First Citizens v. Taylor ( 2020 )

THE STATE OF SOUTH CAROLINA
In The Court of Appeals
First Citizens Bank and Trust Company, Inc.,
Respondent,
v.
Ronald D. Taylor and Ted D. Smith, Defendants,
Ex Parte: Smith Family, LLC, WHS Properties, LLC,
and Wanda H. Smith, Appellants.
Appellate Case No. 2017-001700
Appeal From Greenville County
Charles B. Simmons, Jr., Circuit Court Judge
Opinion No. 5739
Submitted February 18, 2020 – Filed July 8, 2020
AFFIRMED
Randall Scott Hiller, of Greenville, for Appellants.
Joey Randell Floyd and Chelsea Jaqueline Clark, both of
Bruner Powell Wall & Mullins, LLC, of Columbia, for
Respondent.
THOMAS, J.: Smith Family, LLC, WHS Properties, LLC, and Wanda H. Smith
(Appellants) appeal a master-in-equity's order based on First Citizens Bank and
Trust Company, Inc.'s initiation of supplemental proceedings to collect on an order
of judgment, arguing the master erred in (1) adjudicating a Statute of Elizabeth
(SOE) claim as part of supplementary proceedings; (2) adjudicating facts without
the opportunity for Appellants to present evidence; (3) not ruling on whether the
subject property was exempt; (4) granting a motion to join Appellants; and (5)
finding subject matter jurisdiction to add parties. We affirm.
FACTS
On May 22, 2008, Ronald Taylor and Ted Smith1 executed a note in favor of First
Citizens in exchange for a $52,526.07 loan. Taylor and Smith failed to make the
required payments, and on July 28, 2014, First Citizens filed an action against
them. By order filed October 1, 2015, the circuit court entered a judgment of
$74,843.23 against Taylor and Smith. Taylor and Smith appealed to this court,
which affirmed. First Citizens Bank & Trust Co. v. Taylor, Op. No. 2016-UP-471
(S.C. Ct. App. filed Nov. 9, 2016).
After an execution was issued on October 27, 2015, and a nulla bona return was
made to the execution, the matter was referred to the master, and First Citizens
filed a petition for supplemental proceedings. The master held a hearing on
January 23, 2017.
Smith testified he "lived off of" his social security income and had no other sources
of income or bank accounts. Smith admitted his wife owned an LLC, Smith
Family, LLC, that had one bank account at United Community Bank (UCB).
Taylor similarly testified he had no bank accounts and "lived off of" his social
security income. First Citizens moved for additional discovery, which the master
granted.
First Citizens issued subpoenas and motions to compel, seeking documents
regarding Smith Family, LLC. Smith, on behalf of himself and Appellants, moved
to quash as to the UCB account belonging to Smith Family, LLC. After a hearing
and based on documents provided by UCB, the master denied the motion to quash
by order filed May 22, 2017. On May 24, 2017, Smith and Mrs. Smith were
deposed.
1
Ted Smith is married to Wanda H. Smith, one of the appellants.
In his deposition, Smith testified he had an accounting degree and an MBA, was 69
years old, and had worked in banking and the building business until 2008. He
asserted he set up between fifteen and twenty LLCs during his business career, and
he had three primary companies at the time he quit in 2008.
Smith admitted he used the UCB account for personal use, such as to pay bills. He
also admitted he was a signatory on the account. At the time of his deposition, the
UCB account had a balance of $380,000.
Smith testified he was a realtor and a broker-in-charge of two real estate
companies. He admitted he transferred his personal funds into the Smith Family,
LLC, including the following four deposits of his money into the UCB account:
1) March 23, 2016: Inheritance of $15,789.27.2
2) July 14, 2016: Real estate commission for $16,800.
3) August 17, 2016: Real estate commission for $20,250.
4) October 27, 2016: Compensation for managing a project known as the
"Easley Building" of $28,187.49.
These deposits totaled $81,026.76.
