Davis Adv. Sh. No. 31
S.E. 2d


In The Supreme Court

Crestwood Golf Club,

Inc., Crestwood

Partnership, John Boyd,

Claude McCain, Walter

Bryant and George

McCain, Respondents,


Harry H. Potter,

Marguerite Potter and

Kevin E. Potter, Appellants.

Crestwood Golf Club, Inc.

Crestwood Partnership,

John Boyd, Claude

McCain, Walter Bryant

and George McCain, Respondents,


Theodore Potter, Dale

Potter, South Carolina

National Bank, the

Crestwood County Club,

Inc. And Kevin E. Potter

Of which Theodore, Dale and

Kevin Potter are Appellants.

Appeal From Bamberg County

Thomas J. Ervin, Judge

O. Davie Burgdorf, Master-in-Equity

p. 27

Opinion No. 24713

Heard June 17, 1997 - Filed November 10, 1997


Kevin, Theodore, Harry, Dale. and Marguerite

Potter, all of Millville, N.J., Pro Se Appellants.

James Mosteller, III, of Blackville; and James

Nance, of Henderson & Salley, of Aiken, for


TOAL, A.J.: This dispute stems from the sale of a golf course. The

appellants raise numerous issues on appeal. We affirm.


The facts in this case are somewhat complicated. A summary of

relevant facts, parties, and transactions follows:

A. Underlying Transaction (Sale OF CRESTWOOD GOLF COURSE)

On April 3, 1991, Theodore and Dale Potter ("Purchasers") entered into

an agreement with Crestwood Partnership ("Partnership") and Crestwood Golf

Club, Inc. ("Golf Club")(collectively "Sellers") to purchase certain real property

and improvements ("Golf Course") in Bamberg County, as well as machinery,

equipment, membership lists, and golf carts. A golf course and country club

(restaurant and bar) were located on the property. According to the sales

agreement, the total sales price for Golf Course was $412,315.22. 1

An addendum to the sales agreement stated that of the purchase price,

$60,000 represented the price for the land itself, and $250,000 represented

the price for buildings and improvements. The sales agreement itself did not

state the price for the personalty at issue, which included, among other

things, equipment, membership lists, and golf carts. However, the bill of sale

1 According to the closing statement, the final sales price was

$417,516.48, which consisted of the contract price plus various closing costs.

p. 28


for the personalty stated the purchase price was $102,305.22. The total of

these figures is $412,305.22, ten dollars less than the total purchase price.

However, the sales agreement separately valued the membership lists at ten

dollars, and we assume that accounts for the discrepancy in the figures and

the purchase price.

At closing, Purchasers paid Sellers $125,201.26, leaving a balance of

$292,315.22. Purchasers obtained financing and other credits for the rest of

the amount. The various sources of the financing will be discussed below.

Although the sales agreement was between Purchasers, Partnership,

and Golf Club, subsequent instruments clarify what portion of the property

Partnership had owned and what portion Golf Club had owned. The deed of

the real property and improvements was executed on April 3, 1991.

Specifically, Partnership alone deeded the real property and improvements

to Purchasers. Golf Club apparently never owned any portion of the real

property and improvements. In contrast, the Bill of Sale for the personalty,

including equipment and golf carts, reflected that Purchasers bought the

personalty from Golf Club alone; Partnership did not own the personalty that

was the subject of the transaction.

B. Financing of Sale of Golf Course

1. Notes and Mortgages

Purchasers financed the transaction through a variety of means. First,

they borrowed $205,836.25 from South Carolina National ("Bank").2 This

debt was secured by Purchasers' mortgage ("Bank Mortgage") of Golf Course,

as well as a security interest in assets owned by Purchasers in connection

2 Partnership and its partners individually had owed Bank approximately

this amount. The sales agreement as originally drafted required Purchasers

to assume certain Partnership and individual partners' obligations to Bank.

Purchasers would have assumed four individual promissory notes to Bank.

The amount owed on each of those notes was $27,161.25. Purchasers would

also have had to assume a debt of Partnership to Bank in the amount of

$98,657.27. These five obligations totalled $207,302.27, only slightly more

than the $205,836.25 note Purchasers executed to Bank.

