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THE STATE OF SOUTH CAROLINA

In The Supreme Court

Reather B. Tilley, Willis

E. Wood, Owena R.

Wood, Louise Williams,

on behalf of themselves

and all others similarly

situated, Respondents,

v.

Pacesetter Corporation,

including but not

limited to its division

known as Federal

Diversified Services, Appellant.

Appeal From Barnwell County

Henry F. Floyd, Judge

Rodney A. Peeples, Judge

Opinion No. 24848

Heard June 16, 1998 - Filed October 26, 1998

AFFIRMED IN RESULT

Desa Ballard, of West Columbia; Miles Loadholt, of

Ness, Motley, Loadholt, Richardson & Poole, of

Barnwell; Daryl L. Williams, of Jeter & Williams,

of Columbia, and Richard Sinkfield, of Rogers &

Hardin, of Atlanta, Ga., for appellant.

Steven W. Hamm and Mary S. League, both of

Richardson, Plowden, Carpenter & Robinson, PA, of

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Columbia; T. Alexander Beard, of Beard Law

Offices, of Charleston; Bradford P. Simpson and

Randall P. Dong, both of Simpson, Dong &

Wingate, LLC, of Columbia; Daniel W. Williams, of

Bedingfield & Williams, of Barnwell, for

respondents.

David W. Robinson, II, and J. Kershaw Spong, both

of Robinson, McFadden & Moore, of Columbia;

William C. Hubbard, John T. Moore, C. Mitchell

Brown, B. Rush Smith, III, and Jeffrey A. Jacobs,

all of Nelson, Mullins, Riley & Scarborough, of

Columbia, for Amici Curiae South Carolina Bankers

Association and South Carolina Financial Services.

PER CURIAM: This is a class action in which the trial court granted

respondents (hereafter Buyers) summary judgment. The court ruled that

appellant, Pacesetter Corporation, failed to comply with the attorney and

insurance agent preference provisions of the South Carolina Consumer

Protection Code (CPC). We affirm.

FACTS

Pacesetter is a Nebraska Corporation which sells aluminum windows,

awnings, and doors, in South Carolina. Buyers in this case each entered into

a "Retail Installment Sales Contract and Mortgage" to purchase products from

Pacesetter, which was to be secured by a mortgage on their homes. The

contracts contain the following provision:

OBLIGATIONS PERTAINING TO PROPERTY INSURANCE

AND MY REAL ESTATE: 1. I promise to keep my house in good

repair and keep it insured for at least 80% of its replacement

value by buying fire and extended coverage insurance policy. The

insurance company must be approved by you, and the policy must

agree that it will not cancel my policy without telling you. I

authorize the insurance company to pay you directly for any loss.

You can choose to use this insurance payment to either repay any

amounts I owe you or to repair my house. I have the option of

providing property insurance through an existing policy or

through a policy independently obtained and paid for by me ... 5.

If I do not insure my house or fulfill my obligations to my real

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estate, then you can do it for me (but you do not have to). If you

do pay any of these obligations for me, I agree to pay you back

on demand plus interest. Until I pay you back, these amounts

will be added to my debt to you which is secured by my real

estate and house. I know that if you decide to buy insurance for

me you do not have to obtain any homeowner or liability

insurance.

Subsequent to entering the contracts, Buyers instituted this action

pursuant to S.C. Code Ann. § 37-2-413, contending Pacesetter failed to

ascertain their preference of attorney and insurance agent, in violation of S.C.

Code Ann. § 37-10-102.1 They sought damages pursuant to S.C. Code Ann.

§37-10-105,2 and requested class certification. Pacesetter moved to dismiss,

With respect to a consumer credit sale that is secured in whole

or in part by a lien on real estate the provisions of § 37-10-102(a)

apply whenever the seller requires the debtor to purchase

insurance or pay any attorney's fees in connection with

examining the title and closing the transaction. (Emphasis

supplied).

Section 37-10-102(a) provides, in pertinent part:

Whenever the primary purpose of a loan that is secured in whole

or in part by a lien on real estate is for a personal, family or

household purpose -

(a) The creditor must ascertain prior to closing the

preference of the borrower as to the legal counsel that

is employed to represent the debtor in all matters of the

transaction relating to the closing of the transaction and ...

the insurance agent to furnish required hazard and

flood property insurance in connection with the mortgage

and comply with such preference. (Emphasis supplied).