Smith also admitted Mrs. Smith purchased silver from the account in February 21,
2016, for $135,374. The Smiths also purchased gold using money from the
account. Smith estimated they owned approximately $300,000 in gold and silver
at the time of the depositions. Smith acknowledged his money was "mixed in
with" the Smith Family, LLC money.
Mrs. Smith testified in her deposition that she majored in Art in college, worked
for a few years in administrative/retail jobs, worked for fifteen years for her
father's construction company, and then became a stay-at-home mother to the
Smiths' two children. She testified that throughout the forty-two years of their
marriage, she never worked for any of her husband's businesses. According to
Mrs. Smith, she and Smith are now retired, although Smith looks for real estate
deals. Smith always handled the family finances, and Mrs. Smith was only aware
of one BB&T bank account.
2
$15,664.27 distribution from his mother's estate plus $125 payment from the
personal representative.
As to Smith Family, LLC, Mrs. Smith testified her husband managed it; she did not
know where it banked; she did not know what assets it held; she was unaware of
whether there were corporate records and that the LLC had been subpoenaed; and
she knew nothing about the purchase of gold and/or silver. She further testified
Smith had full and exclusive control of all bank accounts of the LLC. Smith
acknowledged she was the sole owner of the LLC and Smith was the sole manager;
however, she insisted the money in the LLC was solely hers although she did not
know where it came from. During cross-examination, she testified the money
came from earnings she saved while working "since [she] was a teenager."
Mrs. Smith testified WHS Properties, LLC (WHS), one of the appellants in this
case, was her company, but she admitted Smith organized it in 2008. Mrs. Smith
testified WHS owned a shopping center that had been sold; the proceeds were
transferred to Smith Family, LLC; and WHS was now "closed." She admitted
Smith suffered financial hardships during the recession in 2008 and 2009.
Following the depositions, First Citizens moved to join Appellants as parties. First
Citizens also moved to execute on funds held by Appellants. The master entered a
consent order prohibiting Smith Family, LLC from selling, disposing of, or
otherwise transferring the gold and silver.
A hearing on the motions to join the parties and execute on the funds was held on
June 23, 2017. First Citizens argued Rhino Realty 1, Fund 1, LLC, changed its
name to WHS Properties, LLC, in 2008 when Smith closed most of his businesses.
First Citizens argued the judgment was obtained in 2015; the funds were
transferred into the Smith Family, LLC account in 2016; and the purchases of gold
and silver were made in 2016. At the time of the hearing, Smith Family, LLC was
actively engaged in a project with a church, which obligated Smith Family, LLC to
build a building. According to First Citizens, Smith was not retired; rather, he was
actively involved in developing property. Furthermore, First Citizens argued, the
SOE applied because property was transferred to a third-party, the Smith Family,
LLC, to avoid the judgment. The master granted the motion to add the parties
during the hearing and took the other issues under advisement.
By written order filed July 5, 2017, the master granted the motion to add the
parties. The master found Smith's deposits totaling $81,026.76 of his personal
funds into the Smith Family, LLC, bank account constituted "transfers without
valuable consideration" or in the alternative, fraudulent transfers made with the
actual intent of defrauding creditors. Thus, the master ordered Appellants to pay
First Citizens $81,026.76 toward its judgment against Smith. The master declined
to seize or proceed against other assets owned by Appellants, "based upon
substantive due process rights of these parties . . . [, finding] such relief is more
appropriately sought through [First Citizens] bringing an independent action
against them."
Appellants moved to reconsider, and First Citizens moved to compel payment. By
order filed August 7, 2017, the master denied the motion to reconsider and held the
motion to compel in abeyance, stating "[i]n the event that Smith Family, LLC has
not paid the money . . . this Court will schedule and hear [the motion to compel] as
soon thereafter as reasonably possible." Appellants filed a motion for supersedeas
with the master and filed a notice of appeal with this court. By order filed
September 6, 2017, the master required Appellants to transfer $125,000 in gold to
First Citizens, after its verification, to be held in a safety deposit box until
Appellants paid the $81,026.76 by December 31, 2017. The master retained
jurisdiction over the motion for supersedeas. First Citizens moved to hold
Appellants in contempt when they failed to comply with the September 6, 2017
order by allegedly tendering only $91,438.76 worth of gold. By order filed
October 20, 2017, the master ordered Smith to liquidate the gold within fifteen
days and pay First Citizens by check to be held by the clerk of court. The master
held in abeyance First Citizen's request for fees for authentication and
transportation of the gold. According to First Citizens, the funds are being held by
the court during the pendency of the appeal.