Ultimately, however, instead of assuming the five debts, Purchasers

simply executed a promissory note to Bank in the total amount owed by

Partnership and the individual partners. Partnership and the partners then

guaranteed Purchasers' obligation to Bank.

p. 29


with Golf Course. Sellers executed to Bank a continuing guaranty of

Purchasers' debt to Bank.

Purchasers also borrowed $72,135.76 ("Crestwood Note") from Sellers

in order to finance the purchase of Golf Course. This debt was secured by

Purchasers' mortgage ("Crestwood Mortgage") of Golf Course to Sellers. In

addition to securing the $72,135.76 debt to Sellers, the Crestwood Mortgage

secured, among other things, "all contingent liability which the Mortgagor

[Purchasers] has to the Mortgagee [Sellers] pursuant to indebtedness of

[Purchasers] to the South Carolina National Bank which is guaranteed by

certain of [Sellers] pursuant to Agreement for Purchase and Sale of Assets

by [Purchasers] . . . for a total principal sum not to exceed $290,534.29. . .3

plus interest at the same rate as in the Note and any other costs payable

hereunder...." Purchasers also gave Sellers a security interest in assets

owned by Purchasers in connection with Golf Course.

2. Guarantees

As a condition of the sale of Golf Course, Sellers and Bank required

Theodore Potter's4 parents ("Guarantors") to guarantee all Purchasers'

indebtedness to Bank and to Sellers. Therefore, Guarantors executed two

separate guarantees. First, they guaranteed Purchasers' indebtedness to

Bank ("Bank Guaranty"). They also guaranteed Purchasers' indebtedness to

Sellers ("Crestwood Guaranty"), including the $290,534.29 contingent liability

referenced in the Crestwood Mortgage.

3. Assignment of Financial Documents

As holders of the Crestwood Note and mortgagees of the Crestwood

Mortgage, Sellers assigned to Bank their interest in the Crestwood Note,

3 This figure represented the total of the $72,135.76 Note, the

$205,836.25 Note to Bank, and a $12,562.28 obligation of Golf Club to Sellers

that Purchasers had assumed. Because Partnership, Golf Club, and certain

individuals had guaranteed the Bank Note, they wanted Purchasers to

provide security for the entire amount for which Partnership could be liable

as a guarantor.

4 As noted above, Theodore Potter was one of the purchasers of Golf

Course. He and his wife Dale Potter (when referred to individually, "Wife")

both signed the sales agreement and all promissory notes, mortgages, and

security agreements.

p. 30


Crestwood Mortgage, Crestwood Guaranty, and various leases (assignment

hereinafter referred to as "Collateral Assignment"). The Collateral

Assignment document gave Sellers the "right to receive and use and enjoy the

property which is the subject" of the assignment, as long as Sellers did not

default under the terms of the Collateral Assignment. Paragraph 4(a) of the

Collateral Assignment required Sellers to:

(i) give prompt notice to the Lender [Bank] of any default under

the Assigned Documents which is not timely cured as provided

therein; (ii) at the sole cost and expense of the Assignor [Sellers],

enforce the payment and observance of each and every covenant

and condition of the Assigned Documents, and (iii) appear in and

defend any action growing out of or in any manner connected

with, the Assigned Documents.

C. Lawsuits Relating to Sale of Golf Course

By June 1, 1992, Purchasers ceased making payments on the Bank

Note. They informed Bank "that they did not intend to pay the bill, and for

[Bank] to go to [Sellers] for payment." As guarantors of Purchasers' debt to

Bank, Sellers began making payments to Bank in order to avoid defaulting

on their continuing guaranty.

Purchasers made interest payments on the Crestwood Note from

approximately April 3, 1991 until November 3, 1991. Purchasers then ceased

making any payments. Sellers demanded Guarantors fulfill the terms of the

Crestwood Guaranty by satisfying the amount of Purchasers' indebtedness,

but Guarantors failed to do so. It is clear from the Record that Purchasers

were dissatisfied with the condition of Golf Course and felt that Sellers

committed material misrepresentations in the process of selling Golf Course

to Purchasers.

Several lawsuits stemmed from this dispute between Purchasers and

Sellers, but only three are particularly relevant to this appeal.

