Serving the Master Challenging the Authority, Power or Jurisdiction of the Master-in-Equity

By Bruce Wallace

“We are all apprentices in a craft where no one ever becomes a master.” —Ernest Hemingway

Masters-in-equity and special refer - ees operate only when the circuit courts refer actions to them. 1 Rule 53 of the South Carolina Rules of governs reference of matters to the master, but lawyers need to know how to challenge the master’s judgment when the mas - ter acts outside of the scope of the order of reference. Integral to this issue is whether challenges are to the authority and power or subject matter jurisdiction of the master. If N

the former, a party’s ability to chal - O T L lenge the judgment on appeal may U F

E be significantly limited; if the latter, G R O the challenge can be raised at any E G

Y

time, including for the first time on B

2 O appeal. There is currently some T O H confusion in the decisions of the P

30 SC Lawyer November 2014 31 appellate courts of this state: some court. In all other actions, the defendant Hayes appealed the Court of Appeals decisions decide circuit court may, upon applica - master’s order, arguing the circuit appeals under “subject matter tion of any party or upon its court improperly referred the jurisdiction” analysis, while other own motion, direct a reference action to the master because Court of Appeals and Supreme of some or all of the causes of Hayes did not consent to the refer - Court decisions resolve similar action in a case. ence. Dispensing with that argu - challenges on other grounds, ment in a footnote, the Court of grounds that contradict the of Rule 53 then empowers the Appeals simply stated “Rule 53(b), subject matter jurisdiction. master: “[o]nce referred, the master SCRCP, permits the circuit court to or special referee shall exercise all direct a reference of all equitable Procedure for referring a case to power and authority which a cir - matters on its own motion.” 8 the master or referee cuit judge sitting without a jury In Roche v. Young Bros., Inc., of would have in a similar matter.” 3 In Florence ,9 the Supreme Court consid - “You don’t notice the referee during the foreclosure actions or in any action ered the reference of a matter to a game unless he makes a bad call.” where a party is in default, the cir - special referee, where the defendant —Drew Curtis cuit court or the clerk of court can was in default but had made an refer the matter to the master-in- appearance. Citing section 14-11-60 Rule 53(b) provides all the circum - equity. 4 In all other cases, the court of the South Carolina Code, the stances under which a matter can may refer an equitable action to defendant argued the circuit court be referred to the master-in-equity. the master, either sua sponte or on could only refer the matter to a spe - Rule 53(b) sets the parameters for the motion of any party. 5 cial referee upon consent of the par - referring a matter to the master: ties. 10 In reconciling that to Is consent necessary? the express terms of Rule 53(a) and In an action where the parties Rule 53(b) also allows any mat - (b), the Supreme Court held that consent, in a default case, or an ter to be referred to the master consent of the defaulting party was action for foreclosure, some or “upon consent of the parties.” 6 not necessary for reference of the all of the causes of action in a However, lack of consent does not action to a special referee. 11 case may be referred to a mas - provide a defense to the reference ter or special referee by order in some equitable actions. In Smith The effect of a jury demand of a circuit judge or the clerk of Companies of Greenville, Inc. v. Hayes ,7 In prior practice, the defendant had to file an answer before a ref - erence could be ordered. 12 Now, QuaQualityalityy law firms Rule 53 specifically allows the cir - demddemandmandd dependablep e cuit court to refer the matter before the defendant makes a jury PProfessionalrofessional LiabilityLi bili y coverage. demand: “ upon the filing of a jury demand , the matter shall be returned to the circuit court.” 13 CNACNA understands the potential risks lawyers face every day. WWe’ree’re e the SinceSince 1961, our Lawyers Professionalofessional Liability Program has Thus, in certain circumstances, the nnation’sation’s larlargestgest action should be returned to the pproviderrovider of helpedhelped firmsms manage risk with a full range of insurance products, legal liability programsograms and services, and vigorous legall defense when it’’ss circuit court if either party files a pprotection.rotection. nneeded.eeded. As part of an insurance organization with $55 billion in jury demand. However, the S.C. aassetsssets and an “A” rating from A.M. Best, we have the financial Court of Appeals has ruled that the strength you can count on. master can sometimes rule on SeeSee how we can help protectprotect your firm by whether a jury demand is proper contactingcontacting TThehe General Agency at such that return to the circuit 1-800-922-5036. court is not automatic. In Wells 14 The Generalneral Agencyy,, the exclusive brookerker for CNA for firms Fargo Bank, N.A. v. Smith , the cir - upup to 34 attorneys, has been handling the insurance needs cuit court referred a foreclosure of professionalsofessionals in South Carolinaolina for over 50 years. We know action to the master-in-equity with