2 At the time this action was instituted, section 37-10-105 provided, in

pertinent part, as follows:

§ 37-10-105. Penalties for violations.

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contending the remedies provided by section 37-10-105 were not applicable

to the "Consumer Credit Sales" in question, and that two of the causes of

action (those of the Woods and Tilley) were barred by the statute of

limitations. Judge Henry Floyd denied Pacesetter's motion to dismiss and

granted plaintiffs' motion for class certification.

Thereafter, Judge Rodney Peeples granted Buyers summary judgment

on the issue of liability, finding Pacesetter had failed to obtain Buyers'

preference as to attorney and insurance agent, in violation of section 37-2-

413(2).

ISSUES

1. Did the circuit court err in finding Pacesetter liable, as a

matter of law, under S.C. Code Ann. § 37-2-413(2)?

2. Did the court err in finding Buyers were entitled to seek the

remedies provided under S.C. Code Ann. § 37-10-105?

3. Did the court err in applying the statute of limitations found

in S.C. Code Ann. § 37-5-202?

4. Did the court err in certifying the class?

1. APPLICABILITY OF SECTION 37-2-413

Pacesetter contends section 37-2-413(2) is inapplicable to this case. We

this chapter, any person who shall receive or contract to receive

a loan finance charge, or other charge or fee in violation of this

chapter shall forfeit-

(a) the total amount of the loan finance charge and the costs of

the action; and the unpaid balance of the loan shall be repayable

without any loan finance charge;

(b) double the amount of the excess loan finance charge or other

charges or fees actually received by the creditor or paid by the

debtor...

This section was amended effective June, 1997; the amendments are not at

issue in this appeal.

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disagree.

Whenever a consumer credit sale is secured in whole or in part by a

lien on real estate, section 37-2-413(2) makes the attorney and insurance

preference provisions of section 37-10-102(a) applicable if the seller requires

the debtor to purchase insurance or pay any attorney's fees in connection

with examining the title and closing the transaction.

Essentially, Pacesetter contends section 37-2-413(2) does not require the

preference notice where, as here, buyers are permitted to provide insurance

themselves through an existing policy, and are not charged a premium by the

lender. We disagree.

If a statute's language is plain and unambiguous, and conveys a clear

and definite meaning, there is no occasion for employing rules of statutory

interpretation and the court has no right to look for or impose another

meaning. Paschal v. State Election Comm'n, 317 S.C. 434, 454 S.E.2d 890

(1995); Carolina Power & Light Co. v. City of Bennettsville, 314 S.C. 137, 442

S.E.2d 177 (1994).

It is undisputed that Pacesetter's contracts contain a provision in which

the buyer promises to "buy... a fire and extended coverage insurance policy,"

and which permits Pacesetter to do so if the buyer fails to do so. Buyers are

contractually required to purchase insurance on their homes.3 The trial

court correctly ruled there was no genuine issue of material fact concerning

this issue.

Pacesetter next contends the court erred in finding that once the

preference provisions were triggered with regard to insurance notification,

the seller was also required to give notice of an attorney preference,

regardless of whether an attorney was actually employed in connection with

the transaction, and regardless of whether the debtor was required to pay

any attorneys fees. It contends the attorney preference notice is required

only if the debtor is actually required to pay an attorney's fee. We disagree.

of its employees that it never enforced the insurance provision of its contract.

Given the fact that buyers were contractually required to purchase insurance,

it is simply irrelevant whether or not Pacesetter chose to enforce its contract.

This is particularly true in light of Pacesetter's contractual non-waiver of

claims clause, permitting Pacesetter, at any time it chose, to foreclose by

virtue of a buyer's failure to obtain insurance.

