773 S.E.2d 607
S.C. Ct. App.2015Background
- Atlantic Private Equity Group borrowed $2,000,000 from Community First Bank in 2008; the loan was secured by mortgages on two Beaufort County parcels. Terry Rohlfing and Jerry Caldwell executed personal guaranties.
- Community First merged into CresCom, which assigned the loan to Deep Keel, LLC. Atlantic defaulted; Deep Keel sought foreclosure and deficiency judgment; also sued guarantors for breach.
- Circuit court referred the matter to a master-in-equity solely "for the purposes of adjudicating the foreclosure action;" guaranty claims were to be returned to circuit court for disposition.
- Deep Keel introduced six loan documents through its sole member (Bynum); Atlantic objected on authentication and hearsay grounds. The master admitted the loan documents.
- Deep Keel did not introduce the accounting records showing payoff; Bynum testified about the outstanding balance based on records he reviewed but those records were not admitted. Atlantic objected; the master admitted Bynum’s testimony under the business-records exception.
- The master ordered foreclosure (affirmed) and entered a deficiency judgment against Atlantic (reversed); the master also made a finding that the guarantors were liable (vacated as beyond the reference).
Issues
| Issue | Plaintiff's Argument (Deep Keel) | Defendant's Argument (Atlantic / Rohlfing & Caldwell) | Held |
|---|---|---|---|
| Admissibility / authentication of loan documents | Bynum’s testimony and document characteristics suffice to authenticate the loan papers | Documents not properly authenticated; Bynum lacked foundation on origin/maintenance | Court: Authentication satisfied (Rule 901); documents also self-authenticating under Rule 902(9) and signatures not specifically denied under UCC §36-3-308(a) — admitted |
| Whether loan documents are hearsay | Documents prove existence and terms of contract, not offered for truth of assertions | Documents contain out-of-court statements and are hearsay | Court: Not hearsay when offered to prove existence/terms of contract; admission proper |
| Admission of Bynum’s testimony as to amount due (business records exception) | Bynum qualified to testify from reviewing bank records; his live testimony should be admissible under Rule 803(6) | Testimony is hearsay based on out-of-court records not admitted; business-records exception requires the record itself and foundation | Court: Bynum’s testimony was hearsay and Rule 803(6) does not permit admitting live testimony of record contents when the underlying records were not offered; admission was erroneous and prejudicial — deficiency reversed |
| Master’s finding as to guarantors’ liability (scope of reference) | Master had authority to resolve all issues raised in foreclosure proceeding | Guaranty liability was reserved to circuit court / jury per order of reference | Court: Finding 18 (guarantors’ liability) exceeded the master’s authority under order of reference and is vacated |
Key Cases Cited
- United States v. Hassan, 742 F.3d 104 (4th Cir. 2014) (lower burden to authenticate documents under Rule 901)
- Kershaw Cnty. Bd. of Educ. v. U.S. Gypsum Co., 302 S.C. 390 (S.C. 1990) (documents with internal consistency may authenticate each other)
- Fields v. Regional Medical Ctr. Orangeburg, 363 S.C. 19 (S.C. 2005) (trial court’s evidentiary rulings reviewed for abuse of discretion)
- Ex parte Dep’t of Health & Environmental Control, 350 S.C. 243 (S.C. 2002) (elements and foundation for business-records exception)
- Twelfth RMA Partners, L.P. v. National Safe Corp., 335 S.C. 635 (Ct. App. 1999) (what qualifies a witness to lay foundation for business records)
- Kepner-Tregoe, Inc. v. Leadership Software, Inc., 12 F.3d 527 (5th Cir. 1994) (signed instruments have independent legal significance and are non-hearsay)