Ardis v. Cox

• Decision Date: 14 April 1993
• Docket Number: No. 2021,2021
• Citation: 431 S.E.2d 267,314 S.C. 512
• Court: South Carolina Court of Appeals
• Parties: Willis ARDIS, d/b/a Swan Lake Service Station, Appellant, v. Charles A. COX and Sumter Oil and Gas Company, Inc., Respondents. . Heard

Page 267

431 S.E.2d 267

314 S.C. 512

Willis ARDIS, d/b/a Swan Lake Service Station, Appellant, v. Charles A. COX and Sumter Oil and Gas Company, Inc., Respondents.

No. 2021.

Court of Appeals of South Carolina.

Heard April 14, 1993.

Decided June 1, 1993.

Rehearing Denied June 29, 1993.

Certiorari Denied April 8, 1994.

S. Jahue Moore, of Kirkland, Wilson, Moore, Allen, Deneen & Taylor, West Columbia, for appellant.

William E. DuRant, Jr., of Schwartz, McLeod, DuRant & Burchstead, Sumter, for respondents.

SHAW, Judge:

Willis Ardis sued Charles Cox and Sumter Oil & Gas Company, Inc. (collectively referred to as "Cox") for fraud and violation of the South Carolina Unfair Trade Practices Act, S.C.Code Ann. § 39-5-10 (1976), et seq., (SCUTPA) arising out of Ardis's purchase of underground gasoline storage tanks from Cox. The trial court granted summary judgment for Cox on Ardis's claims but allowed Ardis to amend his complaint to allege breach of contract. Ardis appeals and we affirm.

Ardis leased and operated a gasoline service station in Sumter. He leased the premises from a third individual not involved in this matter. The underground storage tanks were owned by Cox and Cox supplied Ardis with gasoline.

In March 1987, Cox agreed to sell the underground storage tanks to Ardis. As part of the transaction, Cox agreed to sell gasoline to Ardis thereafter for one cent over cost per gallon. Cox told Ardis that the tanks held 8,000 gallons each so that Ardis could take advantage of the price discount by purchasing higher quantities. Cox did not tell Ardis of the lack of DHEC registration nor possible related penalties. He also did not tell Ardis about possible environmental and cost consequences involved with the purchase.

After the purchase, Ardis learned the tanks were in violation of DHEC registration regulations. He also found out that they would hold only 6,000 gallons of fuel and there were significant environmental problems associated with ownership and maintenance of the tanks rendering the tanks unfit for gasoline storage. Ardis subsequently registered the tanks, had environmental tests performed and, ultimately had the tanks removed from the property.

I.

Ardis first argues the trial judge erred in granting summary judgment to Cox on the fraud cause of action. We disagree.

A. Actual Fraud

Fraud is not presumed, but must be shown by clear, cogent, and convincing evidence. In order to prove fraud, the following elements must be shown: (1) a representation; (2) its falsity; (3) its materiality; (4) either knowledge of its falsity or a reckless disregard of its truth or falsity; (5) intent that the representation be acted upon; (6) the hearer's ignorance of its falsity; (7) the hearer's reliance on its truth; (8) the hearer's right to rely thereon; and (9) the hearer's consequent and proximate injury. King v. Oxford, 282 S.C. 307, 318 S.E.2d 125 (Ct.App.1984). A complaint is fatally defective if it fails to allege all nine elements of fraud. Inman v. Ken Hyatt Chrysler Plymouth, Inc., 294 S.C. 240, 363 S.E.2d 691 (1988). Where the complaint omits allegations on any element of fraud, the trial court should grant the defendant's motion to dismiss the claim. Id. Further, Rule 9(b), SCRCP provides:

In all averments of fraud or mistake, the circumstances constituting fraud or mistake shall be stated with particularity. Malice, intent, knowledge, and other condition of mind of a person may be averred generally.

Ardis contends each element of fraud can firmly be established. He argues each of these elements are established as to Cox's misrepresentation of the capacity of the tanks. The trial judge ruled that (1) there was no evidence Cox intentionally misrepresented the capacity, (2) because Ardis operated the tanks three years prior to the sale and could have easily checked the capacity and because the sale excluded all warranties and included a general release, there was no evidence Cox fraudulently misrepresented the capacity, and (3) even assuming fraud, Ardis did not rely on the capacity of the tanks in purchasing them.

In reviewing the complaint, we note that Ardis does not specifically allege either (1) intent that the representation be acted upon or (2) the hearer's right to rely. The complaint does allege that Ardis "reasonably relied" which may be sufficient to comply with the "hearer's right to rely" element. However, there is absolutely no allegation as to the "intent that the representation be acted upon" element. Thus, the complaint is fatally defective. Further, the trial judge found no evidence of an intentional misrepresentation of tank capacity. Ardis argues that Cox's testimony (regarding his desire to sell the tanks in part because of the underground storage regulations) "fulfills this element of fraud." We disagree. This is inadequate as independent evidence of the element of intent. Ardis is asking us to presume intent by the mere fact that Cox desired the sale to occur. The law clearly requires more.

B. Constructive Fraud

While it is possible to establish constructive fraud in the absence of the element of intent, we find the facts of this case do not support constructive fraud either. To establish constructive fraud, all elements of actual fraud except the element of intent must be established. O'Quinn v. Beach Associates, 272 S.C. 95, 249 S.E.2d 734 (1978). Neither actual dishonesty of purpose nor intent to deceive is an essential element of constructive fraud while intent to deceive is an essential element of actual fraud. The presence or absence of such an intent distinguishes actual fraud from constructive fraud. Giles v. Lanford & Gibson, Inc., 285 S.C. 285, 328 S.E.2d 916 (Ct.App.1985). However, in a constructive fraud case, where there is no confidential or fiduciary relationship, and an arm's length transaction between mature, educated people is involved, there is no right to rely. Poco-Grande Investments v. C & S Family Credit, Inc., 301 S.C. 322, 391 S.E.2d 735 (Ct.App.1990). This is especially true in circumstances where one should have utilized precaution and protection to safeguard his interests. Id. For reasons discussed below, we find no confidential or fiduciary relationship between the parties giving Ardis a right to rely. Being an arm's length transaction between mature, educated people, we find this matter fails to meet the elements necessary to show constructive fraud. We further note Ardis failed to allege constructive fraud or the existence of a fiduciary or confidential relationship.

C. Fraudulent Concealment

Ardis asserts Cox was guilty of fraudulent concealment because Cox knew the tanks would not hold 8,000 gallons, the tanks could have an environmental impact, and the tanks were not registered. He contends Cox had a duty to disclose based on their fiduciary relationship which he asserts arose from a franchise agreement and the...