Stearns Bank Nat. Ass'n v. Glenwood Falls

• Decision Date: 09 April 2007
• Docket Number: No. 4231.,4231.
• Citation: 644 S.E.2d 793
• Court: South Carolina Court of Appeals
• Parties: STEARNS BANK NATIONAL ASSOCIATION, Plaintiff, v. GLENWOOD FALLS, LP, a South Carolina limited partnership; DC Development, Inc.; McBride Building Supplies & Hardware, Inc.; First Federal Savings and Loan Association of Charleston; Charleston Affordable Housing, Inc.; and the Building Center, Inc., Defendants, Of whom DC Development, Inc., is the Respondent, v. and Glenwood Falls, LP, a South Carolina limited partnership, is the Appellant.

644 S.E.2d 793

STEARNS BANK NATIONAL ASSOCIATION, Plaintiff, v. GLENWOOD FALLS, LP, a South Carolina limited partnership; DC Development, Inc.; McBride Building Supplies & Hardware, Inc.; First Federal Savings and Loan Association of Charleston; Charleston Affordable Housing, Inc.; and the Building Center, Inc., Defendants, Of whom DC Development, Inc., is the Respondent, v. and Glenwood Falls, LP, a South Carolina limited partnership, is the Appellant.

No. 4231.

Court of Appeals of South Carolina.

Heard March 6, 2007.

Decided April 9, 2007.

Rehearing Denied May 17, 2007.

Michael W. Tighe and Mary Dameron Milliken, of Columbia, for Appellant.

William E. Booth, III, of West Columbia, for Respondent.

KITTREDGE, J.:

Glenwood Falls, LP, appeals the master's order denying its motion to set aside a default judgment. We affirm.

I.

Glenwood Falls is a South Carolina limited partnership. Glenwood Falls hired DC Development, a South Carolina corporation, to construct apartments on real property Glenwood Falls owned in York County. To fund this project, Glenwood Falls obtained a $1.8 million mortgage from Stearns Bank.

On January 30, 2004, Stearns Bank brought a foreclosure action against Glenwood Falls, DC Development, and Charleston Affordable Housing ("Affordable Housing"). Affordable Housing, a South Carolina non-profit corporation, is one of Glenwood Falls' general partners. On March 15, 2004, DC Development answered and filed a cross-claim against Glenwood Falls, seeking to foreclose a mechanic's lien on the property and asserting causes of action for breach of contract, unjust enrichment, and quantum meruit. DC Development's attorney, William Booth, mailed the cross-claim via certified mail to Glenwood Falls' registered agent, Cathy Kleiman, but Kleiman did not sign the return receipt. Instead, an unauthorized person signed it.

Kleiman nevertheless received the cross-claim and, on May 13, 2004, forwarded it to Robert Nettles, an attorney she believed represented Glenwood Falls. Over the next several months, Kleiman attempted to contact Nettles multiple times to ascertain the status of the cross-claim, but Nettles did not respond. The record does not establish that Nettles was ever retained to represent Glenwood Falls in this matter.

On June 17, 2004, the master issued a foreclosure order, but retained jurisdiction to hear the cross-claim. On July 28, 2004, DC Development's attorney, Booth, purportedly received a phone message from Affordable Housing's attorney, Frank Cisa, regarding Cisa's representation of Glenwood Falls. On November 8, 2004, Booth wrote Cisa the following:

I represent DC Development, Inc. and I believe you represent Glenwood Falls, LP and Charleston Affordable Housing, Inc. I have scheduled the trial of a Cross-Claim of DC Development, Inc. against Glenwood Falls, LP. The trial is scheduled for December 16, 2004, at 1:30 PM in the office of the Master in Equity for York County.

Cisa replied the next day ("the November 9 letter"). He wrote:

I do represent Charleston Affordable Housing, Inc. and I am now taking over the representation of Glenwood Falls, LP. What I gather from you[r] letter is that no Answer was filed on behalf of Glenwood Falls, LP to the Cross-Claim of DC Development, Inc. If that is the case, it was caused by the failure of the original attorney for Glenwood Falls, LP to respond. In any event, for DC Development, Inc. to recover any money in this action, my opinion is that Glenwood Falls, LP needs to assert a claim over and against the architects and engineers who designed this project. Glenwood Falls, LP has no assets. ...

On December 16, 2004, the master heard DC Development's cross-claim against Glenwood Falls, as Booth mentioned in his letter to Cisa. Cisa, however, did not appear on Glenwood Falls' behalf. That same day, Booth filed an affidavit of default. On January 5, 2005, the master entered a default judgment of $1.3 million against Glenwood Falls.

In April 2005, Glenwood Falls moved to set aside the default judgment. Glenwood Falls argued (1) the judgment was void because the court did not have personal jurisdiction over Glenwood Falls as a result of DC Development's failure to properly serve Glenwood Falls, and (2) the judgment was procured through excusable neglect. The master denied Glenwood Falls' motion. The master found (1) the court had personal jurisdiction over Glenwood Falls, despite DC Development's failure to serve Glenwood Falls properly, because Glenwood Falls made a voluntary appearance, which waived its right to contest personal jurisdiction, and (2) the judgment was not procured through excusable neglect. Glenwood Falls appeals.

