John Deere Constr. & Forestry Co. v. N. Edisto Logging, Inc.

443 S.C. 424

904 S.E.2d 889

JOHN DEERE CONSTRUCTION & FORESTRY COMPANY, Respondent,

v.NORTH EDISTO LOGGING, INC. and Paul Gunter, Appellants.

Appellate Case No. 2021-000033

Opinion No. 6069

Court of Appeals of South Carolina.

Heard November 16, 2023

Filed July 3, 2024

Rehearing Denied August 12, 2024

Appeal From Lexington County, Walton J. McLeod, IV, Circuit Court Judge

David Randolph Whitt, of Fleming & Whitt, PA, of West Columbia, for Appellants.

Amy Holbrook Wooten and Paul A. Fanning, both of Ward and Smith, P.A., of Raleigh, North Carolina, for Respondent.

KONDUROS, J.:

John Deere Construction & Forestry Company (John Deere) filed a breach of contract action arising out of the sale and financing of logging equipment to North Edisto Logging, Inc. (North Edisto) and Paul Gunter¹ (collectively, Appel- lants). Appellants appeal the circuit court’s order addressing John Deere’s motion for summary judgment. Appellants contend the circuit court’s order did not have the effect of granting summary judgment to John Deere on the causes of action it raised in its complaint and therefore, the circuit court did not award a $946,378.65 judgment. Alternatively, Appellants assert that if the circuit court did grant summary judgment on those causes of action and award a judgment, it was erroneous. Appellants further maintain the circuit court erred in granting John Deere summary judgment on Appellants’ counterclaims by (1) concluding a breach of the implied duty of good faith and fair dealing is only actionable if there is also a breach of an express term of the contract; (2) concluding that consideration of John Deere’s compliance with the South Carolina claim and delivery statutes² was foreclosed by the preseizure hearing; (3) concluding the consideration of issues related to John Deere’s loan origination was foreclosed by its ruling on good faith and fair dealing; and (4) acting on Appellants’ class action claims before a motion for class certification had been made. We affirm in part and remand.

FACTS/PROCEDURAL HISTORY

North Edisto is a logging business. North Edisto purchased John Deere logging equipment from Flint Equipment Company (Flint) in West Columbia, and John Deere financed those purchases. In 2014 and 2015, Father, individually and on behalf of North Edisto, executed five "Loan Contract - Security Agreement[s]" (collectively, the Contracts) with John Deere.³ As security for the Contracts, North Edisto gave John Deere a security interest in each piece of equipment purchased (the Collateral).

North Edisto initially made payments towards each of the Contracts. However, payments later stopped, and the last payment towards any of the Contracts occurred January 13, 2017. On December 10, 2018, John Deere sent a letter notifying Appellants that payments for the Contracts were delinquent. The letter stated: "[Y]ou are hereby notified that all of the Contracts have been declared in default and the indebtedness owing under each such Contract has been accelerated and is immediately due and payable."

On December 20, 2018, John Deere filed a complaint against Appellants asserting five causes of action for breach of contract—one for each contract—and a cause of action for possession. For each breach of contract cause of action, John Deere alleged Appellants owed the following amounts, respectively: (1) $184,577.29; (2) $250,839.11; (3) $150,985.77; (4) $177,136.01; and (5) $454,836.20.⁴ John Deere also asserted it was entitled to interest and attorney’s fees for each of the Contracts.

On January 8, 2019, John Deere filed a notice of right to preseizure hearing for claim and delivery and an affidavit, sworn by Kathleen Klag-Banks. Klag-Banks stated the total wholesale value of the Collateral was $794,600. John Deere also obtained a bond in the amount of $1,589,200, twice the value of the Collateral.

Appellants filed an answer, raising the defense of unclean hands and counterclaims for breach of loan contracts, negligent supervision—immediate possession, negligent supervision—loan origination, and class action.