the intricacies of a claims-made policy and can help design the power “to take testimony and

coverage to best meet your firm’’ss needs. to direct entry of final judgment in this action under Rule 53(b), SCRCP, www.generalagencyinc.comwwww.generalagencyinc.com.g.generalagencyinc.com and all matters arising from or rea - www.lawyersinsurance.comwwww.lawyersinsurance.com.la.lawyersinsurance.com sonably related to such action. The The prrogramograogram referenced herein is underwritten by one or morree of the CNA companies. CNA is a Master-in-Equity shall retain juris - registered trademark of CNA Financial Corporation. CopyrightCopyright © 2010 CNA. All rights reserved. diction to perform all necessary acts incident to this foreclosure action . . . .” 15 Under this specific

32 SC Lawyer wording of the order of reference appealed, the Court of Appeals power to render the particular (“perform all necessary acts inci - held the order was invalid: judgment requested.’ 28 dent to this foreclosure action”), the Court of Appeals held the mas - the reference expired by its Of the three types of jurisdic - ter properly considered the motion own terms 90 days after the tion, subject matter jurisdiction to strike the jury demand. 16 date of the order of reference. cannot be waived. In Bonney v. At the time the master filed Granger ,29 a defendant challenged Authority or power of the master his order, the case had thus the master’s jurisdiction to partition been withdrawn from him and the subject real property because “The wisest have the most authority.” returned to the circuit court, the claim for partition was raised by —Plato where it remains pending. amendment to the pleadings after Therefore, there has been no the order of reference was filed. The Appeals from masters’ judgments valid order entered in this defendant reasoned that because have addressed more than the case, and the appealed order is the order of reference did not court’s striking of a jury demand. a nullity entered without power specifically mention partition, the The Court of Appeals has resolved or authority .25 master lacked jurisdiction to parti - several challenges to the power and tion the property. 30 The Court of authority of the master. The court Similarly, in Judy v. Judy ,26 the Court Appeals held “[s]ince the master considered the appeal of a defen - of Appeals summarily dismissed a was authorized to conduct the case dant from a master’s judgment in challenge to a special referee’s in accordance with the rules of civil Hayes , wherein the circuit court had authority to reform deeds because procedure, he had authority to per - referred the action to the master to the issue was “unpreserved for mit amended pleadings and to foreclose a bond for title. 17 The mas - appellate review.” 27 In all three of enter judgment on the issues raised ter instead canceled the bond and these cases, then, the court consid - by the amendments.” 31 issued an order requiring the defen - ered the challenges in light of the Thus, while initially deciding the dant to vacate the premises. 