STANDARD OF REVIEW
"A clear and convincing evidentiary standard governs fraudulent conveyance
claims brought under the Statute of Elizabeth." Oskin v. Johnson, 400 S.C. 390,
396, 735 S.E.2d 459, 463 (2012). "An action to set aside a conveyance under the
Statute of Elizabeth is an equitable action, and a de novo standard of review
applies." Id. at 397, 735 S.E.2d at 463. "On appeal from an action in equity, [the
appellate court] may find facts in accordance with its view of the preponderance of
the evidence." Walker v. Brooks, 414 S.C. 343, 347, 778 S.E.2d 477, 479 (2015).
"However, this broad scope of review does not require this court to disregard the
findings at trial or ignore the fact that the [master] was in a better position to assess
the credibility of the witnesses." Laughon v. O'Braitis, 360 S.C. 520, 524-25, 602
S.E.2d 108, 110 (Ct. App. 2004).
"The interpretation of a statute is a question of law." Sparks v. Palmetto
Hardwood, Inc., 406 S.C. 124, 128, 750 S.E.2d 61, 63 (2013) (citing CFRE, L.L.C.
v. Greenville Cty. Assessor, 395 S.C. 67, 74, 716 S.E.2d 877, 881 (2011)). "This
Court may interpret statutes, and therefore resolve this case, 'without any deference
to the court below.'" Brock v. Town of Mount Pleasant, 415 S.C. 625, 628, 785
S.E.2d 198, 200 (2016) (quoting CFRE, 395 S.C. at 74, 716 S.E.2d at 881).
LAW/ANALYSIS
1. Supplementary Proceedings3
Appellants argue the master erred in adjudicating the SOE claim as part of a
supplementary proceeding and making factual findings without the opportunity for
Appellants to present evidence, which Appellants argue violated their rights to due
process. Appellants maintain the master erred by adding them as parties to a
supplementary proceeding, arguing First Citizens was required to file a separate
action, including pleading the SOE, conducting discovery, and affording
Appellants a trial.
There is clear authority to reach assets of a judgment debtor in the hands of a third
party; however, the issue in this case is whether the supplementary proceedings
met the statutory requirements governing the procedure to reach the assets, and
whether this supplementary proceeding provided due process to Appellants. "If a
judgment is unsatisfied, the judgment creditor may institute supplementary
proceedings to discover assets." Johnson v. Serv. Mgmt., Inc., 319 S.C. 165, 167,
459 S.E.2d 900, 902 (Ct. App. 1995), aff'd, 324 S.C. 198, 478 S.E.2d 63 (1996).
"Supplementary proceedings are equitable in nature." Ag-Chem Equip. Co. v.
Daggerhart, 281 S.C. 380, 383, 315 S.E.2d 379, 381 (Ct. App. 1984).
"Proceedings supplementary to execution . . . provid[e] for examination of the
judgment debtor for the purpose of discovering property out of which the judgment
against him may be satisfied . . . ." Lynn v. Int'l Bhd. of Firemen & Oilers, 228
S.C. 357, 362, 90 S.E.2d 204, 206 (1955).
South Carolina Code Section 15-39-410 provides the court "may order any
property of the judgment debtor, not exempt from execution, in the hands either of
himself or any other person or due to the judgment debtor, to be applied toward the
satisfaction of the judgment . . . ." S.C. Code Ann. § 15-39-410 (2005) (emphasis
added). Our code also provides a judgment creditor with the ability to "arrest"
funds in the hands of a third party if alleged by a creditor to belong to the judgment
debtor and to hold the funds until the true ownership is decided. S.C. Code Ann.
§§ 15-39-310 to -320 (2005); see Deer Island Lumber Co. v. Virginia-Carolina
3
Like Appellants did in their brief, we combine the first two arguments.
