Benedict Coll. v. Nat'l Credit Sys., Inc.
| Decision Date | 24 October 2012 |
| Docket Number | No. 5043.,5043. |
| Citation | 735 S.E.2d 518,400 S.C. 538 |
| Parties | BENEDICT COLLEGE, Respondent, v. NATIONAL CREDIT SYSTEMS, INC., Christopher Rehkow, and Eric Dean Snyder, Appellants, v. Darren L. Ford, individually, and Leonard Williams, individually and in his representative capacity on behalf of Benedict College, Third Party Defendants, Of whom Leonard Williams is also a Respondent. Appellate Case No. 2010–174166. |
| Court | South Carolina Court of Appeals |
OPINION TEXT STARTS HERE
J. Charles Ormond Jr., of Holler Dennis Corbett Ormond Plante & Garner, of Columbia, for Appellants.
Charles T. Speth II and Douglas J. Rosinski, of Ogletree Deakins Nash Smoak & Stewart PC, of Columbia, for Respondents.
National Credit Systems, Inc. (NCS) appeals the dismissal of its counterclaim for civil conspiracy. NCS argues the circuit court erred in (1) finding it failed to state a claim upon which relief could be granted and (2) failing to provide an opportunity to amend its pleading. We reverse.
On May 8, 2007, Benedict College entered into an Amended and Restated Mortgage and Security Agreement (the Security Agreement) with its lenders in exchange for a loan of $8.4 million. Among other restrictions, the Security Agreement required the College to obtain the written approval of its bond insurer, Radian Asset Assurance, before selling its portfolio of certain student loans.
On May 18, 2007, the College and NCS entered into an agreement under which NCS would attempt to collect those student loans on behalf of the College (the Collection Agreement). Leonard N. Williams, the College's Interim Chief Financial Officer, signed on behalf of the College, and sales representatives Darren L. Ford and Eric Dean Snyder signed on behalf of NCS. The College did not secure Radian's approval before executing the Collection Agreement.
In 2008, the College filed an action against NCS for breach of contract, fraud, fraud in the inducement, and unjust enrichment. Following procedural matters and the addition of other parties, NCS counterclaimed against the College for breach of contract and civil conspiracy.
NCS's breach of contract claim asserted the College breached the Collection Agreement by failing to provide the number of accounts agreed to under its provisions, settling or deferring certain accounts directly with debtors, and failing to remit money due to NCS as a result of its collection efforts. The contract claim further alleged NCS had suffered actual and consequential damages “[a]s a direct and proximate result of these breaches of the Collection Agreement.”
NCS also counter- and cross-claimed for civil conspiracy against Williams, Ford and the College. The civil conspiracy claim alleged the following 1:
Williams was an agent of the College and at all times had the authority to act on its behalf. Ford worked as an independent contractor sales trainee for NCS, and he arranged the potential deal between the College and NCS through prior relationships he maintained with people at the College. In May 2007, the College and NCS executed the Collection Agreement. However, the College did so without obtaining the prior approval of its bond insurer, Radian, which was required by the Security Agreement. NCS did not know the College had failed to obtain the required pre-approval of the Collection Agreement before executing it.
Williams subsequently sought Radian's approval of the Collection Agreement. However, he provided Radian with an unsigned copy of the Collection Agreement without mentioningit had already been entered. Radian rejected the Collection Agreement, and Williams contacted NCS's principals for “ clarification” of the Collection Agreement's terms. NCS's principals did not “ agree to modify or alter the terms of the Collection Agreement.”
“[B]ecause NCS management ... would not agree [to] modifications of the terms of the Collection Agreement, which ... Radian was requiring of [the College] in order for Radian to provide its written consent ..., Williams pursued other means.” Williams obtained a document from Radian's and the College's counsels with terms acceptable to Radian—the Addendum. He then presented the Addendum to Ford. Ford lacked express, implied or apparent authority to sign the Addendum for NCS, and Williams knew Ford's limitations. Nevertheless, Williams and Ford signed the Addendum without providing a copy to NCS. The Addendum removed or altered many provisions in the Collection Agreement designed to protect NCS, including a guaranteed refund provision that would effectively limit NCS's contractual liability to $255,000. Under the Addendum, NCS's liability could reach $1,020,000.
After the Addendum was executed, the College paid NCS, and NCS provided services to the College, in accordance with the Collection Agreement. NCS continued to lack knowledge of the Addendum while providing those services, and the allegations do not indicate when NCS first learned of the Addendum. However, the College eventually initiated the current lawsuit seeking payment pursuant to the Addendum's guaranteed refund provision.
