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

• Decision Date: 16 September 1987
• Docket Number: No. 1028,1028
• Citation: 294 S.C. 27,362 S.E.2d 308
• Court: South Carolina Court of Appeals
• Parties: NORTH 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. and 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 Appellant. Appeal of DAV CORP. . Heard

Page 308

362 S.E.2d 308

294 S.C. 27

NORTH 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. isThird-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 isThird-Party Plaintiff, v.Daniel A. VOGEL, Jr., SecondThird-Party Defendant. andNCF 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 Appellant.

Appeal of DAV CORP.

No. 1028.

Court of Appeals of South Carolina.

Heard Sept. 16, 1987.

Decided Oct. 26, 1987.

John M. Leiter of Lawn & Leiter, Myrtle Beach, for appellant.

Steven H. John, North Myrtle Beach, J. Rutledge Young, Jr. of Young, Clement, Rivers & Tisdale, Charleston and Joel W. Collins, Jr. of Collins & Lacy, Columbia, for respondents.

GOOLSBY, Judge:

The main issue in this foreclosure action by the respondentNorth Carolina Federal Savings and Loan Association("NCFS & L") against the appellantDAV Corporation("DAV") and the respondentsParasol Development Corporation("Parasol") and Carolina FinCorp., Inc., now NCF Financial Corporation("NCF"), doing business as Parasol Inn Joint Venture ("Parasol Inn"), and against the defendantPetite Paris, Inc., is whether DAV is entitled as a matter of right to a jury trial on counterclaims it asserts against NCFS & L, on cross-claims it asserts against Parasol and NCF, and on third-party claims it asserts against the third-party defendantsRoger Van Wie, Geoffrey Van Wie, and Resort Management Group, Inc.("Resort Management").We dismiss.

On January 24, 1984, Parasol, NCF, and DAV entered into a joint venture agreement for the purpose of developing a condominium project in Horry County, South Carolina.The agreement established Parasol Inn as a South Carolina Partnership.On the same day, Parasol Inn, by its partners, executed a promissory note and secured the note by giving NCFS & L a mortgage in the amount of $1,950,000.

NCFS & L instituted the instant action on February 8, 1985, seeking a judgment on the note and foreclosure of the mortgage.

DAV simultaneously alleges in counterclaims against NCFS & L and in cross-claims against NCF causes of action for breach of contract accompanied by a fraudulent act, breach of contract, breach of fiduciary obligations, wrongful dissolution of the partnership, and violation of the unfair trade practices act.It alleges in cross-claims against Parasol causes of action for breach of contract accompanied by a fraudulent act, breach of fiduciary duties, and wrongful dissolution of the partnership.DAV simultaneously alleges in cross-claims against Parasol and in third-party claims against the Van Wies and Resort Management causes of action for conversion and violation of the unfair trade practices act.

DAV, apparently by motion, demanded a jury trial on the causes of action alleged in its counterclaims, cross-claims, and third-party claims.Parasol, on the other hand, moved pursuant to Rules 13(i),14(a),21, and42(b) of the South Carolina Rules of Civil Procedure for severance of and "separate trials" on the causes of action alleged in DAV's counterclaims, cross-claims, and third-party claims.NCFS & L and NCF moved to refer the entire matter to the master.

The circuit court refused DAV's demand for a jury trial on its several claims, denied Parasol's request for severance of and separate trials on DAV's counterclaims, cross-claims, and third-party claims, and referred all issues to the master.DAV appeals the denial by the circuit court of the demand for a jury trial and of the request for severance and separate trials.

Regarding DAV's contention that it is entitled to a jury trial on its counterclaims, a defendant in an equity action, such as a mortgage foreclosure, has a right to a jury trial on a counterclaim that is legal and compulsory in character.C & S Real Estate Services 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);S.C.R.Civ.P. 13(a).But where a defendant in an action begun in equity asserts a permissive counterclaim that is legal in nature, the defendant is deemed to have waived the right to a jury trial on the issues raised by the counterclaim.Id.

A counterclaim is compulsory if the counterclaim "arises out of the same transaction or occurrence that is the subject matter of the opposing party's claim."S.C.R.Civ.P. 13(a).Two tests a court may use in determining whether a claim arises out of the same transaction or occurrence are whether the issues of fact and law raised by the claim and counterclaim are largely the same and whether there is any logical relation between the claim and the counterclaim.Sue & Sam Manufacturing Company v. B-L-S Construction Company, 538 F.2d 1048(4th Cir.1976);Minnetonka, Inc. v. Sani-Fresh Intern., Inc., 103 F.R.D. 377(D.Minn.1984);H. LIGHTSEY & J. FLANAGAN, SOUTH CAROLINA CIVIL PROCEDUREat 251(1985).A counterclaim is compulsory if the question posed by either test is answered affirmatively.6 C. WRIGHT & A. MILLER, FEDERAL PRACTICE AND PROCEDURE: CIVIL§ 1410 at 43(1971).

When these tests are applied to the case at hand, it is clear that DAV's counterclaims against NCFS & L are not compulsory but are permissive.

NCFS & L's claim and DAV's counterclaims, as the pleadings reveal, do not raise largely identical issues of fact and law.The issues surrounding NCFS & L's claim relate only to the note and mortgage allegedly given by Parasol Inn on January 24, 1984.On the other hand, the issues surrounding DAV's counterclaims relate to alleged subsequent oral agreements by NCFS & L and NCF to provide Parasol Inn additional financing and a construction loan, to the joint venture agreement itself, to certain alleged unfair acts and practices committed by NCFS & L and NCF that are not alleged to have involved the note and mortgage, and to two alleged...