Hobbithouser v. Crosby

THIS OPINION HAS NO
PRECEDENTIAL VALUE.  IT SHOULD NOT BE CITED OR RELIED ON AS PRECEDENT IN ANY
PROCEEDING EXCEPT AS PROVIDED BY RULE 239(d)(2), SCACR.

THE STATE OF SOUTH CAROLINA

In The Court of Appeals

Hobbithouser,
LLC, Appellant,

v.

Thomas L. Crosby,
Jr., J & A Construction, and Joe A. Daves, Respondents,

Appeal From York County

S. Jackson Kimball, Master-In-Equity

Unpublished Opinion No.  2008-UP-339

Submitted May 1, 2008 – Filed July 7, 2008  

AFFIRMED

Charles B. Baxley, of Lugoff, for Appellant.

Daniel D. D’Agostino, of York, for Respondents and

Thomas L. Crosby, Jr., pro se, of Matthews.

PER CURIAM:  In
this action to foreclose a real estate mortgage, Hobbithouser, LLC (Hobbithouser)
appeals the master-in-equity’s finding that Thomas L. Crosby, Jr.’s payments on
two promissory notes extinguished the notes and the related mortgage.  We affirm.[1]   

FACTS

On
October 13, 1999, Crosby secured personal loans made to him by Carolina First
Bank (Carolina First) by mortgaging approximately 164 acres in York County (York Property).  Subsequently, in an unrelated action, J & A Construction,
Inc. obtained and recorded a judgment against Crosby.  Crosby failed to pay the
judgment and the sheriff levied on the York Property.  On July 10, 2002, after
two execution sales, the sheriff deeded the York Property to J & A
Construction, the high bidder at both sales.

After
the York Property was levied, but prior to the execution sales, Crosby executed two promissory notes to Carolina First.  The first note (Note One), in the
amount of $374,307.77, refinanced the original loan from October 1999 and was
secured by the York Property.  The second note (Note Two), in the amount of
$153,071.71, was cross-collateralized by the October 1999 mortgage on the York
Property. 

On
October 21, 2003 and November 28, 2003, more than a year after J & A
Construction acquired the York Property, Crosby, using his personal funds, paid
Carolina First in full for both notes.  Thereafter, on December 3, 2003,
Carolina First assigned Note One, Note Two, and the October 1999 mortgage to
Hobbithouser, a South Carolina corporation in which Crosby owns an eighty
percent interest.  The assignment was subsequently filed on June 14, 2004.

Meanwhile,
on November 24, 2003, Crosby wrote a check to himself from the Hobbithouser
account in the amount of $1,339,129.80 when Hobbithouser’s account contained approximately
$200.  The next day, Crosby made a deposit from his personal account into the Hobbithouser
account in the exact same amount as written on the check.[2] 

Sometime
after the York Property was deeded to J & A Construction and the notes and
mortgage were assigned to Hobbithouser, Hobbithouser claimed J & A
Construction failed to timely make interest payments on the notes.  On December
22, 2005, Hobbithouser filed this action against Crosby, J & A Construction,
and Joe A. Daves to foreclose the mortgage on the York Property.  After a non-jury
trial, the master denied Hobbithouser’s claim for foreclosure of the mortgage
and directed the clerk of court to satisfy the mortgage.  The master also
denied Hobbithouser’s motion to reconsider.  This appeal followed.

STANDARD OF REVIEW

“An action to foreclose a real estate mortgage is an
action in equity.”  BB&T of South Carolina v. Kidwell, 350 S.C. 382,
387, 565 S.E.2d 316, 319 (Ct. App. 2002).  In an action in equity, we may
review the facts in accordance with our own view of the preponderance of the
evidence.  Smith v. Barr, 375 S.C. 157, 160, 650 S.E.2d 486, 488 (Ct.
App. 2007).  However, we need not disregard the factual findings of the master,
who saw and heard the witnesses and was in a better position to judge their
credibility.  Id.

