Beck v. Clarkson

• Citation: 387 S.E.2d 681,300 S.C. 293
• Decision Date: 13 September 1989
• Docket Number: No. 1401,1401
• Court: Court of Appeals of South Carolina
• Parties: Allen BECK, Appellant, v. Sheelah CLARKSON, Respondent. . Heard

Page 681

387 S.E.2d 681

300 S.C. 293

Allen BECK, Appellant, v. Sheelah CLARKSON, Respondent.

No. 1401.

Court of Appeals of South Carolina.

Heard Sept. 13, 1989.

Filed Oct. 30, 1989.

William L. Dodson, Jr., of the Bowen Law Firm, Greenville, for appellant.

T. Emmet Walsh and William E. Walsh, of Gaines & Walsh, Spartanburg, for respondent.

GARDNER, Judge:

Plaintiff Allen Beck (Beck) brought this action against defendant Sheelah Clarkson (Clarkson) alleging (1) a cause of action for breach of a partner's fiduciary duty, (2) a second cause of action based upon Section 33-41-540, Code of Laws of South Carolina (1976, as amended) in which he alleged that Clarkson must account to the appellant for all profits derived by her from the Spring City venture and hold such profits in trust for the appellant, and (3) for breach of the partnership agreement and wrongful dissolution. When the case was called for trial and at the close of Beck's case in chief, the trial judge granted a directed verdict on the grounds that Beck failed to prove damages to a reasonable certainty. We reverse and remand.

ISSUES

Beck asserts that the trial judge erred in granting the directed verdict.

By additional sustaining grounds, Clarkson argues (1) that Beck failed to offer sufficient evidence to establish the existence of the partnership and (2) assuming there was evidence of a partnership, it was a partnership at will which was terminated before acquiring assets or transacting business.

FACTS

The facts, considered in a light most favorable to Beck, are that Beck, in January 1985, entered into an agreement with defendant Clarkson and a third party, Gerrye Clegg, to form a partnership, known as C.B.C. Investments. The name "C.B.C. Investments" was derived from the first letter of each partner's last name. The partnership was formed for the purpose of building and developing a warehouse facility in Cherokee County, South Carolina, and leasing the warehouse to Spring City Knitting Co. (Spring City) a division of Cluett, Peabody Company (Cluett).

The partners of C.B.C. Investments began researching the information necessary to develop the warehouse. Beck's wife, a real estate broker, assisted in the research. Clarkson submitted, on behalf of C.B.C. Investments, on March 18, 1985, a proposal, including a proposed lease to Cluett. Cluett expressed interest in the C.B.C. proposal but expressed uncertainty as to what size building they would require.

Over a number of months, Clarkson continued to negotiate with Cluett on behalf of C.B.C. Investments. As evidence of the continued negotiations, Clarkson mailed a second proposal for the warehouse facility to Beck on June 19, 1985.

Around July 1, 1985, Clarkson, at her father's direction, withdrew from C.B.C.; she told Beck that the project would be developed for the benefit of herself, her brothers and sisters and not C.B.C. Clarkson assured her father that she would proceed solely at his direction and she thereafter, excluding Beck, proceeded with the negotiations with Cluett and Spring City. On or about June 27, 1985, Clarkson sent further proposals to Cluett, but this time on behalf of herself and her brothers and sisters. These proposals included the original C.B.C. Investments proposal for the 60,000 square foot building, a proposal similar to that mailed to Beck on June 19, for 150,000 square foot On September 20, 1985, Clarkson acting on behalf of herself and her brothers and sisters, with whom she was now in a partnership known as "Clarkson Associates," entered into a contract to purchase the land for the warehouse facility to be leased to Spring City. The contract called for a total purchase price of $80,000.00. On October 29, 1985, Cluett finalized their specification requirements in a letter to Clarkson; the purchase of the property for the facility was then completed by deed on November 8, 1985.

building, and an additional proposal for a 90,000 square foot building.

On December 23, 1985, Clarkson, her brothers and sisters entered into a written partnership agreement; subsequently another party, John C. Anderson, came into the partnership with a 50 percent interest.