II.

The decision to grant or deny a motion for relief from judgment lies within the sound discretion of the trial court and will not be disturbed on appeal absent an abuse of discretion. BB & T v. Taylor, 369 S.C. 548, 551, 633 S.E.2d 501, 502-03 (2006). "An abuse of discretion arises where the judge issuing the order was controlled by an error of law or where the order is based on factual conclusions that are without evidentiary support." Id. at 551, 633 S.E.2d at 503.

III.

Glenwood Falls argues the master erred in denying its motion to set aside a default judgment because (1) the judgment was void, as Glenwood Falls was not properly served and did not make a voluntary appearance, and (2) the judgment was procured through excusable neglect, as Glenwood Falls' attorneys abandoned it. We find no abuse of discretion in the denial of Glenwood Falls' motion for relief from default judgment.¹

A. Voluntary Appearance

Glenwood Falls contends the judgment was void as a result of DC Development's improper service, and the master erred in finding Glenwood Falls made a voluntary appearance. We disagree.

A court may set aside a default judgment in accordance with Rule 60(b), SCRCP. See Rule 55(c), SCRCP. Rule 60(b)(4) provides: "On motion and upon such terms as are just, the court may relieve a party or his legal representative from a final judgment ... [if] the judgment is void...." "A judgment is void if a court acts without personal jurisdiction." BB & T v. Taylor, 369 S.C. 548, 551, 633 S.E.2d 501, 503 (2006).

A court usually obtains personal jurisdiction by the service of the summons and complaint. To serve a partnership, a copy of the summons and complaint must be delivered to "an officer, a managing or general agent, or to any other agent authorized by appointment or by law to receive service of process," or sent by "registered or certified mail, return receipt requested and delivery restricted to the addressee." Rule 4(d)(3) & (8), SCRCP. Although a court commonly obtains personal jurisdiction by the service of the summons and complaint, it may also obtain personal jurisdiction if the defendant makes a voluntary appearance. Rule 4(d) ("Voluntary appearance by defendant is equivalent to personal service.").²

As the master found, and neither party contests, DC Development did not properly serve Glenwood Falls under Rule 4(d)(8), because an unauthorized person signed the return receipt. Normally, this would be a suitable ground to grant relief from judgment under Rule 60(b)(4). See Rule 4(d)(8) ("Any such default or judgment by default shall be set aside pursuant to Rule 55(c) or Rule 60(b) if the defendant demonstrates to the court that the return receipt was signed by an unauthorized person."). But the master did not set aside the default judgment under Rule 60(b)(4) because he found Glenwood Falls made a voluntary appearance, which under Rule 4(d) is "equivalent to personal service." Thus, the master concluded the court had personal jurisdiction over Glenwood Falls.

The critical issue, therefore, is whether the master erred in finding Glenwood Falls made a voluntary appearance. "The term `appearance' is used particularly to signify or designate the overt act by which one against whom suit has been commenced submits himself to the court's jurisdiction." 4 Am.Jur.2d Appearance § 1 (1995). "An appearance may be expressly made by formal written or oral declaration, or record entry, or it may be implied from some act done with the intention of appearing and submitting to the court's jurisdiction." Id. No specific act constitutes an appearance, as "a defendant may choose to come into court with trumpets, or quietly by the back door." Stephens v. Ringling, 102 S.C. 333, 342, 86 S.E. 683, 685 (1915). Accordingly, courts decide on a case by case basis whether a defendant's act demonstrates an intent to submit to the court's jurisdiction.

Here, the master found the November 9 letter from Glenwood Falls' attorney, Cisa, to DC Development's attorney demonstrated an intent to submit to the court's jurisdiction and, therefore, constituted a voluntary appearance. The master cited Petty v. Weyerhaeuser Company, 272 S.C. 282, 251 S.E.2d 735 (1979), for the proposition that a letter from one attorney to another may constitute a voluntary appearance. Glenwood Falls argues Petty is distinguishable from this case.

In Petty, plaintiff's counsel sent the summons and complaint to defense counsel in Tacoma, Washington. A few weeks later, defense counsel called plaintiff's counsel to request an extension of time to answer the complaint, which plaintiff's counsel granted. Defense counsel memorialized this exchange in a letter to plaintiff's counsel, which read: "Confirming our telephone conversation of February 27, please consider this letter as an informal notice of appearance on behalf of [the defendant] in the suit you recently instituted. ..." Id. at 284, 251 S.E.2d at 736. The letter also stated the defendant would like to "explore settlement possibilities prior to retaining counsel in South Carolina for formal appearance, answer and defense or settlement by local counsel." Id. When, after numerous attempts, plaintiff's counsel could not reach defense counsel to discuss settlement possibilities, plaintiff's counsel filed...