18 Hayes master’s power or authority, and case in light of the master’s powers, appealed the master’s decision, never used the term “subject mat - in the next breath, the Bonney court arguing the master did not have the ter jurisdiction.” held the defendant had “submitted authority to cancel the bond, but to the master’s subject matter jurisdic - only the authority to foreclose his “Subject matter jurisdiction” of tion to the same extent as if the interest therein. 19 On appeal, the the master matter were before the circuit Court of Appeals held “Rule 53(c) court,” and held this jurisdictional gives the master the power to con - “No mistake is more common and more argument to be without merit. 32 In duct hearings in the same manner fatuous than appealing to logic in using the term “subject matter juris - as the circuit court, unless the order cases which are beyond her jurisdic - diction,” the court cited the case of of reference specifies or limits his tion.” —Samuel Butler Fox v. Munnerlyn 33 in support of its powers.” 20 Because the order of ref - holding. The Fox court did not decide erence did not limit the master’s The Court of Appeals has some - a challenge to subject matter juris - power, then, he was free to cancel times couched the appeal of the diction; in fact, the term appears the bond. 21 Because the court power of the master as a challenge nowhere in the Fox decision. decided the case in light of any to “jurisdiction,” or “subject matter The Supreme Court considered “limitation to the master’s power,” jurisdiction.” There are three types a master’s jurisdiction in Wachovia the Hayes court did not use the of jurisdiction: Bank of South Carolina, N.A. v. term “subject matter jurisdiction.” 22 Player .34 Initially, the Court of Similarly, in Smith v. Ocean Jurisdiction is generally defined Appeals sua sponte requested that Lakes Family Campground ,23 the as ‘the authority to decide a the appellants address the master’s Court of Appeals considered the given case one way or the other. jurisdiction to entertain a Rule appeal of a defendant where the Without jurisdiction, a court 60(b)(4) motion. 35 The Court of master issued his order outside cannot proceed at all in any Appeals then dismissed the appeal the time limits imposed in the cause; jurisdiction is the power because the master lacked “subject order of reference. In Ocean Lakes , to declare law, and when it matter jurisdiction.” 36 On writ of the circuit court referred the ceases to exist, the only func - certiorari, the Supreme Court action to the master, requiring that tion remaining to a court is that reversed, noting “[t]he proper con - “the final order shall be filed with - of announcing the fact and dis - struction of the order of reference in 90 days of the date of this order; missing the cause.’ Specifically, is that it gives the master jurisdic - otherwise this order of reference is ‘[j]urisdiction is composed of tion over the case and all matters null and void.” 24 When the master three elements: (1) personal arising from it until the master has filed his final order 145 days after jurisdiction; (2) subject matter performed all the duties assigned the reference, and the parties jurisdiction; and (3) the court’s to him.” 37 The Supreme Court then