On January 20, 1986, Clarkson Associates entered into a lease agreement with Spring City by which Spring City agreed to pay $25,800.00 as monthly rent. The record reflects that subsequently the warehouse was built by Clarkson Associates at a cost of $1,879,578.90. The record reflects that Clarkson Associates on July 1, 1987, mortgaged the property to the South Carolina National Bank for $1,712,244.16. There is evidence of record that Beck was in a position to pay his part of the difference between the actual cost of the purchase of the land and the construction of the building and the amount received from the mortgage. The mortgage called for monthly payments of $22,000.00 which left a $3,800.00 per month cash flow since Spring City had agreed to pay all taxes and insurance on the property. There is expert testimony to the effect that the equity of Clarkson Associates partnership in the facility as of the time of trial was $1,870,700.00. The expert testified that at the end of the 5-year period, Clarkson Associates' equity in the warehouse facility would be $2,859,453.00.

The case was called for jury trial at the March 1988 term of the Spartanburg County Court of Common Pleas. At the conclusion of Beck's case the defendant moved for a directed verdict on the grounds that (1) Beck had failed to prove that a partnership existed, (2) that if the partnership existed, it was a partnership at will terminable by either party and without liability for damages and that such partnership was terminated prior to the ownership of any property or any business being conducted and (3) that the plaintiff failed to prove any damages. The trial judge granted a directed verdict as to all of the causes of action alleged by Beck on the grounds that Beck had failed to prove damages to a reasonable certainty.

DISCUSSION

I.

When a party makes a motion for a directed verdict or, under previous practice, for an involuntary non-suit, it is incumbent upon the trial judge, and this court on appeal, to view the evidence and all inferences arising therefrom in the light most favorable to the plaintiff. If there is more than one reasonable inference which may be drawn from the plaintiff's evidence, one of which could support a verdict for the plaintiff, then a motion for a directed verdict or non-suit should be denied. Riddle v. Pitts, 283 S.C. 387, 324 S.E.2d 59 (1984).

Before ruling on Clarkson's motion for directed verdict, the trial judge observed that Beck's evidence as to damages was in the nature of an expectancy and was therefore too speculative and uncertain to allow the case to go to the jury. The trial judge obviously based his opinion on the theory that lost profits from a new business are per se nonrecoverable. This was established in the case of Standard Supply Co. v. Carter & Harris, 81 S.C. 181, 62 S.E. 150 (1908) and was the law of this state for many years. Recently, the Supreme Court has abandoned this rule in favor of the modern view that the new business issue is to be considered as a matter of evidentiary sufficiency rather than an automatic bar to recovery. See John D. Hollingsworth on Wheels, Inc. v. Arkon Corporation, 279 S.C. 183, 305 S.E.2d 71 (1983); Bryson v. Arcadian Shores, Inc., 273 S.C. 471, 257 S.E.2d 233 (1979).

The Supreme Court removed all doubt as to the proper rule on this issue in the recent case of Drews Company, Inc. v. Ledwith-Wolfe Associates, Inc., 296 S.C. 207, 371 S.E.2d 532 (1988). Therein the court stated "we believe South Carolina should now unequivocally join those jurisdictions applying the new business rule as a rule of evidentiary sufficiency and not as an automatic preclusion to recovery of lost profits by a new business or enterprise." In Drews Company, the court applied the same standards for judging lost profits of a new business as those applied to lost profits in other cases, and set forth three requirements. First, the profits must have been prevented or lost as a natural consequence of the breach of contract; second, lost profits must reasonably be supposed to have been within the contemplation of the parties at the time the contract was made as a probable result of a breach of the contract, and finally, the lost profits must be established with reasonable certainty, and not be conjectural or speculative.

A definition of reasonable certainty is contained in the case of South Carolina Finance Corporation of Anderson v. West Side Finance Company, 236 S.C. 109, 122-123, 113 S.E.2d 329, 336 (1960); we quote:

To warrant such recovery, loss of profits must be established with reasonable certainty, for recovery cannot be had for profits that are conjectural or speculative. But it must be borne in mind that since profits are prospective they must, to some extent, be uncertain and problematical, and so, on that account or on account of the difficulties in the way of proof, a person complaining of breach of contract cannot be deprived of all remedy, and uncertainty merely as to the amount of profits that would have been made does not prevent a recovery. The law does not require absolute certainty of data upon which lost profits are to be estimated, but all that is required is such reasonable certainty that damages may not be based wholly upon speculation and conjecture, and it is sufficient if there is a certain standard or fixed method by which profits sought to be recovered may be estimated and determined with a fair degree of accuracy.

The following from 59A Am.Jur.2d Partnership Section 566 (1987) is pertinent to this issue; we quote:

Section 566. Generally; future profits

In case of a breach of the partnership contract by wrongful dissolution, the damages recoverable include the value of the profits which the plaintiff otherwise would have received, or the value to him of...