Chem. Co., 111 S.C. 299, 303, 97 S.E. 833, 834 (1919) (describing the ability to
arrest funds). Section 27-23-10(A), the SOE, provides as follows:
Every gift, grant, alienation, bargain, transfer, and
conveyance of lands, tenements, or hereditaments, goods
and chattels or any of them, or of any lease, rent,
commons, or other profit or charge out of the same, by
writing or otherwise, and every bond, suit, judgment, and
execution which may be had or made to or for any intent
or purpose to delay, hinder, or defraud creditors and
others of their just and lawful actions, suits, debts,
accounts, damages, penalties, and forfeitures must be
deemed and taken . . . to be clearly and utterly void . . . .
S.C. Code Ann. § 27-23-10(A) (2007). Finally, however, Section 15-39-460
provides:
If it appears that a person or corporation alleged to have
property of the judgment debtor or indebted to him
claims an interest in the property adverse to him or
denies the debt such interest or debt shall be recoverable
only in an action against such person or corporation by
the receiver.
S.C. Code Ann. § 15-39-460 (2005) (emphasis added).
Appellants cite Wannamaker v. Bryant, 165 S.C. 107, 110, 162 S.E. 779, 780
(1932) (quoting Palmetto Bank & Trust Co. v. McCown-Clark Co., 143 S.C. 98,
103, 141 S.E. 155, 156 (1928)), in which our supreme court held the court had no
authority to "summarily dispose of the issue of ownership, or to order property
claimed by another to be applied towards the satisfaction of an execution against
the judgment debtor." First Citizens argues Wannamaker is distinguishable.
In Wannamaker, a wife transferred real estate to her husband to avoid a creditor.
Id. at 108, 162 S.E. at 779. The creditor filed an action against the husband and the
wife to set aside the deed, alleging a fraudulent conveyance. Id. Thereafter, the
creditor filed "proceedings supplementary to the execution." Id. The husband was
not made a party to the supplementary proceedings. Id. At the hearing in the
supplementary proceedings, the trial court found the transfer had been made "to
keep the bank from getting the property." Id. The trial court ordered the property
was subject to the satisfaction of the creditor's judgment. Id. at 108−09, 162 S.E.
at 779−80. On appeal, our supreme court reversed, recognizing the husband had
not been made a party to the supplemental proceedings. Id. at 110, 162 S.E. at
781. The court noted its judgment was "without prejudice to the right of the
[creditor] to proceed with his action to set aside the deed . . . ." Id. at 111, 162 S.E.
at 781.
Appellants also rely on Palmetto Bank & Trust Co. v. McCown-Clark Co., 143
S.C. 98, 141 S.E. 155 (1928). In Palmetto Bank, the corporate judgment debtor
was named as the beneficiary on a life insurance policy of one of its individual
owners. Id. at 100, 141 S.E. at 155. The corporation denied ownership of the
funds, stating the individual owner had paid the premiums on the policy, and
maintained the proceeds belonged to the owner's wife. Id. After supplementary
proceedings, the circuit court granted judgment in the creditor's favor. Id. at 101,
141 S.E. at 155. Our supreme court reversed, finding as follows:
It appears manifestly intended by the [statutes] that a
third person claiming property rights which have not
been passed upon in the original action under which the
execution is issued should not be deprived either of his
day in court or of the right of trial in the form prescribed
by law for a regular judicial procedure. No provision
appears that either expressly or by implication gives
authority to the court to summarily dispose of the issue of
ownership, or to order property claimed by another to be
applied towards the satisfaction of an execution against
the judgment debtor. Nor can an appearance and return
to such a rule, when made in obedience to the order of
the court, be given effect as consent to a mode of trial not
authorized by the provisions of the statutes. On the other
hand, it must also be recognized that no limitation is
imposed upon the discretion of the circuit judge in
keeping the property within the control of the court, by
forbidding its transfer or other disposition.
