McClurg v. Deaton

716 S.E.2d 887, 395 S.C. 85, 2011 S.C. LEXIS 288

Opinions

Justice PLEICONES.

We granted certiorari to review a decision of the Court of Appeals which upheld the circuit court’s denial of both petitioners’ Rule 60(b), SCRCP, motions. McClurg v. Deaton, 380 S.C. 563, 671 S.E.2d 87 (Ct.App.2008). We affirm.

The Court of Appeals rested its affirmance on issue preservation grounds, that is, the failure of the petitioners to argue to the circuit court that they had a meritorious defense.¹ A meritorious defense is necessary in order for a judgment to be set aside under Rule 60(b). See Mitchell Supp. Co., Inc. v. Gaffney, 297 S.C. 160, 375 S.E.2d 321 (Ct.App.1988). The Court of Appeals did not decide, nor do we, whether a meritorious defense as to damages alone and not as to liability is an adequate basis for the grant of Rule 60 relief. Moreover, we do not decide whether a party demonstrating a meritorious defense to the damages awarded in the default proceeding would be entitled to have the entire judgment set aside or merely the damages award.

Since the issue of a meritorious defense was neither raised to nor ruled upon by the circuit court,² the decision of the Court of Appeals is

AFFIRMED.

BEATTY, KITTREDGE, JJ., and Acting Justice JOHN H. WALLER, concur. TOAL, C.J., dissenting in a separate opinion.

Footnotes

1

. "Preserving issues for appellate review is a fundamental component of appellate practice.” Toal, Vafai, Muckenfuss Appellate Procedure in South Carolina (1999) 65. Issue preservation requires that the question presented to the appellate court "must first have been fairly and properly raised in the lower court and passed upon by that court." Id. The dissent would alter these well-settled precepts in favor of burdening trial courts with discerning the issues a party should raise, and perusing the record for evidence to support those issues.

Here, the dissent would find the issue of a meritorious defense raised by New Prime when, in two sentences in the portion of its pretrial memorandum titled "Background,” which precedes the section titled "Argument,” it states:

Neither Zurich nor New Prime heard about the suit that was filed against Deaton until October 7, 2005, after the default judgment for $800,000 was entered (see Affidavit of Gail Meyer at ¶ 13-14). Plaintiff's counsel had previously demanded $170,000 to settle the matter.

The dissent also finds Deaton raised a meritorious defense when, in its "Supplemental Memorandum in Support of Amended Motion to Set Aside Default Judgment,” he footnoted his text sentence "Therefore, the Plaintiffs’ loss of a windfall Default Judgment simply should not be a factor in the Court's decision” with the following:

It is appropriate to characterize the Default Judgment as a windfall for Plaintiffs given the fact that their Counsel made a settlement demand of $170,000 from Zurich on April 26, 2004, little over a year before the Default Judgment of over four times that amount was entered. See Exhibit A ¶ 16.

To say that these three sentences "fairly and properly raised” the issue of a meritorious defense to the circuit court, albeit without use of "magic words” strains credulity, as does the suggestion that Thompson v. Hammond, 299 S.C. 116, 382 S.E.2d 900 (1989) stands for the proposition that a party need not argue "the existence of a meritorious defense within a Rule 60(b) motion.”

Moreover, it is well-settled that the moving party in a Rule 60(b) motion has the burden of presenting evidence entitling him to relief. BB & T v. Taylor, 369 S.C. 548, 633 S.E.2d 501 (2006) (emphasis supplied). Memorandum in support of a motion is not evidence. Harris Teeter, Inc. v. Moore & Van Allen, PLLC, 390 S.C. 275, 701 S.E.2d 742 (2010) (Hearn, J., dissenting). Even if we were to find that the issue of a meritorious defense were suggested by the memoranda, neither petitioner could be said to have presented evidence of such a defense as it is beyond cavil that a settlement offer is not evidence. Rule 408, SCRE; Fesmire v. Digh, 385 S.C. 296, 683 S.E.2d 803 (Ct.App.2009).

