United States
    • U.S. District Court — District of South Carolina
    • 16 Julio 2015
    ...is compulsory where there is a logical relationship between the claim and the counterclaim. North Carolina Federal Sav. and Loan Ass'n v. DAV Corp., 381 S.E.2d 903, 905 (S.C. 1989). "The purpose of Rule 13(a) is 'to prevent multiplicity of actions and to achieve resolution in a single lawsu......
  • Miller v. Miller
    • United States
    • New York Supreme Court — Appellate Division
    • 19 Julio 2017
    ...claims here would have undermined the enforceability of the South Carolina final order (see id.; North Carolina Fed. Sav. & Loan Assoc. v. DAV Corp., 298 S.C. 514, 518, 381 S.E.2d 903, 905 ).In light of our determination, the parties' remaining contentions have been rendered academic.Accord......
  • In re Bobo, C/A No. 07-01120-HB (Bankr. S.C. 1/17/2008), C/A No. 07-01120-HB
    • United States
    • U.S. Bankruptcy Court — District of South Carolina
    • 17 Enero 2008
    ...test" to determine whether a counterclaim is compulsory under the Rule 13(a) definition. N.C. Fed. Sav. & Loan Ass'n v. DAV Corp., 298 S.C. 514, 518-19, 381 S.E.2d 903, 905 (1989); Beach Co. v. Twillman Ltd., 351 S.C. 56, 61, 566 S.E.2d 863, 865 (S.C. App. 2002). In this test the court look......
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