Id. at 103, 141 S.E. at 156 (emphasis added). The court in Palmetto Bank relied on
Deer Island, quoting: "It is true the issue of ownership may not be finally
determined, except the Deer Island Lumber Company shall be heard." Id. (quoting
Deer Island, 111 S.C. at 302, 97 S.E. at 834). However, in Deer Island, the third
party (Deer Island Lumber) claiming ownership over the funds alleged to belong to
the judgment debtor moved to intervene in the supplementary proceedings. Deer
Island, 111 S.C. at 302, 97 S.E. at 833. The judgment debtor appealed a temporary
injunction restricting a bank from releasing the funds. Id. The circuit court
appointed a receiver and granted the motion to intervene. Id. On appeal, our
supreme court affirmed. Id. at 305, 97 S.E. at 834.
First Citizens distinguishes Palmetto Bank, arguing Appellants did not claim
ownership of the deposits made by Smith, the judgment debtor. Instead, Smith's
uncontradicted deposition testimony stated the funds at issue were his own.
Furthermore, in Wannamaker, the husband was not made a party to the
supplementary proceedings. Wannamaker, 165 S.C. at 108, 162 S.E. at 779. In
this case, Appellants were joined and had the opportunity to participate in the
proceedings. The court in Palmetto Bank prohibited a summary disposition of the
issue of ownership, which is not the case here. See Palmetto Bank, 143 S.C. at
103, 141 S.E. at 156. Finally, in Deer Island, the court permitted a motion to
intervene, implying a continuation of the supplementary proceedings, rather than a
separate action, could be used to determine ownership of the funds as long as the
third party alleging ownership had the opportunity to be heard. Deer Island, 111
S.C. at 302, 97 S.E. at 833.
In this case, Appellants had the opportunity to dispute the funds belonged to Smith,
and Smith's own testimony was that the funds at issue were his funds deposited
into Smith Family, LLC's account. Appellants were on notice and participated
throughout the proceedings, during discovery, depositions, hearings, and judicial
review. Appellants could have presented rebuttal evidence and had every
opportunity to be heard. See Kurschner v. City of Camden Planning Comm'n, 376
S.C. 165, 171, 656 S.E.2d 346, 350 (2008) ("The fundamental requirements of due
process include notice, an opportunity to be heard in a meaningful way, and
judicial review."). As the master found in his order denying Appellants' motion for
reconsideration,
In terms of Smith Family, LLC's ability to present
evidence and testimony, this Court notes that depositions
were taken in conjunction with the Supplemental
Proceedings, and Counsel for Smith Family, LLC
participated in the depositions. Moreover, [Appellants'
counsel] presented this Court with his arguments and had
the opportunity to present evidence at the Motions
hearing on June 23, 2017, if Smith Family, LLC wanted
to present evidence. However, in light of the prior sworn
testimony at the January 23, 2017 Supplemental
Proceedings hearing, the admissions by Ted D. Smith in
his deposition, along with the deposition testimony of
Wanda H. Smith, it is difficult to imagine what, if any,
evidence or testimony that Smith Family, LLC and/or
Ted D. Smith could have presented to dissuade this Court
from finding the deposit of Ted D. Smith's personal funds
into the bank account of Smith Family, LLC as being
fraudulent transfers.
We affirm, finding the master did not err in applying either the SOE or section 15-
39-410 in a supplementary proceeding and there was no due process violation.4
2. Exemption
Appellants argue the master erred in finding the funds were transferred in violation
of the SOE without determining if they were exempt from execution under section
15-39-410. Appellants maintain the master only has authority over non-exempt
property and section 15-41-30 provides a minimum exemption of $10,000, which
was not considered by the master.
Appellants did not raise this issue to the master at the hearing, the master did not
rule on it, and Appellants raised it for the first time in their motion for
reconsideration. Thus, it is not preserved for appellate review. See Stevens &
Wilkinson of S.C., Inc. v. City of Columbia, 409 S.C. 563, 567, 762 S.E.2d 693,
695 (2014) ("[A] party cannot use a Rule 59(e)[, SCRCP] motion to advance an
issue the party could have raised to the [trial] court prior to judgment, but did
not."); Patterson v. Reid, 318 S.C. 183, 185, 456 S.E.2d 436, 437 (Ct. App. 1995)
("A party cannot for the first time raise an issue by way of a Rule 59(e) motion
which could have been raised at trial.").