1. Foreclosure Action against Purchasers

On May 29, 1992, Sellers filed a complaint against Purchasers. The

complaint primarily sought foreclosure of the Crestwood Mortgage and

security agreement. Purchasers' answer was filed June 26, 1992. It

contained several defenses and counterclaims, including counterclaims for

fraud, breach of contract, and racketeering.

p. 31


Because of the outcome of a federal lawsuit involving identical claims,

the trial court dismissed Purchasers' counterclaims and referred the

foreclosure portion of the action to a master in equity. The master in equity

found Sellers entitled to foreclose except as to Theodore Potter's half interest

in the real estate and improvements.5

Purchasers appeal the trial court's order dismissing the counterclaims

and the master's order requiring foreclosure.

2. Lawsuit against Guarantors

On May 26, 1992, Sellers filed a complaint against Guarantors. The

complaint alleged that Purchasers had defaulted under the terms of the

Crestwood Note and Crestwood Mortgage and that Sellers had accelerated the

amount due because of such default. The complaint also alleged that

Guarantors were liable for the full amount of Purchasers' indebtedness to

Sellers by reason of Guarantors' unconditional guaranty of Purchasers'

obligations to Sellers.

Guarantors answered the complaint on June 26, 1992. The answer

contained several defenses and counterclaims.6 Specifically, Guarantors

alleged Sellers had engaged in fraud, breach of contract, and racketeering.

The trial court dismissed Guarantors' counterclaims and referred the

cause of action concerning the Crestwood Guaranty to the master in equity.

The master in equity ruled Sellers had a right to recover under the terms of

the Crestwood Guaranty. Guarantors appeal the dismissal of the

counterclaim and the ultimate ruling of the master in equity.

5 In federal court, Theodore Potter received the remedy of rescission of

the deed for the real estate and improvements, but not for the bill of sale for

the personalty. Stated another way, Theodore obtained a judgment against

Partnership, which had sold him the real estate, but not against Golf Club,

which had sold him the personalty. Because he continued to have an interest

in the personalty covered in the security agreement, Theodore Potter

remained a party to this action.

6 They later filed an amended answer alleging additional defenses.

p. 32


3. Federal Court Litigation

Theodore Potter, Kevin Potter,7 and Guarantors brought an action

against Sellers in the summer of 1993 in the United States District Court for

the District of South Carolina. Dale Potter, Theodore Potter's wife, was not

a party to the federal action. This lawsuit concerned the agreement to sell

Golf Course and all its equipment and improvements. The Potters alleged

fraud, breach of contract, and certain other causes of action.

The district court judge dismissed the fraud claims and directed a

verdict in favor of Sellers as to Guarantors' claims. Theodore and Kevin

Potter's claims regarding negligent misrepresentation were sent to the jury,

and the jury found negligent misrepresentation in the sale of the real estate

and improvements. Accordingly, the Potters obtained judgment against

Partnership, which had sold them the real property. Theodore and Kevin

Potter elected the remedy of rescission of the contract as to the real estate

and improvements rather than simply collecting damages for breach of

contract. As to personalty, the judgment was in favor of Golf Club, which

had sold Purchasers the personalty; accordingly, Theodore Potter or his

assignee remained responsible for his agreement to purchase equipment and

other personalty from Sellers.


Purchasers and Guarantors have raised a number of issues on appeal.

We shall first address the Dale Potter appeal, then the Theodore and Kevin

Potter appeal, then the appeal by Guarantors.

A. Dale Potter Appeal

1. Dismissal of Counterclaim

Kevin Potter, who allegedly is appearing as assignee of Dale Potter's

interests, raises several issues concerning the dismissal of Dale Potter's

7 Kevin Potter is the brother of Theodore Potter. Although the nature

of his relationship to these lawsuits is not entirely clear, Kevin appears to

have been the assignee of Theodore Potter's interests. He further asserts he

is the assignee of Dale Potter's interests.

p. 33


counterclaims.8 Because Dale Potter did not appeal the rulings of the trial

court, the issues raised by Kevin Potter concerning Dale Potter are not

properly before this Court. Accordingly, we affirm the dismissal of Dale

Potter's counterclaims.

The basis for the trial court's dismissal of Dale Potter's counterclaims

is unclear. Portions of the order dismissing the counterclaims suggest the

dismissal resulted from Dale Potter's failure to appear and defend in the

lawsuit. Other portions of the order suggest her counterclaims were

dismissed based on res judicata and collateral estoppel. In either case, there

is no reversible error.