Williams and Ford executed the Addendum “conspiring and intending to unilaterally alter the terms of the guarantee provisions in the Collection Agreement with the specific intent of harming NCS by way of purportedly binding it to contractual terms and guarantee provisions, to which NCS had not agreed.” Moreover, “the joint discussions between Williams and Ford were made with the intent to maliciously injure and harm NCS and to further their own motives and objectives.” Lastly, “[t]he acts of Williams, Ford, and [the College] ... directly and proximately resulted in special and additional damages to NCS, which include, but are not limited to, the costs and attorney's fees associated with the defense of [the College]'s allegations.” 2
Williams and the College filed a motion to dismiss NCS's civil conspiracy cause of action under Rule 12(b)(6), SCRCP, arguing NCS failed to adequately plead two of the three elements of civil conspiracy: intent to harm and special damages. After arguments, the circuit court granted the motion. The court found NCS failed to allege Williams and Ford intended to harm NCS. It also found NCS failed to assert any special damages, specifically reasoning “costs and attorney's fees are not special damages” and the damages NCS sought to recover for civil conspiracy were the same damages it claimed for breach of contract. This appeal followed.
1. Did the circuit court err in finding NCS failed to state a claim for civil conspiracy?
2. Did the circuit court err in failing to provide NCS an opportunity to amend its pleadings?
Under Rule 12(b)(6), SCRCP, a defendant may move for the dismissal of a complaint on the basis that the plaintiff “fail[ed] to state facts sufficient to constitute a cause of action.” In evaluating a motion to dismiss pursuant to this rule, the circuit court must view the facts alleged in the complaint and any reasonable inferences to be drawn therefrom in the light most favorable to the plaintiff. Gentry v. Yonce, 337 S.C. 1, 5, 522 S.E.2d 137, 139 (1999). If those facts and inferences would entitle the plaintiff to relief on any theory, then a dismissal for failure to state a claim is improper. Hackworth v. Greywood at Hammett, LLC, 385 S.C. 110, 115, 682 S.E.2d 871, 874 (Ct.App.2009). On appeal, the appellate court applies the same standard of review as the circuit court. Doe v. Marion, 373 S.C. 390, 395, 645 S.E.2d 245, 247 (2007). A complaint should not be dismissed merely because doubt exists that the plaintiff will ultimately prevail. Id. at 395, 645 S.E.2d at 248.
NCS argues the circuit court erred in dismissing its civil conspiracy claim. Specifically, NCS asserts the circuit court erred in finding NCS failed to (1) allege Williams and Ford intended to harm NCS and (2) raise sufficient claims for special damages. We agree.3
“The tort of civil conspiracy has three elements: (1) a combination of two or more persons, (2) for the purpose of injuring the plaintiff, and (3) causing plaintiff special damage.” Hackworth, 385 S.C. at 115, 682 S.E.2d at 874 (citing Vaught v. Waites, 300 S.C. 201, 208, 387 S.E.2d 91, 95 (Ct.App.1989)).
On appeal, NCS contends the circuit court erred in finding no allegation of intent to harm NCS because the complaint asserts Williams and Ford conspired to alter the terms of the Agreement and purport to bind NCS to those terms. We agree.
In a civil conspiracy claim, injury to the plaintiff need not be the only purpose behind the tortfeasor's conduct; many conspiracies will be at least partly motivated by the tortfeasor's desire to protect or benefit the tortfeasor's own lot. To be actionable, therefore, a conspiracy's “primary purpose or object” must be “to injure the plaintiff.” Lee v. Chesterfield Gen. Hosp., Inc., 289 S.C. 6, 13, 344 S.E.2d 379, 383 (Ct.App.1986); see also Pye v. Estate of Fox, 369 S.C. 555, 567, 633 S.E.2d 505, 511 (2006).
Viewed in the light most favorable to NCS, the allegations can reasonably be interpreted to mean Williams and Ford signed the Addendum with the primary purpose to eventually induce NCS to follow the Addendum's guaranteed refund provision without realizing the Addendum was unenforceable. Although it is clear that Williams and Ford may have signed the Addendum at least partly to protect the College from a claim by Radian, the specific intent alleged by NCS's pleading explicitly states they acted to “harm[ ] NCS by way of purportedly binding” NCS to terms the company had not agreed to. As interpreted, therefore, NCS's allegations satisfy the requirement that the conspiracy's “primary purpose” was “to injure the plaintiff.” Thus, the circuit court erred in dismissing the claim on this basis.
NCS contends the circuit court also erred in dismissing its claim for failure to allege special...
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