In Wachovia Bank, National Association v. William E. Blackburn, et. al., the South Carolina Court of Appeals has ruled that counterclaims involving allegations of sales misrepresentations and pre-purchase fraud by Wachovia are not subject to jury trial waivers contained in a Note, Mortgage and Personal Guaranties executed by the Defendants.
In this case, William Blackburn, along with several other Defendants, executed loan documents in connection with the purchase of some property in Georgetown County. According to the Defendants, they purchased the property at a “high pressure” sales event after Wachovia and others defrauded the buyers by artificially inflating property values and making other various misrepresentations regarding the property and its amenities.
Wachovia filed a foreclosure action in Georgetown County after the Defendants allegedly failed to make payments as called for in the loan documents. Defendants filed an answer counterclaim and third-party complaint asserting the following counterclaims: Negligent Misrepresentation, Unfair Trade Practices, Promissory Estoppel, Breach of Contract Accompanied by Fraudulent Act, Breach of Fiduciary Duty, Fraud/ Fraud in the Inducement, Breach of Contract/ Negligence, Breach of Contract, Civil Conspiracy, and Illegality of Contract. The Defendants demanded a jury trial on their counterclaims.
Wachovia subsequently filed a motion to strike the jury demand and to refer the case to the Master-in-Equity for Georgetown County. The motion to strike was based on the jury trial waivers quoted below, contained within certain loan documents.
WAVIER OF JURY TRIAL. TO THE EXTENT PERMITTED BY APPLICABLE LAW, EACH OF BORROWER BY EXECUTION HEREOF AND BANK BY ACCEPTANCE HEREOF, KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT EACH MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED ON, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS NOTE, THE LOAN DOCUMENTS OR ANY AGREEMENT CONTEMPLATED TO BE EXECUTED IN CONNECTION WITH THIS NOTE, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY WITH RESPECT HERETO. THIS PROVISION IS A MATERIAL INDUCEMENT
In response to Wachovia’s motion, the Defendants made two arguments: (1) the waiver was not “knowingly and voluntarily” made, and (2) the waiver was not applicable to their counterclaims.
The court make quick work of the Defendants’ argument regarding whether or not the waiver was made knowingly and voluntarily. The Court ruled the waivers were conspicuous and unambiguous and the Defendants were charged with reading the loan documents before they signed them. Win for the Bank, right? Not so fast…
While ruling the waivers were knowingly and voluntarily made, the Court found the waivers inapplicable to the Defendants’ counterclaims. The Court held, “We do not believe the allegations of sales misrepresentations and pre-purchase fraud by the Blackburns are sufficiently related to the note, and this, we do not believe they are subject to the waivers”.
So the take-home lesson from this case is that just because you signed a document which contains a valid waiver of your right to a jury trial does not mean you waived your rights to all potential claims. Contact the Law Office of Marcus W. Meetze, LLC if you have questions regarding foreclosures in South Carolina.