If the trial court dismissed Dale Potter's counterclaims based on her

repeated failure during the litigation to appear and to prosecute and defend

the action, there was no error. Rule 41(c), SCRCP, allows a trial judge to

dismiss an action, upon a party's motion, for the other party's failure to

prosecute a counterclaim, cross-claim, or third-party claim. Here, that rule

would not apply; any dismissal was accomplished by the judge sua sponte.

However, this Court has held that trial judges possess the inherent power to

dismiss actions sua sponte for a party's failure to prosecute the relevant

claims. See, e.g., Small v. Mungo, 254 S.C. 438, 442, 175 S.E.2d 802, 803

(1970)(noting that "it is within the inherent power of the court to dismiss an

action for failure to prosecute."); see also 24 Am. Jur. 2d Dismissal,

Discontinuance, and Nonsuit 48 (1983)("Provision is made in federal and

state statutes or rules of practice for dismissal of civil actions for failure of

prosecution by the plaintiff. However, the power of trial courts to dismiss a

case for failure to prosecute with due diligence is generally considered

8 Purchasers argue in part that Dale Potter's counterclaims were never

actually dismissed by the trial court. Their argument concerning the

dismissal of the counterclaims is a "fallback" position. Based on the language

in the order dismissing the counterclaims, as well as statements made by the

trial judge at the hearing on the motion to dismiss the counterclaims, we

conclude Dale Potter's counterclaims were dismissed at the same time that

Theodore Potter's counterclaims were dismissed.

When he dismissed the counterclaims, the trial judge referred all

remaining issues to the master in equity. If he had not intended to dismiss

Dale Potter's counterclaims, then they were referred to the master in equity,

and Dale Potter should have appealed the order of reference. Given that

neither she nor anyone else appealed that order, we conclude the parties

agreed that Dale Potter's counterclaims had been dismissed by the trial

court's order.

p. 34


inherent and independent of any statute or rule of court. Such power is

deemed to be necessarily vested in trial courts to manage their own affairs

so as to achieve orderly and expeditious disposition of cases."); cf. Collins v.

Sigmon, 299 S.C. 464, 385 S.E.2d 835 (1989)(finding that federal court's

exercise of inherent power to dismiss a case sua sponte for lack of

prosecution operated as an adjudication on the merits just as would a

dismissal pursuant to Rule 41, FRCP.). Nevertheless, as will be explained

below, there is no reversible error even if the judge should not have

dismissed Dale Potter's counterclaims for failure to prosecute.

If the trial court dismissed Dale Potter's counterclaims based on the

doctrines of res judicata or collateral estoppel, the dismissal was error. For

a claim to be barred by the doctrine of res judicata, identity of parties is

necessary. No one disputes that Dale Potter was not a party to the federal

court action. Accordingly, res judicata cannot apply to her counterclaims in

the state court foreclosure action.

Nevertheless, such error is not reversible because Dale Potter has not

appealed the dismissal of her counterclaims. The Potters claim Kevin Potter

has appealed as assignee of Dale Potter. However, the Record contains

insufficient evidence of any such assignment. The transcript of the hearing

before the master in equity references an inadequate deed from Dale to

Theodore Potter; the deed lacks a sufficient number of witnesses and also is

not recorded. Additionally, although the Record contains an assignment of

Dale Potter's interest, it does not appear this assignment was presented

either to the trial court that dismissed the counterclaims or to the master in

equity who ordered the foreclosure. Given the lack of evidence regarding an

assignment, Dale Potter herself was required to appeal the dismissal of her

counterclaims. Because she failed to do so, the dismissal of her

counterclaims is affirmed in its entirety.

2. Foreclosure Order Against Dale Potter

Even assuming Kevin or Theodore Potter received an assignment of

Dale Potter's interest in time for them to appeal the foreclosure order, we

affirm the order of foreclosure against Dale Potter's half interest in Golf

Course and the improvements and personalty located thereon. The legal

issues raised regarding foreclosure against Dale Potter mirror those raised

by Theodore and Kevin Potter, which are discussed below.

p. 35


B. Theodore and Kevin Potter Appeal

1. Standing

Purchasers first argue the master in equity erred in finding Sellers

entitled to enforce the Crestwood Guaranty and Crestwood Mortgage. They

specifically claim Sellers lack standing to enforce these instruments because

Sellers assigned all rights in the instruments to Bank. We disagree.