January 2015 33 held “the master had not conclud - Procedure Act, a circuit court the master. In Karl Sitte , the plain - ed his duties under the order of has the power to hear a con - tiff obtained an order of reference reference when this Rule 60(b)(4) demnation action. Additionally, without the consent of the defen - motion was filed, and therefore he pursuant to the Uniform dant, although consent was had jurisdiction to decide the Declaratory Judgments Act, a required at the time by the terms motion.” 38 Therefore, in reversing circuit court has the authority of the South Carolina Code section the Court of Appeals, the Supreme to preside over a declaratory 15-31-10. 50 However, the Court of Court confirmed that the order of judgment action. The circuit Appeals held the defendant “East reference granted the master juris - court may, upon application of Coast … participated in the refer - diction. The Supreme Court did not any party or upon its own ence proceedings without objecting use the term “subject matter juris - motion, ‘direct a reference’ of or excepting to … the master’s diction,” except where it described some or all of the causes of appointment, authority, or jurisdic - the Court of Appeals’ use of that action in a case to a master-in- tion . East Coast, therefore, waived term. As a result, Player arguably equity. Once an action is any objection …” 51 The Court of does not stand for the proposition referred, the master possesses Appeals also held the defendant, that a challenge to the master’s all power and authority that a by participating without objection, power or authority is a challenge to circuit judge sitting without a “waived its right to attack the subject matter jurisdiction. jury would have in a similar authority of the master to enter The Court of Appeals’ contin - matter. 43 final judgment in the action.” 52 ued use of the term “subject matter jurisdiction” is evidenced in Wells Analyzing the subject matter juris - Practice pointers Fargo Bank v. Smith, supra , where the diction challenge under the tradi - court determined that “once the tional subject matter jurisdiction “An ounce of practice is worth case is referred to the Master, he , the Court of Appeals more than tons of preaching.” has subject matter jurisdiction to found the master had jurisdiction —Mahatma Gandhi resolve the action to the extent the because the circuit court had sub - order of reference provides, and ject matter jurisdiction. 44 Because of the appellate courts’ with the authority a circuit court Specifically, the court stated, “the conflicting use of the term “subject judge would have in a similar mat - amount of jurisdictional wetlands matter jurisdiction” when dis - ter.” 39 As a result, the court found … was properly before the master. cussing challenges to a master’s the master had subject matter The issue was plainly pled … in authority or power, it is somewhat jurisdiction to rule on Wells Fargo’s [the] complaint.” 45 confusing whether such challenges motion to strike the jury demand, The Supreme Court reached invoke true challenge to subject “as the matter was properly before the same result in Linda Mc Co., Inc. matter jurisdiction. To avoid this the Master pursuant to the order of v. Shore .46 Defendant Shore chal - confusion, South Carolina lawyers reference and our rules of civil pro - lenged the master’s jurisdiction to can and should take action to: (1) cedure.” 40 In finding “subject matter proceed with supplemental pro - confirm the circuit court ’s subject jurisdiction,” the Court of Appeals ceedings because the subject judg - matter jurisdiction to hear the relied on both Hayes and Ocean ment had expired. The Supreme matter; (2) use the broad language Lakes Campground .41 Again, though, Court curtly rejected the argument, of the order cited in Wells Fargo v. neither Hayes nor Ocean Lakes stating, “the expiration of the judg - Smith 53 in the order of reference to Campground mentions the term ment … would not affect the sub - ensure the master has the power “subject matter jurisdiction.” ject matter jurisdiction of the cir - and authority to rule on any issue; When considered in light of a cuit court to hear the dispute. The and (3) raise all objections to the traditional subject matter jurisdic - running of the ten-year period does master’s jurisdiction, authority or tional challenge, it is easier to see not influence the power of the cir - power before the master and file a that challenges to a master’s cuit court to hear disputes related Rule 59(e) motion if those objec - authority are something else. In to section 15-39-30.” 47 tions are not sufficiently addressed Normandy Corp. v. S.C. Dep’t of Finally, challenges to a master’s in an order by the master. Transp. ,42 the Court of Appeals jurisdiction are not true “subject Similarly, masters-in-equity and decided a challenge to the master- matter” challenges because they special referees can sua sponte raise in-equity’s subject matter jurisdic - can be waived. Traditionally, “[t]he the issue and ask each party if tion to determine the value of land lack of subject matter jurisdiction they challenge the order of refer - in a condemnation action. may not be waived, even by con - ence or the master or special refer - However, the Court of Appeals ana - sent of the parties[.]” 48 However, in ee’s authority or power to decide lyzed the issue in light of the circuit Karl Sitte Plumbing Co., Inc. v. Darby any issue pending before the court. court’s subject matter jurisdiction: Dev. Co. of Columbia, Inc. ,49 the Court With careful planning and cogent of Appeals found appellant waived arguments, the challenged issues Under the Eminent Domain its right to contest the reference to will be raised and ruled on, there -

