Hughes v. Bank of Am.

1

Phillip Francis Luke Hughes, on behalf of the Estate of Jane K. Hughes, Petitioner, v. Bank of America National Association, Respondent.

No. 28187

Appellate Case Nos. 2021-001339, 2022-000079

Supreme Court of South Carolina

January 17, 2024

Heard March 28, 2023

Appeal from Spartanburg County R. Keith Kelly and Grace Gilchrist Knie, Circuit Court Judges

ON WRIT OF CERTIORARI TO THE COURT OF APPEALS

Bradley Davis Hewett and D. Michael Kelly, of Mike Kelly Law Group, LLC; and Jamie Nicole Smith, of South Carolina Human Affairs Commission, all of Columbia, for Petitioner.

Robert A. Muckenfuss, of Charlotte, NC; Elizabeth Marion Zwickert Timmermans and Jonathan Y. Ellis, of Raleigh, NC; and Kathryn M. Barber, of Richmond, Virginia, all of McGuire Woods LLP for Respondent.

JAMES JUSTICE

This suit arises out of $795.20 in insurance premiums charged by respondent Bank of America to Petitioner's parents in connection with a home equity line of credit they obtained from Bank of America in 2006. The extraordinarily convoluted procedural history of this case ends with this consolidated opinion. Petitioner, as personal representative of the estate of Jane Hughes (his late mother), sued Bank of America for fraud, fraudulent concealment, and breach of contract accompanied by a fraudulent act. The issues are (1) whether we should overrule precedent holding the claims do not survive a party's death; (2) whether, even if these claims do survive, the claims are barred in this case by res judicata and the statute of limitations; and (3) whether the circuit court erred in ruling Bank of America's motion for sanctions pursuant to the South Carolina Frivolous Civil Proceedings Sanctions Act (FCPSA)^[1] and Rule 11, SCRCP was premature. The first two issues stem from the court of appeals' decision in Hughes ex rel. Estate of Hughes v. Bank of America National Association, Op. No 2021-UP-341 (S.C. Ct. App. filed Sept. 29, 2021). The third issue stems from the court of appeals' decision in Hughes ex rel. Estate of Hughes v. Bank of America National Association, Op. No. 2021-UP-354 (S.C. Ct. App filed Oct. 13, 2021).

The circuit court (Judge Kelly) granted Bank of America's motion to dismiss all three causes of action, ruling the claims did not fall within the survival statute (S.C. Code Ann. § 15-5-90 (2005)) and therefore did not survive Jane Hughes' death, and also ruling the claims were barred by the three-year statute of limitations and by the res judicata effect of rulings in related federal court litigation. Judge Kelly also ruled the statute of limitations was not equitably tolled. The court of appeals affirmed Judge Kelly's ruling on the survival statute and did not reach the remaining issues. Hughes, Op. No. 2021-UP-341, at 1-2.

We granted Petitioner's petition for a writ of certiorari and granted Petitioner's motion to argue against precedent. We hold Petitioner's claims for fraud and fraudulent concealment survived the death of Jane Hughes. For a different reason, we hold the claim for breach of contract accompanied by fraudulent act also survived her death. However, we hold all three causes of action are barred by the preclusive effect of the rulings of the United States District Court, as affirmed by the Fourth Circuit in 2018. Therefore, we affirm as modified in part and reverse in part the court of appeals' decision in Op. No. 2021-UP-341.

Bank of America moved for sanctions in the circuit court, but the circuit court (Judge Knie) ruled the motion could not be heard until the conclusion of Petitioner's appeal of the Rule 12(b)(6) dismissal. Bank of America appealed that ruling, and the court of appeals reversed and remanded the sanctions motion to the circuit court, holding the sanctions motion was not premature. Hughes, Op. No. 2021-UP-354, at 6-9. We affirm the court of appeals on that issue in Section IV of this opinion.

I.

In June 2006, John and Jane Hughes opened a home equity line of credit with Bank of America. They authorized Bank of America to automatically draft payments of principal and interest from their joint Bank of America checking account. At closing, Bank of America offered an insurance plan that would cancel loan payments in the event of disability, accidental death, or involuntary unemployment. Petitioner claims that even though Mr. and Mrs. Hughes initialed a form at closing declining the offer, Bank of America immediately began drafting $28.40 from the Hughes' checking account each month in payment of the premium for that insurance. That premium charge was itemized each month on the Hughes' bank statement, with the notation "Ad Insurance Des:XXXXXX:4374 ID: 6 R# XXXXXXX1070 Indn: Hughes Sr, John P Co ID:XXXXXX4660 Ppd."