Finally, if we were to construe the trial judge’s statement that "there has been no showing of a meritorious defense” as a ruling rather than an observation, compare Mize v. Blue Ridge Ry. Co., 219 S.C. 119, 64 S.E.2d 253 (1951) (mere observations by trial judge do not enlarge grounds upon which motion is made), the fact remains that he would have been correct. Rule 408, SCRE; Fesmire, supra.

2

. Although both petitioners filed motions for reconsideration in the trial court, neither challenged the finding of the circuit court that there was no showing of a meritorious defense. Moreover, petitioner New Prime did not challenge the finding of no meritorious defense in its appellant’s brief. Petitioner Deaton, in his appellant's brief, referenced a discrepancy between the documented medical expenses and the damages award only in support of his argument that there was a defect in respondent's pleading warranting a setting aside of the default judgment. The settlement offer was not mentioned. The "substantial discrepancy between the settlement offer and the amount awarded upon default” relied upon by the dissent as the basis for a meritorious defense appears for the first time in petitioners’ appellate reply briefs. It is axiomatic that an issue cannot be raised for the first time in a reply brief. Chet Adams Co. v. James F. Pedersen Co., 307 S.C. 33, 413 S.E.2d 827 (1992).

None of the cases cited by the dissent support the dissent’s proposition that a party is not required to argue to the trial or appellate court that it has a meritorious defense in order to obtain Rule 60(b) relief. In Em-Co Metal Prods., Inc. v. Great Atlantic & Pacific Tea Co., 280 S.C. 107, 311 S.E.2d 83 (Ct.App.1984), the Court of Appeals affirmed an order relieving respondent from a default judgment under the statutory predecessor to Rule 60(b), citing both deference to judicial discretion and the "liberal spirit” of the statute, a spirit which did not survive the adoption of the SCRCP. Sundown Operating Co., Inc. v. Intedge Industries, Inc., 383 S.C. 601, 681 S.E.2d 885 (2009) (standard for relief under Rule 60(b) rigorous). Moreover, in Em-Co, the appealed order stated respondent had a meritorious defense but did not support this conclusion of law by factual findings. Appellant argued this omission required reversal. The Court of Appeals, in affirming this conclusion, noted there was evidence in the record to support it in an attorney’s letter. In Em-Co, the court looked for evidence to affirm a finding by the trial court, while here the dissent is searching for evidence to reverse. Moreover, the dissent finds this evidence in mere factual recitations which reflect a settlement offer made long before discovery was complete or a complaint had been filed.

The dissent’s reliance on Mictronics, Inc. v. S.C. Dep’t of Rev., 345 S.C. 506, 548 S.E.2d 223 (Ct.App.2001) and Williams v. Watkins, 384 S.C. 319, 681 S.E.2d 914 (Ct.App.2009) is similarly misplaced. In Mictronics, the Court of Appeals affirmed a circuit court order granting relief from an administrative law judge’s (ALJ’s) order dismissing a contested case for procedural reasons, using its authority to affirm an appeal for any reason appearing in the record. See Rule 220(b), SCACR. The court found the circuit court had applied the incorrect standard in reversing the ALJ’s order, and proceeded to review the case under the correct standard. The court, applying this new standard, found evidence of a meritorious defense in the respondent’s prehearing statement, that is, the document it had filed with the ALJ in support of the merits of its claim that it was entitled to a tax exemption. This decision does not stand for the proposition that an appellate court must search the record for evidence of a meritorious defense in order to reverse an appealed order, but rather that when affirming for any reason, the court may rely on arguments actually raised by the party below. In Williams v. Watkins, the Court of Appeals found the meritorious defense in the party’s pleading.

Here, the dissent does not rely on any argument made to the lower tribunal but instead searches the record for evidence to support an argument raised for the first time in a petition for rehearing after the Court of Appeals had affirmed the appeal. It is axiomatic that an issue cannot be raised for the first time on rehearing. E.g., Nelson v. QHG of South Carolina, Inc., 362 S.C. 421, 608 S.E.2d 855 (2005).

The dissent goes beyond plain error, and would require appellate courts to search the record in an effort to reverse. This we should not do. E.g., Elam v. S.C. Dep’t of Transp., 361 S.C. 9, 602 S.E.2d 772 (2004).