755 S.E.2d 437
S.C.2014Background
- Wachovia filed a foreclosure action on a note secured by mortgage and guaranties against William and Judith Blackburn (Respondents).
- Respondents asserted numerous counterclaims including misrepresentation, estoppel, breach of contract, fraud, fiduciary duties, conspiracy, illegality, and SCUTPA, premised on Wachovia’s alleged involvement with the Seller and Realtors.
- The counterclaims allege Wachovia acted as an agent/partner/conspirator with the Seller and Realtors to inflate property values and promise amenities to induce the lottery sale.
- The note and guaranties contained a conspicuous jury trial waiver; Respondents signed these documents during the loan/guaranty transactions.
- The circuit court granted summary relief enforcing the waivers, striking the jury demand; the court of appeals partially reversed, focusing on scope and an outrageous-torts exception.
- This Court reverses in part and affirms in part, holding waivers are enforceable and cover the counterclaims, and discards the outrageous-torts exception to arbitration in this waiver context.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Are counterclaims in an equitable foreclosure subject to jury trial? | Blackburns argue waivers don’t apply to sales-related counterclaims. | Wachovia contends waivers cover all disputes arising from loan documents and related conduct. | Yes; waivers cover the counterclaims to the extent legal/compulsory or otherwise. |
| Were the jury trial waivers knowingly and voluntarily executed? | They signed the waivers without understanding due to failure to read. | Respondents are bound; signing and conspicuous waivers show knowledge and voluntary assent. | Waivers were knowingly and voluntarily executed and enforceable. |
| Does an outrageous and unforeseeable torts exception apply to jury trial waivers here? | Appeals would allow non-arbitrary exceptions to require jury trial. | Exception should govern arbitration; not applicable to jury trial waivers. | No; the exception does not apply; waivers cover the counterclaims. |
Key Cases Cited
- Hayne Fed. Credit Union v. Bailey, 327 S.C. 242 (1997) (mortgage foreclosure is an action in equity)
- Johnson v. S.C. Nat'l Bank (Johnson II), 292 S.C. 51 (1987) (rules for equity vs. law and permissive/compulsory counterclaims)
- N. C. Fed. Sav. & Loan Ass'n v. DAV Corp., 298 S.C. 514 (1989) (logical relationship test for compulsory counterclaims)
- Williford v. Downs, 265 S.C. 319 (1975) (equity a jury trial right generally not available)
- Regions Bank v. Schmauch, 354 S.C. 648 (2003) (reading and understanding contract waiver obligations)
- Wells Fargo Bank, N.A. v. Smith, 398 S.C. 487 (Ct.App. 2012) (logical relationship and compulsory counterclaims in context)