Supreme Court Seal
Supreme Court Seal
South Carolina
Judicial Department
2008-UP-339 - Hobbithouser v. Crosby


In The Court of Appeals

Hobbithouser, LLC, Appellant,


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Unpublished Opinion No.  2008-UP-339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  


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]   


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.


“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.


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).


For the foregoing reasons, the order on appeal is


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).