Burbach v. Investors Management Corp. Intern.

• Decision Date: 04 December 1996
• Docket Number: No. 2652,2652
• Citation: 484 S.E.2d 119,326 S.C. 492
• Court: South Carolina Court of Appeals
• Parties: Guenter BURBACH and Karen S. Burbach, Respondents, v. INVESTORS MANAGEMENT CORPORATION INTERNATIONAL and Hoflang Industries, Appellants. . Reheard

Page 119

484 S.E.2d 119

326 S.C. 492

Guenter BURBACH and Karen S. Burbach, Respondents, v. INVESTORS MANAGEMENT CORPORATION INTERNATIONAL and Hoflang Industries, Appellants.

No. 2652.

Court of Appeals of South Carolina.

Reheard Dec. 4, 1996.

Decided March 31, 1997.

Susan P. McWilliams, Jennifer J. Aldrich, and Elizabeth Ann L. Felder, all of Nexsen, Pruet, Jacobs & Pollard, Columbia, for appellants.

Thomas F. McDow; and Lucy L. McDow, Rock Hill, for respondents.

HEARN, Judge:

This court granted a petition for rehearing en banc to review our decision in Burbach v. Investors Management Corp. International, Op. No. 2481, (S.C.Ct.App. filed Mar. 18, 1996) (Davis Adv. Sh. No. 6 at 20). The prior opinion of this court is hereby withdrawn; we now affirm the jury verdict.

FACTS

In January 1991, Guenter and Karen Burbach executed a one-year lease for a house owned by Hoflang Industries. The Burbachs paid a security deposit of $350 to Investors Management Corporation International (IMC), Hoflang's leasing agent.¹

While the Burbachs lived in the house they had constant problems with its oil furnace that the landlords never satisfactorily resolved. In November 1991, the Burbachs gave IMC written notice of their intention to vacate due to the heating system's failure. They vacated the house on Thanksgiving Day, 1991.

Even though the Burbachs demanded the return of their security deposit, the landlords never returned it. The landlords assert they did not return the deposit due to their "belief that there was some damage to the rental property during the Burbachs' occupancy."

The Burbachs brought this action against the landlords, alleging causes of action for (1) failure to return their security deposit under S.C.Code Ann. § 27-40-410 (Supp.1996) of the South Carolina Residential Landlord and Tenant Act (SCRLTA); (2) failure to provide essential services under S.C.Code Ann. §§ 27-40-440 & 27-40-630 (1991) of the SCRLTA; (3) common law conversion of their security deposit; and (4) violation of the South Carolina Unfair Trade Practices Act (UTPA), S.C.Code Ann. §§ 39-5-10 to 39-5-560 (1985 & Supp.1996). The landlords counterclaimed for damages for lost rents and repairs.

During the trial, the Burbachs presented testimony from three prior tenants of the landlords: Harold Doe, Lynn Channel, and Deborah Gower. These witnesses testified about IMC's failure to return their security deposits and its attempt to charge them for repairs. ² They also testified about court actions brought by and against IMC arising from these disputes and the outcome of these actions. The trial court admitted the testimony over the landlords' objection, finding it relevant to the Burbachs' UTPA claim, as well as to the issue of punitive damages under their conversion cause of action.

The trial judge carefully instructed the jury on the admission of this disputed evidence. He stated:

Now, in this case there has been evidence of other cases involving IMC. These are not allowed in evidence to prove that IMC or Hoflang are liable in this case. This case, the case of the Burbachs must rise or fall on its own merits. However, these matters, that is these other matters of litigation involving IMC are to be considered by you on the issue of punitive damages, if you decide that plaintiffs are entitled to punitive damages, and may also be considered by you in regard to the Unfair Trade Practices Act because one of the requirements in that is that the plaintiffs prove that the conduct that they say constituted an unfair trade practice affected the public interest.

Following these instructions, the case was submitted to the jury on fourteen special written interrogatories. The jury responded in favor of the Burbachs on all fourteen interrogatories, including the following:

Did IMC and Hoflang Industries convert the Burbachs' security deposit to their own use?

If the answer to [the preceding question] is yes, are the Burbachs entitled to recover punitive damages?

Was the failure of IMC or Hoflang Industries to return the $350 security deposit an unfair or deceptive act in the conduct of trade of commerce?

Was the failure of IMC or Hoflang Industries to return the $350 security deposit either a wilful or knowing violation of the South Carolina Unfair Trade Practices Act?

The jury found for the Burbachs on all of their causes of action and awarded the Burbachs $32,000 in punitive damages for conversion. After the Burbachs elected to recover on the conversion action, the court conducted a thorough post-trial review of the punitive damages award and affirmed it.