3. Subject Matter Jurisdiction and Joinder of Appellants
4
Without citation to authority, Appellants summarily address the master's findings
that the transfers were fraudulent conveyances. We decline to address this issue.
See Broom v. Jennifer J., 403 S.C. 96, 115, 742 S.E.2d 382, 391 (2013) ("Issues
raised in a brief but not supported by authority may be deemed abandoned and not
considered on appeal.").
Appellants argue the master lacked subject matter jurisdiction to add parties to an
order for discovery of property supplemental to execution of judgment; thus, the
master erred in granting the motion for joinder. We disagree.
"Whether a court has subject matter jurisdiction is a question of law we review de
novo." Deborah Dereede Living Tr. dated Dec. 18, 2013 v. Karp, 427 S.C. 336,
346, 831 S.E.2d 435, 441 (Ct. App. 2019). "[S]ubject matter jurisdiction refers to
a court's constitutional or statutory power to adjudicate a case." Johnson v. S.C.
Dep't of Prob., Parole, & Pardon Servs., 372 S.C. 279, 284, 641 S.E.2d 895, 897
(2007). "Stated somewhat differently, 'subject matter jurisdiction is the power of a
court to hear and determine cases of the general class to which the proceedings in
question belong.'" Id. (quoting State v. Gentry, 363 S.C. 93, 100, 610 S.E.2d 494,
498 (2005)). "It is well-settled that issues relating to subject matter jurisdiction
may[ ]be raised at any time." Bardoon Props., NV v. Eidolon Corp., 326 S.C. 166,
168, 485 S.E.2d 371, 372 (1997).
A master's authority to determine issues referred to him by the circuit court is a
question of subject matter jurisdiction, which "may be raised at any time, including
on appeal." Normandy Corp. v. S.C. Dep't of Transp., 386 S.C. 393, 403, 688
S.E.2d 136, 141 (Ct. App. 2009). "Pursuant to Rule 53, SCRCP, a master has no
power or authority except that which is given to him by the order of reference."
Bunkum v. Manor Props., 321 S.C. 95, 98, 467 S.E.2d 758, 760 (Ct. App. 1996).
"When a case is referred to a master, Rule 53(c)[, SCRCP] gives the master the
power to conduct hearings in the same manner as the circuit court, unless the order
of reference specifies or limits his powers." Smith Cos. of Greenville, Inc. v.
Hayes, 311 S.C. 358, 360, 428 S.E.2d 900, 902 (Ct. App. 1993). Rule 69, SCRCP
provides that "proceedings supplementary to and in aid of a judgment . . . shall be
as provided by law[,]" and authorizes a judgment creditor to "examine any person .
. . in the manner provided . . . for obtaining discovery."
In this case, the circuit court's order of reference ordered Taylor and Smith to
appear before the master "TO SHOW CAUSE why [their] property should not be
applied towards satisfaction of the Judgment" and referred the case to the master
with the authority to "entertain and rule upon all motions necessary to dispose of
this matter, to include but not limited to, motions to dismiss, motions to appoint
Receiver, motions to continue the matter, and motions to sell all or certain property
of judgment debtor in satisfaction of [First Citizen's] debt and has authority to enter
a Final Order."
We find the master acted within his subject matter jurisdiction in joining
Appellants in the supplementary proceedings, in applying the SOE and section 15-
39-410 in determining the ownership of the funds, and in ordering the sale of the
gold and silver to satisfy the judgment. The type of procedure used, whether a
supplementary proceeding or a new action, does not affect the master's power to
hear this type of case. See Gentry, 363 S.C. at 100, 610 S.E.2d at 498 (noting
"subject matter jurisdiction is the power of a court to hear and determine cases of
the general class to which the proceedings in question belong").
CONCLUSION
Based on the foregoing, the master's order is
AFFIRMED.
HUFF and MCDONALD, JJ., concur.