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The literal terms of the statute require that whenever the seller

requires the debtor to purchase. insurance or pay any attorney's fees, the

seller must comply with the preference provisions. Construing this provision

liberally, as we must,4 we find the statute unambiguously requires the

preference notice as to both attorney and insurance agent whenever the seller

requires either the purchase of insurance or the payment of any attorney's

fees.5

Finally, Pacesetter contends it substantially complied with the notice

requirements of 37-10-102(a), as required by this Court's recent opinion in

Davis v. Nationscredit Financial Services Corp., ___ S.C. ___ 484 S.E.2d 471

(1997). We disagree.

Davis was a certified question which addressed the lender's use of a

separate piece of paper to ascertain a borrower's preferences of legal counsel.

and hazard insurance, rather than including a preference statement on the

first page of the credit application. Here, there is no separate statement,

nor any attorney/insurance preference statement. The mere fact that

Pacesetter's contracts gave debtors the "option of providing property

insurance through an existing policy or through a policy independently

obtained" simply does not meet section 37-10-102(a)'s requirement that the

seller "must ascertain the preference of the borrower as to the ... insurance

agent to furnish required hazard and flood property insurance... "

Accordingly, the trial court properly ruled Pacesetter had not substantially

complied with the statute.

2. REMEDIES UNDER SECTION 37-10-105

Pacesetter contends the remedies found in section 37-5-202 are the

construed and applied to promote its underlying purposes and policies."

5 In light of our holding, it is unnecessary to decide whether the fees

charged by Pacesetter in connection with its closing were, in fact, "attorneys

fees." But see State v. Buyer's Service Co., 292 S.C. 426, 317 S.E.2d 15

(19871)(preparation of deeds, notes, and other legal instruments related to

mortgage loans and transfers of real property by a commercial title company

constitutes the unauthorized practice of law).

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exclusive remedy for a violation of the attorney preference provisions in

regard to consumer credit sales. We disagree. Construing the statutes

liberally, as required by section 37-1-102,6 we find Buyers may seek the

remedies set forth insection 37-10-105.

Section 37-10-101 states that "unless otherwise provided," Chapter 10

of title 37 applies only to designated loan transactions other than consumer

loan transactions. Section 37-2-413(2) "otherwise provides," making section

37-10-102(a) applicable whenever the sale is secured by a lien on real estate,

and the seller requires the debtor to purchase insurance or pay any attorney's

fees in connection with closing-the transaction.

Pacesetter contends that, in providing a specific remedy in 37-5-2027 for

violations of section 37-2-413, the legislature intended 5-202 as the exclusive

remedy. We disagree. Had the Legislature so intended, it could have

specifically provided that section 37-5-202 was the exclusive remedy. Accord

Hainer v. American Medical International, ___ S.C.___, 492 S.E.2d 103

(1997)(if legislature had intended certain result in a statue, it would have

said so). Under a liberal construction of the CPC, we find the section 37-10-

105 remedies are available.8

nature such that the statute should be strictly construed against the

purchasers. As Judge Floyd noted, however, strict construction of penal

statutes may be modified by affirmative legislative action. 2B Singer,

Sutherland Statutory Construction, section 59.06. Further, this Court has

held that recognized rules of statutory construction must give way to the

cardinal rule of legislative intent. Gardner v. Biggart, 308 S.C. 331, 417

S.E.2d 858 (1992). See also Bell Finance Co. v. S.C. Dept. Of Consumer

Affairs, 297 S.C. 111, 374 S.E.2d 918 (Ct. App. 1988)(penal statutes should

not be subjected to strained interpretation in order to exclude from their

operation cases which would otherwise be encompassed). In light of section

37-1-102's requirement of liberal construction of the CPC, a strict construction

is unwarranted.

7 Section 37-5-202 provides that, for violations of section 37-2-413, a

consumer has a right to recover actual damages and also a right, in an action

other than a class action, to recover a penalty between $100.00-$1000.00.

8Additionally, in Camp v. Springs Mortgage Corp., 310 S.C. 514, 49-6

S.E.2d 304 (1993), this Court clearly implied that, in light of the purpose of

the CPC to protect consumers, the remedies available under 37-10-105 were

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3. STATUTE OF LIMITATIONS

There is no statute of limitations set forth in Chapter 10 of Title 37 for

violations of section 37-10-105.9 Judge Floyd ruled the statute of limitations

set forth in section 37-5-202 applied (no action pursuant to this subsection

may be brought more than one year after the scheduled or accelerated

maturity of the debt). We disagree.