Ordinarily, an assignment "vests the legal title in the assignee and

places the property beyond the control of the assignor . . . ." 6 Am. Jur. 2d

Assignments for Benefit of Creditors 75 (1963). When the assignee retains

no rights to the assigned property, the assignee lacks standing to enforce

any agreements regarding the assigned property.

Unlike a traditional assignment, however, the Collateral Assignment

makes clear that Sellers retained both the right and the obligation to enforce

the assigned documents. Although the Collateral Assignment does contain

language assigning to Bank "all of the right, title and interest of [Sellers] to"

the Crestwood Note, Crestwood Mortgage, Crestwood Guaranty, and certain

leases, later language clarifies the nature of the assignment. Paragraph 2(a)

of the Collateral Assignment gives Sellers the right "to receive and use and

enjoy the property which is the subject of this Assignment" as long as Sellers

do not default on any guaranty obligations to Bank and comply with the

terms of the Collateral Assignment. Paragraph 2(b) provides that the

Collateral Assignment shall "become and be void and of no effect" after

Sellers satisfy all indebtedness the Collateral Assignment is intended to

secure. This language and other language in the Collateral Assignment

indicates the sole purpose of the assignment is to provide additional security

for Sellers' guaranty of Purchasers' debt to Bank.

Paragraph 4 of the Collateral Assignment directly addresses Sellers'

right to enforce the assigned documents. As quoted above, paragraph 4(a)

requires Sellers to bring actions to enforce the assigned documents:

The Assignor will: (i) give prompt notice to the Lender of

any default under the Assigned Documents which is not timely

cured as provided therein; (ii) at the sole cost and expense of the

Assignor, enforce the performance and observance of each and

every covenant and condition of the Assigned Documents, and (iii)

appear in and defend any action growing out of or in any manner

connected with, the Assigned Documents.

p. 36


(emphasis added). As provided by paragraph 4(c), Bank will enforce the

assigned documents only if Sellers default on their guaranty obligation to

Bank or fail to comply with the conditions of the Collateral Assignment.

Therefore, Sellers had both the right and the duty to bring actions to

foreclose the Crestwood Mortgage. Given the language of the Collateral

Assignment, Appellants' argument regarding standing or real party in

interest lacks merit.


Purchasers next argue that the trial court and/or master in equity erred

in allowing the Crestwood foreclosure action and the action on the Crestwood

Guaranty to be tried as separate lawsuits. In essence, they suggest the

Crestwood Mortgage and Crestwood Guaranty arose from the same

transaction and that, therefore, Sellers were obliged to try the foreclosure and

guaranty as one action.

Purchasers' argument fails for three reasons. First, none of the

relevant orders address this issue, so even if the issue was raised,9

Purchasers had a duty to move pursuant to Rule 59(e), SCRCP, for a ruling

on the issue. Second, Sellers moved to consolidate the cases, but Purchasers

opposed consolidation. Third, the hearing in the foreclosure and guaranty

actions was, in fact, consolidated,, even though technically the cases

themselves were not. Under these circumstances, this issue lacks merit.

3. Adjudication of Equitable Claims Prior to Final Decision on Counterclaims

Purchasers next argue the master in equity erred in failing to stay the

equitable proceedings until the appeal of the dismissal of the legal

counterclaims. We need not reach this issue.

Given our affirmance of the dismissal of Theodore Potter's

counterclaims, Theodore and Kevin Potter have suffered no harm from the

trial of the foreclosure action prior to the final appellate disposition of the

9 At the April 24, 1995 hearing, for the first time, Kevin Potter stated it

would be best if the foreclosure and guaranty actions were tried together.

Sellers had no objection to this, and it appears from the Record that the

parties actually consented to the procedure that ultimately was followed.

Given those facts, it is unclear exactly what Purchasers are appealing here.

p. 37



4. Theodore's Counterclaims - Effect of Stipulation

Theodore Potter next argues that the trial court erred in dismissing his

counterclaims because Sellers had consented through stipulation of counsel

to litigating certain of the counterclaims after the federal trial. We disagree.

The Record contains no such stipulation, and we are aware of none.

