In The Supreme Court

Countrywide Home Loans, Inc, Appellant,


Sharon W. Umbarger a/k/a Sharon Umbarger, James B. Umbarger and Branch Banking and Trust Company of South Carolina, Respondents.

Appeal from Lexington County
Clyde N. Davis, Jr., Special Referee

Memorandum Opinion No. 2011-MO-001
Heard November 16, 2010 Filed January 7, 2011


Kevin A. Hall and M. Todd Carroll, both of Hall & Bowers, of Columbia, for Appellant.

J. Kershaw Spong, of Robinson, McFadden & Moore, of Columbia, for Respondent Branch Banking and Trust Company of South Carolina.

Sharon and James Umbarger, both of West Columbia, Pro Se, Respondents.

PER CURIAM: Countrywide appeals an order granting respondent BB&T summary judgment, finding BB&T's mortgage had priority over Countrywide's mortgage on property once owned by respondent Umbargers.[1] We affirm.


In May 2000, the Umbargers established a revolving line of credit with BB&T and gave BB&T a mortgage, which was recorded in May 2000. This mortgage required a written request in order to be closed. In November 2002, the Umbargers executed another note and mortgage which were subsequently assigned to Countrywide.[2] This mortgage was recorded on November 13, 2002, and on November 15, 2002, Countrywide paid off the balance due under the BB&T line of credit. BB&T received no written request to close its line of credit, and on November 20, 2002, after Countrywide had paid the balance due, the Umbargers borrowed again against the BB&T line of credit.

In January 2007, Countrywide began this foreclosure proceeding against the Umbargers and in April 2007 amended its complaint to add BB&T as a defendant. In its amended complaint, Countrywide prayed that Countrywide's mortgage be declared the first lien. BB&T answered, denying Countrywide's claim that it held a valid first lien. The Umbargers did not answer Countrywide's amended complaint. Countrywide then filed a claim with its title company and did not pursue further action in this case until May 2008.

In November 2007, approximately ten months after Countrywide commenced this foreclosure action and about five months after BB&T filed its answer in Countrywide's suit, BB&T brought suit to foreclose its mortgage, naming the Umbargers and Countrywide as defendants. The Umbargers and Countrywide were properly served, and when no party answered, an order of default was entered and the matter referred to the special referee.

On Friday, January 4, 2008, BB&T's attorney sent a courtesy email to Countrywide's attorney[3] notifying her of the hearing scheduled in BB&T's foreclosure for Monday, January 7, 2008, at 11:30 am. Countrywide's attorney responded by email, saying:

Hi Ben. Happy New Year to you. Thank you for the information re your hearing. FYI: My client thought they were in first position. The mortgage you are foreclosing came as a surprise to them. My client had me place their foreclosure on hold and file a title claim when they learned of your client's mortgage. They will be interested in bidding at the sale so I would love to know when the proposed sale date will be. Are you asking for a Feb sale date?

BB&T's attorney responded that BB&T would be asking for a sale on February 4 at 11:00 am.

On January 7, 2008, the special referee held the foreclosure hearing in BB&T's suit. Only BB&T appeared, and that same day the referee filed an "Order and Judgment of Foreclosure and Sale," finding BB&T held the first mortgage and that Countrywide's mortgage was "junior and subordinate." On February 4, 2008, the property was sold to a third party.

In May 2008, Countrywide filed an affidavit of default on the part of the Umbargers in this foreclosure action, and in June 2008 this suit was referred to the special referee. BB&T filed a motion for summary judgment seeking a ruling that its lien had priority over Countrywide's. This appeal follows from an order granting BB&T's motion.

On the merits, the special referee held BB&T was entitled to summary judgment on the lien priority issue on four alternate grounds:

(1) BB&T's judgment in its foreclosure case was res judicata;

(2) Countrywide waived its right to contest and/or was equitably estopped from challenging the priority issue because it chose not to contest the issue at BB&T's January 2008 hearing despite having been given notice, and indicated at that juncture that it would only bid at the sale;

(3) Laches barred Countrywide's claim; and

(4) that Countrywide's remedy was to file a Rule 60(b), SCRCP, motion in the BB&T action if it wanted relief from that judgment.

While Countrywide raises a number of issues on appeal, we address only one.


Did the special referee err in giving BB&T's judgment preclusive effect?


The referee's central holding was that Countrywide's claim of priority was barred by res judicata by virtue of BB&T's judgment in its foreclosure suit. Countrywide raises a number of challenges to this ruling. We affirm.

First, Countrywide alleges that under Rule 13(a), SCRCP, BB&T was required to assert its claim of lien priority as a compulsory counterclaim in Countrywide's foreclosure, and that since BB&T did not do so, it was improper to file a separate suit. Assuming that BB&T's priority dispute was a compulsory counterclaim in Countrywide's suit, Countrywide provides no authority that BB&T's failure to raise the counterclaim affects the validity of BB&T's judgment. In fact, according to the note following Rule 13, if a party fails to assert a compulsory counterclaim, then a judgment in that action bars further litigation of the claim. By failing to assert the claim in BB&T's foreclosure action which has gone to judgment, Countrywide is barred from relitigating it here by virtue of Rule 13.

Countrywide next claims the referee erred in finding res judicata barred its claim for priority. As authority, Countrywide cites State v. Bacote, 331 S.C. 328, 503 S.E.2d 161 (1998) and Aaron v. Mahl, 381 S.C. 585, 674 S.E.2d 482 (2009) for the proposition that collateral estoppel does not apply where the issue sought to be precluded was decided in a default judgment. Such may be the case for collateral estoppel claims, but default judgments are res judicata in the absence of fraud or collusion. Morris v. Jones, 329 U.S. 545 (1947). The referee's ruling here is predicated on res judicata, and Countrywide has not claimed fraud or collusion. See also Rule 13(a) analysis, supra.

Countrywide also assails BB&T for not raising the issue of res judicata in its answer to this suit, dated June 18, 2007, yet BB&T's foreclosure suit was not even filed until November 8, 2007 and its judgment not filed until January 2008. Countrywide also argues that the Court should decline to allow use of the doctrine here because BB&T should not have filed its own suit. There is no prohibition on BB&T's filing. Countrywide should have filed an answer or made a Rule 12(b)(8), SCRCP, motion in BB&T's foreclosure suit rather than defaulting.


We affirm the special referee's order granting BB&T summary judgment as the issue of lien priority is res judicata.


TOAL, C.J., PLEICONES, BEATTY, HEARN, JJ., and Acting Justice James E. Moore, concur.

[1] The Umbargers are not participating in this appeal.

[2] We will refer to this as the Countrywide Mortgage.

[3] This attorney is not representing Countrywide in this appeal.