In the original opinion issued by this court, the majority held the evidence admitted by the trial judge was not sufficiently similar to the Burbachs' claim and reversed the jury verdict. Burbach, Op. No. 2481, (Davis Adv. Sh. No. 6 at 23). After rehearing en banc, we now affirm.

DISCUSSION

On appeal, the landlords assert the trial judge impermissibly admitted testimony concerning the prior tenants' claims against IMC. They argue such testimony was not relevant on the UTPA cause of action because the testimony was not similar to the Burbachs' complaints. They also argue the UTPA does not apply and that the SCRLTA provides an exclusive remedy.

The Burbachs contend the disputed evidence was relevant on three matters: (1) the effect of the landlords' behavior on the public interest; (2) whether the landlords' retention of their security deposits was wilful as defined by the UTPA; and (3) punitive damages. We agree.

S.C.Code Ann. § 39-5-10(b) (1985 & Supp.1996) sets forth a broad definition of "trade and commerce" to include the "sale or distribution" of any "thing of value" directly or indirectly affecting South Carolina's citizens. Leases, while created by contract, grant to the tenant the right to use and enjoy property. They clearly are a "thing of value," even under the strictest reading of the statute's plain language.

The landlords cite Connolly v. People's Life Insurance Co., 294 S.C. 355, 364 S.E.2d 475 (Ct.App.1988), rev'd on other grounds, 299 S.C. 348, 384 S.E.2d 738 (1989), for the proposition that the UTPA does not apply to leases. The dispositive issue in Connolly was whether the conversion of a note and mortgage constituted a violation of the unfair trade practices act. 294 S.C. at 356, 364 S.E.2d at 476. Connolly did not address the applicability of the UTPA to leases.

The landlords also assert the UTPA does not apply to the breach of a private contract such as the one the Burbachs had with IMC. They argue the UTPA does not apply because the Burbachs' private relationship with IMC did not create a public interest. We disagree.

Residential leases are things of value which directly affect the citizens of this state. The fact that our legislature has regulated the landlord-tenant relationship by enacting the SCRLTA supports this conclusion. See S.C.Code Ann. §§ 27-40-10 to 27-40-940 (1991 & Supp.1996). While landlord-tenant relationships are frequently governed by contract, landlords have certain statutory duties, as do tenants. These duties protect the public interest in that they create a framework that governs landlord-tenant relationships regardless of the private arrangements parties have made between themselves.

Moreover, the conduct of the landlords is capable of repetition. "[U]nfair or deceptive acts or practices in the conduct of trade or commerce have an impact upon the public interest if the acts or practices have the potential for repetition." Noack Enterprises, Inc. v. Country Corner Interiors of Hilton Head Island, Inc., 290 S.C. 475, 480, 351 S.E.2d 347, 350-51 (Ct.App.1986), cert. dismissed, 294 S.C. 235, 363 S.E.2d 688 (1987). The problems experienced by the Burbachs are not isolated events. At least several other tenants experienced similar problems. The other tenants not only complained, but also received judgments. At least one case involved unfair trade practices. Clearly, the landlords' behavior is capable of repetition.

In an action brought under the UTPA, a material issue to be proved is that the unfair trade practice or act affects persons other than the parties to the transaction. Indeed, this court held in Jefferies v. Phillips that UTPA cases require specific proof of similar acts, transactions, or happenings where there is some special relation between them which would tend to prove or disprove some fact in dispute. 316 S.C. 523, 528-29, 451 S.E.2d 21, 23 (Ct.App.1994). Without evidence of the prior tenants' similar experiences, the Burbachs would not have been able to prove their UTPA claim.

The landlords argue the evidence was dissimilar because the reasons for withholding the security deposits varied from case to case. In our view, however, the factor which makes the landlords' prior conduct relevant is the withholding of tenants' security deposits for pretextual reasons. The fact that the reason asserted by IMC differed from case to case is unimportant; the similarity arises from the pretextual nature of the reason. Accordingly, we conclude the testimony from the prior tenants was admissible on the Burbachs' UTPA claim.

We believe the trial judge handled the difficult evidentiary issues presented in this case correctly, and with great care. His instructions to the jury on their consideration of this evidence and his use of special interrogatories focused the jury's attention on the Burbachs' claims rather than on the prior tenants' difficulties. ³

The Burbachs argue that even if the disputed evidence was not properly admissible under the UTPA, it was admissible on the issue of punitive damages on the conversion cause of action. We agree.

Under Gamble v. Stevenson, 305 S.C. 104, 111-12, 406 S.E.2d 350, 354 (1991), trial judges are required to conduct a post-trial review of punitive damage awards and consider the following factors: (1) defendant's degree of culpability; (2) duration of the conduct; (3) defendant's awareness or...