As the appellant, Theodore Potter bore the burden of providing this Court

with a sufficient Record to review his assertions of error. See, e.g., Hamilton

v. Greyhound Lines East, 281 S.C. 442, 316 S.E.2d 368 (1984); see also Rule

209(h), SCACR ("Except as provided by Rule 211 and Rule 207(b)(1)(D) and

(2), the appellate court will not consider any fact which does not appear in

the Record on Appeal.").

Moreover, as Sellers note, at the state court hearing on Sellers' motion

to dismiss the counterclaims, Potter did not argue or introduce the stipulation

to which he now refers. In short, this issue was not raised to the trial court.

Accordingly, this Court need not address the issue. See, e.g., Schofield v.

Richland County School Dist., 316 S.C. 78, 447 S.E.2d 189 (1994)(an issue

may not be raised for the first time on appeal, but must have been raised to

the trial judge to be preserved for appellate review).

5. Lack of Consent to Litigate Mortgage Issues After Federal Trial

Purchasers next argue that if the parties did not consent to litigating

the validity of the Crestwood mortgages after the federal trial, then the

doctrines of res judicata and collateral estoppel bar any action on the

foreclosure because the validity of the mortgage could and should have been

litigated as part of the federal action. We disagree.

The precise issue here is whether Sellers should have been barred from

asserting their claims in state court since they could and should have

asserted such claims as counterclaims in federal court.

In resolving whether res judicata applies, the discussion must be

divided between permissive and compulsory counterclaims. However, even

before reaching these subjects, it must first be decided if federal or state law

controls. In the instant case, the prior litigation occurred in federal court.

In Kirven v. Virginia-Carolina Chemical Co., 77 S.C. 493, 498, 58 S.E. 424,

p. 38


425 (1907), the South Carolina Supreme Court held that "When the [federal]

judgment was urged as a bar to the action in the State Court, a Federal

question was presented, and must be determined in accordance with the

decisions of the United States Supreme Court." Thus, federal law controls

in this case.

The term res judicata encompasses two types of preclusion: claim

preclusion and issue preclusion. See Pedrina v. Chun, 906 F. Supp. 1377 (D.

Hawaii 1995). "Issue preclusion and claim preclusion have historically been

called collateral estoppel and bar or merger respectively." Id. at 1399. For

the sake of simplicity, this Court will use the terms issue preclusion and

claim preclusion. "Issue preclusion only bars relitigation of particular issues

actually litigated and decided in the prior suit." Id. "Claim preclusion ...

bars plaintiffs from pursuing successive suits where the claim was litigated

or could have been litigated." Id. Issue preclusion is inapplicable to the

instant case because Purchasers are arguing that Sellers should have

litigated issues in federal court, not that such issues were actually litigated.

The application of claim preclusion turns on whether a counterclaim is

permissive or compulsory. If a counterclaim is permissive, but not raised in

the first case, a defendant is not precluded from asserting the claim in a

later action. See Kirven v. Virginia-Carolina Chemical Co., 77 S.C. 493, 58

S.E. 424 (1907), aff'd, 215 U.S. 252, 30 S. Ct. 78, 54 L. Ed. 179 (1909); 50

C.J.S. Judgments 777(c) (1997). On the other hand, if a counterclaim is

compulsory, but not raised in the first action, a defendant is precluded from

asserting the claim in a subsequent action. See Baker v. Gold Seal Liquors,

Inc., 417 U.S. 467, 469 n. 1, 94 S. Ct. 2504, 2506 n. 1, 41 L. Ed. 2d 243, 247

n. 1 (1974); Dillard v. Security Pacific Brokers, Inc., 835 F.2d 607, 609 (5th

Cir. 1988); In re Phillips, 124 B.R. 712, 716 (Bkrtcy. W.D. Tex. 1991).

Therefore, in the instant case, the pivotal issue is whether Sellers'

potential counterclaims in the federal case were compulsory or permissive.