Appellants also filed a demand for a preseizure hearing, asserting the affidavit for claim and delivery contained numerous defects. Appellants contended the affidavit did not state (1) it was made subject to the penalties of perjury, (2) the affiant would be competent to testify as to the matters contained in the affidavit, or (3) the substance of the affidavit would be the affiant’s testimony in a hearing before the court. Appellants also asserted the affiant did not allege she was authorized to testify on John Deere’s behalf, did not state if she worked for John Deere or another entity, and did not provide the capacity of her employment. Additionally, Appel- lants argued the affidavit did not attempt "to establish a foundation for the conclusory statements it contain[ed]" and did not indicate what records were consulted in reviewing the affidavit and what role the affiant had in drafting the affidavit. Moreover, Appellants maintained the affidavit was defective because it provided a wholesale value for the Collateral without providing any source. They contended section 15-69-30(5) of the South Carolina Code required a statement of the actual value; they maintained "the actual value would be the fair market value resulting from a commercially reasonable sale." Appellants argued John Deere used the lower wholesale value in bad faith to lower the value of the required bond. They also asserted John Deere had not complied with the bond requirements. Appellants further contended "the amount due is the subject of serious dispute."

The Honorable William P. Keesley conducted a preseizure hearing.⁵ Following the preseizure hearing, Judge Keesley issued an order for immediate dispossession, ordering Appellants to deliver the Collateral after seven days. Subsequently, John Deere obtained possession of the Collateral. On November 22, 2019, John Deere notified North Edisto it would be selling the Collateral on December 5, 2019, via online auction. John Deere sold the Collateral on the date stated.⁶

On June 24, 2020, John Deere deposed Daughter as the Rule 30(b)(6), SCRCP, representative of North Edisto. Daughter stated that in October 2015, she and John Deere Financial began discussing modifying the loans. Daughter indicated she believed the modification was still under consideration because she never received a denial of her request. She provided she was never asked for financial documents in regards to the loan modification request. Daughter asserted North Edisto had suffered significant losses over the previous four years as a result of several events, including the flood of 2015 and her father’s illness.

Daughter also read from a letter from John Deere Financial dated October 8, 2015, which stated:

The recent flooding conditions in South Carolina may create challenges and concerns for many of our customers at John Deere. With over 175 years of experience, working with those linked to the land, we understand that an event like this gives us yet another opportunity to build trust while working closely with our customers to understand their individual circumstances and needs, and to offer assistance when we are able. Please know that John Deere Financial is here to help find solutions through this difficult time, which position your customers for future success.

We have been proactive, and in many instances, we may have already spoken with you or some of your customers about the impact from the flooding. Nonetheless, if you know of customers in your area that need assistance, we would encourage you to please have them call our dedicated toll-free construction and forestry support line

….

As always, we are here to help and look forward to working with you and our valued customers. Thank you in advance for your loyalty, support, and assistance.

Daughter stated the letter was addressed "Dear John Deere Dealer" and Flint sent it to North Edisto. At that point in the litigation, Appellants had not produced this letter to John Deere.

On August 18, 2020, John Deere filed another affidavit from Klag-Banks. In this affidavit, Klag-Banks stated she was "a Senior Litigation Administrator with Deere Credit Services, Inc., a servicing agent for John Deere." She asserted that after the sales of the Collateral, Appellants still owed the following amounts plus interest for the Contracts: (1) $135,460.70; (2) $175,952.13; (3) $123,136.66; (4) $172,660.90; and (5) $339,168.26.⁷ As an exhibit to the affidavit, John Deere provided a letter (Extension Letter) from John Deere Financial, stating: "Pursuant to your request, the payment extension/deferral agreement on [contract 1] has now been processed." The Extension Letter gave October 25, 2016, as the "Extension/Deferral Effective Date." The affidavit stated the Extension Letter extended the maturity date for contract 1 by five months.

John Deere filed a motion for summary judgment, asserting no issues of material fact existed and it was entitled to judgment as a matter of law. It contended Appellants "failed to present any evidence disputing [(1)] the validity and enforceability of the Contracts," (2) "the unpaid balance of the Contracts, or ([3]) the validity and enforceability of [John Deere’s] security interests in the Collateral." Additionally, it argued that no evidence in the record established the elements for Appellants’ counterclaims and raised additional reasons the counterclaims failed.

On October 22, 2020, Appellants filed an affidavit from Daughter in response to the motion for summary judgment but did not file any opposing memorandum. In regards to the Extension Letter, Daughter stated:

2) I was shocked to see the unsigned form [Extension L]etter …. It is surprising to me that such a letter would not have been signed by Paul Whelan,⁸ given my extensive discussions with him about the need for a modification. I also find it odd that this letter only covers one of our multiple accounts with [...