34 SC Lawyer fore preserving them for appeal 14 398 S.C. 487, 730 S.E.2d 328 (Ct. App. 2012) 95, 467 S.E.2d 758 (Ct. App. 1996) (finding 15 regardless of their nature. Id. at 493, 730 S.E.2d at 331. the master in equity did not have subject 16 Id. matter jurisdiction because final judg - 17 311 S.C. at 359, 428 S.E.2d at 901. ment had been entered by the master and Bruce Wallace is a member in the 18 Id. subject matter jurisdiction rested with Charleston office of Nexsen Pruet. 19 Id. at 360, 428 S.E.2d at 902. “the circuit court proper”). 20 Id. 46 390 S.C. 543, 703 S.E.2d 499 (2010). 21 Id. 47 Id. at 558, 703 S.E.2d at 506 (emphasis Endnotes 22 Id. added). 1 See Chabek v. Nationwide Mut. Fire Ins. Co. , 303 23 315 S.C. 379, 433 S.E.2d 909 (Ct. App. 1993). 48 In re November 4, 2008 Bluffton Town Council S.C. 26, 29, 397 S.E.2d 786, 787 (Ct. App. 1990) 24 Id . at 380, 433 S.E.2d at 910. Election , 385 S.C. 632, 637, 686 S.E.2d 683, (“[N]othing can originate before a master.”). 25 Id. at 381, 433 S.E.2d at 910 (emphasis 686 (2009). 2 See Linda Mc Co., Inc. v. Shore , 390 S.C. 543, added). 49 295 S.C. 70, 367 S.E.2d 162 (Ct. App. 1988). 557, 703 S.E.2d 499, 506 (2010) (“subject 26 403 S.C. 203, 742 S.E.2d 672 (Ct. App. 2013). 50 Id ., 367 S.E.2d at 163. matter jurisdiction may be raised at any 27 Id . at 210-11, 742 S.E.2d at 676. 51 Id. at 72, 367 S.E.2d at 163–64 (emphasis time including ... for the first time [on 28 Limehouse v. Hulsey , 404 S.C. 93, 104, 744 added). appeal].”). S.E.2d 566, 572 (2013) (internal citations 52 Id. at 73, 367 S.E.2d at 164 (emphasis 3 Rule 58(c), SCRCP. omitted). added); see also , Bonney v. Granger , 292 S.C. 4 See Wells Fargo Bank, N.A. v. Smith , 398 S.C. 29 292 S.C. 308, 356 S.E.2d 138 (Ct. App. 1987). 308, 356 S.E.2d 138 (Ct. App. 1987), holding 487, 730 S.E.2d 328 (Ct. App. 2012) 30 Id . party submitted to the subject matter (Greenville County Clerk of Court); Cockcroft 31 Id. at 322, 356 S.E.2d at 147. jurisdiction of the master) compare, Bailey v. Airco Alloys, Inc. , 276 S.C. 184, 277 S.E.2d 32 Id. (emphasis added). v. Bailey , 330 S.C. 326, 498 S.E.2d 891 (Ct. 587 (1981) (Charleston County Clerk); Smith 33 283 S.C. 490, 493, 323 S.E.2d 68, 69 n.1 (Ct. App. 1998) (holding special referee lacked v. Hawkins , 254 S.C. 423, 175 S.E.2d 824 App. 1984). “jurisdiction” to hear matter despite par - (1970) (Greenwood County Clerk). 34 341 S.C. 424, 535 S.E.2d 128 (2000). ties’ consent to matter before the referee 5 Rule 53(b), SCRCP. 35 Id. at 426, 535 S.E.2d at 129. because the master did not have the 6 Id. 36 Id. authority to refer the matter); Chabek v. 7 311 S.C. 358, 428 S.E.2d 900 (Ct. App. 1993). 37 Id. at 427, 535 S.E.2d at 129. Nationwide Mut. Fire Ins. Co. , 303 S.C. 26, 8 Id. at 360, 428 S.E.2d at 902 n.1. 38 Id. at 428, 535 S.E.2d at 129. 397 S.E.2d 786 (Ct. App. 1990) (holding 9 332 S.C. 75, 504 S.E.2d 311 (1998). 39 398 S.C. at 493, 730 S.E.2d at 331. party’s participation in the proceedings 10 Id. at 80, 504 S.E.2d at 313. 40 Id. before the master did not confer jurisdic - 11 Id. at 82–83, 504 S.E.2d at 315. 41 Id. tion to the master because the circuit 12 See First Palmetto State Bank and Trust Co. v. 42 386 S.C. 393, 688 S.E.2d 136 (Ct. App. 2009). court did not have subject matter juris - Boyles , 302 S.C.136, 139, 394 S.E.2d 313, 315 43 Id. at 403, 688 S.E.2d at 141–142 (internal diction); Bunkum v. Manor Properties , supra (1990) (defendant had ten days after serv - citations omitted). (parties cannot consent to subject matter ice of answer to demand trial by jury). 44 Id. at 403–04, 688 S.E.2d at 142. jurisdiction before the master). 13 Rule 53(c), SCRCP (emphasis added). 45 Id.; cf. Bunkum v. Manor Properties , 321 S.C. 53 398 S.C. 487, 730 S.E.2d 328 (Ct. App. 2012).

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