Rule 13(a), FRCP, states, "A pleading shall state as a counterclaim any claim

which at the time of serving the pleading the pleader has against any

opposing party, if it arises out of the transaction or occurrence that is the

subject matter of the opposing party's claim . . . ." However, there is a

significant exception to this rule: "the pleader need not state the claim if (1)

at the time the action was commenced the claim was the subject of another

pending action . . . ." Rule 13(a), FRCP. In this case, Sellers filed their

action against Harry and Marguerite Potter in state circuit court on May 26,

1992. Three days later, Sellers filed their action against Theodore and Dale

Potter in state circuit court. It was not until the summer of 1993 that

p. 39


Theodore, Harry, and Marguerite Potter filed their action in federal district

court. Clearly, the state court actions were pending at the time the federal

action was commenced. Therefore, Sellers' potential counterclaims in the

federal case were not compulsory because such claims were the subject of

pending litigation in state court. Consequently, claim preclusion is not a bar

to Sellers' claims in state court.

6. Consent to Litigating Mortgage and Guaranty in Separate Action

Purchasers next argue that because Sellers consented to litigating all

issues concerning the Crestwood Mortgages in a separate action,10 dismissal

of the counterclaims was inappropriate under Rule 12(b)(8), SCRCP. This

argument is simply a restatement of Potters' other arguments concerning

dismissal of the counterclaims, and we find it lacks merit.

7. Sellers' Motion to Amend Pleadings

Purchasers next argue the trial court erred in allowing Sellers to

amend their pleadings to allege res judicata and collateral estoppel as

defenses to Purchasers' counterclaims. We disagree.

At the hearing on Sellers' motion to amend their pleadings to allege

these defenses and on Sellers' motion to dismiss the counterclaims,

Purchasers simply addressed the substance of the res judicata and collateral

estoppel issues without arguing that Sellers should not be allowed to amend

their pleadings to include res judicata and collateral estoppel. Given this

fact, we hold Purchasers impliedly waived any objection they had to

amendment of the pleadings, and that, therefore, such amendment was

appropriate under Rule 15, SCRCP. Moreover, Rule 15 provides that "leave

[to amend pleadings] shall be freely given when justice so requires and does

not prejudice any other party." We find no abuse of discretion here. See,

e.g., Foggie v. CSX Transportation, Inc., 313 S.C. 98, 431 S.E.2d 587 (decision

on motion to amend pleadings rests within sound discretion of trial judge).

8. Discovery Abuse

Purchasers next argue the trial court erred in refusing to grant their

10 Purchasers refer to various "stipulations" that are nowhere to be found

in the Record.

p. 40


motion for discovery relief because of Sellers' failure to answer any discovery.

We disagree.

In the motion for sanctions, Purchasers asked for the following relief:

(1) dismissal of Sellers' complaints and judgment in favor of the Purchasers

on the Purchasers' counterclaims; or (2) striking of Sellers' answers to

counterclaims and refusing to allow Sellers to "support or oppose designated

claims and defenses"; or (3) continuance of trial until Sellers fully complied

with Purchasers' discovery requests. Attached to the motion are

interrogatories, requests for production of documents, and requests for

admission. The motion also describes alleged discovery abuse occurring

during certain depositions noticed by Purchasers.

The master in equity heard arguments and testimony on this motion.11

Appellant Kevin Potter requested the judge deem admitted all the

Purchasers' requests for admission because of Sellers' failure to respond. One

of Sellers' attorneys stated to the Court that he had never received the

requests for admission.12 Bank's attorney stated to the Court that he had no

memory of the delivery and service of the requests for admission. One of

Sellers' attorneys also denied having received a letter from Kevin Potter

questioning him about the status of the requests. Ultimately, the master in

equity allowed Sellers to respond to the requests for admission, and Sellers

admitted four of the requests and denied the rest. The master in equity did

not abuse his discretion by refusing to deem admitted the requests for

admission, particularly in light of the lack of hard proof that Sellers actually

received the requests.

As to the interrogatories and document requests, one of Sellers' lawyers

stated to the master in equity that he answered Purchasers' interrogatories

and request for production of documents. The lawyer apparently then

introduced the certificate of mailing for the answers to the interrogatories

and request for production of documents, which certificate has been included

in the Record on Appeal. We find that the master in equity had sufficient

11 The trial judge determined that all pending motions, including

discovery motions, would be referred to the master in equity as part of the

foreclosure and guaranty actions.

12 Kevin Potter asserted that he hand-served the requests for admission

at the deposition of Marguerite Potter, a guarantor.

p. 41


evidence before him to conclude that sanctions were inappropriate.13 Kevin

Potter seems to complain that he never received the discovery, but the

certificate of service suggests Sellers did all that they were obligated to do.