Mr. Hughes died in 2008. In 2015, the Hughes family advised Bank of America of Mr. Hughes' death, and Bank of America refunded the premiums drafted during that roughly seven-year period. Bank of America did not, however, refund premiums of $795.20 drafted during the twenty-eight months between the 2006 closing and Mr. Hughes' 2008 death.

Mrs. Hughes died in 2015, and Petitioner was appointed personal representative of her estate. In 2015, Petitioner sued Bank of America in Spartanburg County for violation of the Truth in Lending Act (TILA),^[2] breach of contract, fraud, fraudulent concealment, and breach of contract accompanied by fraudulent act. Bank of America removed the case to federal court, where Petitioner voluntarily dismissed without prejudice his claims for fraud, fraudulent concealment, and breach of contract accompanied by fraudulent act. The district court granted BOA's motion to dismiss Petitioner's TILA and breach of contract claims, finding Petitioner "fail[ed] to dispute [he] neglected to file [his] lawsuit before the pertinent statutes of limitations expired. Instead, [he relies] on the doctrine of equitable tolling to argue [his] claims are timely." Hughes ex rel. Est. of Hughes v. Bank of Am., Nat'l Ass'n, No. 7:15-5083, 2017 WL 569847, at *2 (D.S.C. Feb. 13, 2017). The district court rejected Petitioner's equitable tolling argument, and the Fourth Circuit affirmed in an unpublished opinion. Hughes ex rel. Est. of Hughes v. Bank of Am. Nat'l Ass'n., 697 Fed.Appx. 191 (4th Cir. 2017). The United States Supreme Court denied certiorari. Hughes ex rel. Est. of Hughes v. Bank of Am. Nat'l Ass'n, 583 U.S. 1103 (2018).

In 2017, while Petitioner's appeal to the Fourth Circuit was pending, Petitioner commenced the instant litigation against Bank of America in Spartanburg County, asserting claims for fraud, fraudulent concealment, and breach of contract accompanied by fraudulent act (the three claims Petitioner voluntarily dismissed in federal court). Bank of America moved to dismiss the action for failure to state a claim upon which relief can be granted. See Rule 12(b)(6), SCRCP. As noted above, Judge Kelly granted the motion to dismiss, finding none of Petitioner's claims survived Mrs. Hughes' death, the claims were barred by res judicata, the three-year statute of limitations had expired for all three claims, and equitable tolling of the limitations period did not apply.

Petitioner appealed, and our court of appeals affirmed Judge Kelly's ruling that Petitioner's claims did not survive Mrs. Hughes' death. See Hughes, Op. No. 2021-UP-341, at 1-2. Finding that holding was dispositive, the court of appeals did not address the issues of res judicata, the expiration of the statute of limitations, or equitable tolling. Bank of America raises these three issues to this Court as additional sustaining grounds.

As he did in the federal litigation, Petitioner contends the three-year statute of limitations for his three current causes of action was equitably tolled for two basic reasons: (1) Bank of America's fraudulent concealment of its debiting of the Hughes' joint checking account for the insurance premiums, and (2) Mrs. Hughes' alleged blindness, mental decline, and other health problems. In the federal litigation, the district court considered and rejected both arguments as a basis for invoking equitable tolling, and the Fourth Circuit affirmed. On the first point, Petitioner emphasizes the notation Bank of America placed beside each checking account entry for the premium: "Ad Insurance Des:XXXXXX:4374 ID: 6 R# XXXXXXX1070 Indn: Hughes Sr, John P Co ID:XXXXXX4660 Ppd." On the second point, Petitioner's affidavit filed in the federal litigation is in the record. In that affidavit, Petitioner stated that "[i]n the years leading to her death in 2015," Mrs. Hughes underwent major heart surgery, suffered from dementia, suffered from cataracts, and underwent eye surgery. Petitioner swore Mrs. Hughes' poor eyesight rendered her unable to read documents "for several years prior to her death" in 2015. He similarly stated in the affidavit that Mrs. Hughes' physical and mental ailments rendered her unable to read or understand her monthly bank statements "in the years prior to her death." This vague time frame referenced by Petitioner in his federal court affidavit-the "years prior to her death"-is consistent with Petitioner's allegations in his complaint in this action that Mrs. Hughes was age 85 at the time of the closing and that she suffered from impaired cognition, psychosis, lack of decisional capacity, blindness, and heart problems "in the years subsequent to June 2006." Even though Mrs. Hughes' alleged cognitive deficit or lack of capacity has always been the linchpin of Petitioner's equitable tolling argument, at no time has Petitioner alleged with any specificity when Mrs. Hughes' cognitive deficit or mental capacity issues manifested themselves.

Two days after Petitioner filed his notice of appeal from Judge Kelly's order, Bank of America timely moved for...