South Carolina: Court of Appeals Vacates Foreclosure Sale for Failure to Comply with South Carolina Publication Statute

The South Carolina Court of Appeals has issued another case emphasizing the importance of following the service by publication statutes in order to obtain jurisdiction over the party being served. Previously, the S.C. Court of Appeals issued its decision in Caldwell v. Wiquist, 402 S.C. 565,741 S.E.2d 583 (Ct. App. 2013) establishing that affidavits requesting service by publication that are defective and do not meet the requirements of the publication statute will not be sustained even in the absence of fraud or collusion. This makes the second time the Court of Appeals has addressed the need for strict compliance with the South Carolina publication statute. It also marks the second time this issue has arisen in connection with a foreclosure case.        

In its most recent opinion addressing the issue, Belle Hall Plantation v. Keys, Op. No. 5467 (S.C. Ct. App. filed February 8, 2017) (Shearouse Adv. Sh. No. 4 at 49), the South Carolina Court of Appeals confirmed the requirements set forth in Wiquist that a foreclosing plaintiff must meet to obtain an Order authorizing service by publication. In Belle Hall, the Court found that the publication Order obtained by the plaintiff was based upon an affidavit that was on its face defective because the defendant referenced in the affidavit was not the same defendant listed in the Order.  As the affidavit supporting the publication order was defective, the Court of Appeals affirmed the decision by the trial judge to vacate the foreclosure sale that had occurred because the Court lacked personal jurisdiction over the defendant in question.

Although the Court’s decision was based primarily upon the defect in the service by publication process, the Court also took the opportunity to discuss the Bona Fide Purchaser argument raised by the Appellants who purchased the property in question at the foreclosure sale. Section 15-39-870 of the South Carolina Code provides that when a property is sold at a judicial sale under a court decree, the proceedings upon which the sale is based are res judicata as to any bona fide purchaser for value without notice. To meet the requirements to be a bona fide purchaser, a party must show: “(1) actual payment of the purchase price of the property, (2) acquisition of legal title to the property, or the best right to it, and (3) a bona fide purchase ‘i.e., in good faith and with integrity of dealing, without notice of a lien or defect.’” (quoting Robinson v. Estate of Harris, 378.S.C. 140 146, 662 S.E. 2d 420, 423 (Ct. App. 2008). In Belle Hall, the purchasers met all of the requirements except for actual payment. Here, the purchasers had paid the 5% deposit on sale day as required by the terms of the Court sale. However, before paying the balance due on the deposit, the purchasers obtained actual notice of the defective service by publication when the defendant filed motions to set aside the sale.

It would appear that the Court of Appeals is sending the message to foreclosure counsel that the statutory requirements of the civil procedure rules in South Carolina must be followed strictly in order to produce a valid sale result at the end of the foreclosure process. 

Published by John S. Kay on February 20, 2017