Section 37-5-202 provides, in pertinent part, as follows:

(1) If a creditor has violated any provisions of this title

applying to ... attorney's fees (§§ 37-2-413 and 37-3-404), ...

the consumer has a cause of action to recover actual damages

and also a right in an action other than a class action, to

recover from the person violating this title a penalty in an

amount determined by the court not less than one hundred

dollars nor more than one thousand dollars. With respect to

violations arising from sales or loans made pursuant to a

revolving charge or a revolving loan account no action pursuant

to this subsection may be brought more than two years after the

violation occurred. With respect to violations arising from other

consumer credit transactions, no action pursuant to this

subsection may be brought more than one year after the

scheduled or accelerated maturity of the debt.

Clearly, the one year statute of limitations period applies to actions

pursuant to 37-5-202. As section 37-5-202 specifically prohibits class

actions, plaintiffs could not have brought their action pursuant to that

subsection. Accordingly, the statute of limitations in 5-202 does not apply to

Buyers' claims.

We find the applicable statute of limitations is three years pursuant to

S.C. Code Ann. § 15-3-540(2)(an action upon a liability created by statute

upon a penalty or forfeiture). Without section 37-10-105, Buyers would have

9As amended in 1997, section 37-10-105 now provides for a three year

statute of limitations. The amendments specifically note, however, that no

inference should be drawn as to the applicable statute of limitations for

pending actions.

p.47

no claim here, as their sole remedy would be under 5-202 which prohibits

class actions. Accord Sauls-Baker Co. V. Atlantic Coast Line R.R., 109 S.C.

285, 289, 96 S.E. 118, 119 (1917)(where action is allowed only by virtue of

statute for penalty, it is an "action upon a statute for a penalty"). However,

we disagree with Pacesetter's assertion that two of the present claims are

barred by this three year limitations period. We find the limitations period

set forth in section 15-3-540(2) begins to run each time a payment is made.

Section 37-10-105 recodifies the penalty for usury in former S.C.Code

Ann. § 34-31-50. Haynsworth and Smith, South Carolina Consumer

Protection Code and Comments, 399, Comment I (S.C. Bar-CLE Div. 3rd Ed.

1996). The statute of limitations for an action seeking the remedies

recoverable for usury begins to run at the time each payment is made on the

loan. Stewart v. Fowler, 16 S.C.L. (1 Harper 403) (1824). Accordingly,

although we find the three year statute of limitations applicable, it begins to

run from each payment,10 such that plaintiffs' claims are not barred.

4. CLASS CERTIFICATION

Finally, Pacesetter contends the circuit court erred in certifying the

class in this case. We disagree.

A trial judge's ruling on whether an action is properly maintainable as

a class action is within his discretion. Waller v. Seabrook Island Property

seeks recovery under section 37-10-105 pursuant to a counterclaim, the three

year statute of limitations is clearly inapplicable. See Earle v Owings, 72 SC

362, 51 SE 980 (1905)(statute imposing penalty for usury and providing

recovery thereof by counterclaim, by plain implication indicates that the

counterclaim is available and is effective as long as the right of action exists

on the principal sum; the counterclaim follows the main contract, and is not

barred within the three years). See also Section 37-10-105, as amended by

1997 Act No. 99 (subsection does not bar a debtor from asserting a violation

of this chapter in an action to collect a debt which was brought more than

three years from the date of the occurrence of the violation as a matter of

defense by recoupment or set-off in such action).

p.48

Owners, 300 S.C. 465, 388 S.E.2d 799 (1990). A court may not look to the

merits when determining whether to certify a class. Curley v. Cumberland

Farms Dairy, 728 F.Supp 1123 (D.N.J.1990) (citing Eisen v. Carlisle &

Jacquelin, 417 U.S. 156, 177-78, 94 S.Ct. 2140, 2152-53, 40 L.Ed.2d 732

(1974)).

We find no error in the circuit court's certification of the class in this

case.

The judgment below is

AFFIRMED IN RESULT.

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