LAW / ANALYSIS

I.  Payments to Carolina First

Hobbithouser
argues the master erred in finding Crosby’s payments to Carolina First
extinguished his debt.  We disagree.

In Jeffcoat
v. Morris, the court considered whether a receiver of a debtor, who
purchased a debtor’s note by paying off the debt, could sue the co-maker of the
debtor’s note.  300 S.C. 526, 389 S.E.2d 159 (Ct. App. 1989), overruled by United Carolina Bank v. Caroprop, 316 S.C. 1, 446 S.E.2d 415 (1994).[3] 
After reviewing North Carolina and Virginia case law, the court held “payment
of a note by a maker, or an appointed receiver of the maker, operates to
extinguish the note, discharging the liability of any co-makers on the note.”  Id. at 529, 389 S.E.2d at 161.  The court reasoned that “[t]o allow a maker of a
note, or one who stands in the shoes of that person, to acquire an assignment
of the note and then sue his co-makers on the note would open the doors to
possible abuse and sharp dealing.”  Id.

Similarly,
in Ives v. Rutland, a purchaser of property took the property subject to
a mortgage, paid the bank in full for the mortgage, and then rather than
satisfying the mortgage, requested the bank assign it to him.  The court held
the mortgage “became a dead paper” when the purchaser paid it off, thus there
were no rights to assign.  135 S.C. 173, 182, 133 S.E. 539, 541 (1926).  See
also 59 C.J.S. Mortgages § 460 (1998) (stating that payment of a mortgage
debt generally discharges the mortgage and terminates the mortgagee’s rights).

Here,
Crosby paid off his debt in full and then secured an assignment to
Hobbithouser, a company in which he owned an eighty percent interest.  In
accordance with South Carolina jurisprudence, Crosby’s two notes and mortgage
were extinguished when he, as the sole debtor on the notes and mortgage, paid
the debts in full.  Once the debts were paid, the mortgage was satisfied and
there were no rights to assign to Hobbithouser.  Therefore, J & A
Construction’s judgment lien assumed the status of a first lien on the real
property, and J & A Construction’s purchase of the property at the
execution sale was free and clear from the prior lien of the mortgage. 

II.  Agent of Hobbithouser

Hobbithouser
also contends the master erred in finding Crosby acted in an individual
capacity when he paid off his debts because he was acting as an agent for
Hobbithouser.  This issue is not preserved for our review. 

At
trial and in its motion to reconsider, Hobbithouser argued Crosby made the
payment on its behalf; however, it did not specifically raise any agency
arguments.  See Collins Entm’t Corp. v. Coats & Coats Rental
Amusement, 368 S.C. 410, 418, 629 S.E.2d 635, 639 (2006) (finding a
general, non-specific argument that does not encompass the specific grounds
raised on appeal does not preserve the issue).  Accordingly, this argument is
not preserved for our review. 

III.  Defense
of Avoidance

Hobbithouser
argues the master erred in admitting evidence constituting the defense of
avoidance because J & A Construction failed to plead it as a defense.  This
issue is not preserved for our review.    

Hobbithouser did
not make this argument to the master.  Because this argument was not raised to
or ruled upon by the master, it is not preserved for our review.  See Wilder
Corp. v. Wilke, 330 S.C. 71, 76, 497 S.E.2d 731, 733 (1998) (stating an
argument raised for the first time on appeal is not preserved for appellate
review).

CONCLUSION

For the foregoing
reasons, the order on appeal is

AFFIRMED.

HEARN,
C.J., and SHORT and KONDUROS, JJ., concur.

[1]  We
decide this case without oral argument pursuant to Rule 215, SCACR.

[2]  Crosby testified the money he deposited was
payment to him from an unrelated land sale.

[3]  Jeffcoat was overruled “at least to the
extent that it prevents a mortgagor from being equitably subrogated to rights
of a mortgagee.”  Williams v. Sandman, 187 F.3d 379, 382 n.2 (4th Cir.
1999).