Moreover, as Sellers point out, although Sellers in the discovery answers

objected to certain information, Purchasers never moved to compel more

complete answers or more documents; rather, Purchasers simply denied

having received any discovery.

Under these circumstances, the master in equity did not err in refusing

to sanction Sellers. See, e.g., Rule 37, SCRCP (generally providing for motion

to compel discovery prior to any imposition of sanctions); Dunn v. Dunn, 298

S.C. 499, 502, 381 S.E.2d 734, 735 (1989)(stating that the "trial court judge's

ruling on discovery matters will not be reversed on appeal absent a clear

abuse of discretion.").

9. Attorneys' Fees

Finally, Purchasers argue the attorneys' fee award by the master in

equity was excessive and included costs associated with other actions. We


The master in equity made thorough findings regarding the factors to

consider in determining a reasonable attorneys' fee. See, e.g., Blumberg v.

Nealco, Inc., 310 S.C. 492, 427 S.E.2d 659 (1993)(delineating factors to

consider in attorneys' fee award and requiring judges to state findings

explicitly). Moreover, considerable evidence was presented at the hearing

regarding the time spent by the attorneys in attempting to represent their

clients' interests. The affidavit filed after the hearing had as its purpose the

segregation of attorneys' fees associated with the foreclosure from fees

associated with related proceedings. When the master in equity stated he

would require a post-hearing affidavit segregating attorneys' fees associated

with the foreclosure from those associated with other related actions,

Purchasers did not object. We find ample support for the attorneys' fee


13 One of Sellers' lawyers stated at the hearing on the motion for

discovery sanctions that the answers to interrogatories and document

requests were the same in the foreclosure action and in the action on the


p. 42


C. Harry and Marguerite Potter Appeal

Guarantors have raised a number of issues on appeal. Nearly all the

issues are identical to those raised by Purchasers. Based on our rulings in

Purchasers' appeal, we affirm the following issues raised by Guarantors:

Issue 1 (standing/capacity to sue); Issue 2 (failure to join necessary parties);

Issue 3 (adjudication of equitable claims prior to final decision on

counterclaims); Issue 4 (disn-Lissal of Guarantors' counterclaims); Issue 5 (res

judicata/collateral estoppel as to Sellers' claims); Issue 6 (consent to litigating

mortgage and guaranty in separate action); Issue 7 (motion to amend answer

to counterclaims); Issue 8 (discovery abuse; importantly, the Record does not

reflect that Guarantors moved to compel discovery); Issue 10 (attorneys' fees).

Guarantors' Issue 9 is different from any issue raised by Purchasers.

Specifically, Guarantors argue the master erred by entering judgment against

them prior to assessment of Purchasers' default. They further argue the

judgment against them should not have exceeded the amount of Purchasers'


We find no error. There are several good reasons the judgment against

Guarantors exceeded the amount of Purchasers' default. First, Sellers

incurred greater attorneys' fees in the action against Guarantors. Second,

and more importantly, Guarantors guaranteed to Sellers Purchasers' payment

of $290,534.29. Purchasers did not actually owe Sellers that full amount;

part of that amount represented an obligation of Purchasers to Bank.

However, because Sellers had guaranteed Purchasers' obligation to Bank,

Sellers obtained from Guarantors an obligation to "cover" this amount should

Purchasers default in their obligation to Bank. In contrast, Sellers could only

obtain judgment against Purchasers in the amount of Purchasers' default to

Sellers plus any amount Sellers had actually paid on their guaranty of

Purchasers' debt to Bank. The difference in the amounts of the judgments

was well supported by the evidence and by the differing nature of the

Guarantors' and Purchasers' obligations to Sellers.

Moreover, we find no prejudice in the entry of judgment prior to

assessment of Purchasers' default. The amount of the judgment entered

against Guarantors finds full support in the Record.

14 Judgment against Purchasers totalled $218,653.93, whereas the

judgment against Guarantors totalled $437,555.

p. 43



For the foregoing reasons, the judgments of the trial court and of the

master in equity are AFFIRMED.

FINNEY, C.J., MOORE and WALLER, JJ., and Acting Associate

Justice L. Casey Manning, concur.

p. 44