Cannon v. Johnson, Lane, Space, Smith & Co., Inc.

• Court: U.S. District Court — District of South Carolina
• Writing for the Court: Robert C. Elliott, Columbia, S. C., for plaintiff
• Citation: Cannon v. Johnson, Lane, Space, Smith & Co., Inc., 460 F. Supp. 724 (D. S.C. 1978)
• Decision Date: 24 March 1978
• Docket Number: Civ. A. No. 77-688.
• Parties: Marion C. CANNON, Plaintiff, v. JOHNSON, LANE, SPACE, SMITH & COMPANY, INC., Defendant.

460 F. Supp. 724

Marion C. CANNON, Plaintiff, v. JOHNSON, LANE, SPACE, SMITH & COMPANY, INC., Defendant.

Civ. A. No. 77-688.

United States District Court, D. South Carolina, Columbia Division.

March 24, 1978.

Robert C. Elliott, Columbia, S. C., for plaintiff.

Charles W. Knowlton, William C. Boyd, III, Columbia, S. C., for defendant.

ORDER ON DEFENDANT'S MOTION FOR SUMMARY JUDGMENT

HEMPHILL, District Judge.

By motion filed December 19, 1977, defendant seeks summary judgment in his favor upon the grounds that there is no genuine issue as to any material fact and that defendant is entitled to judgment as a matter of law. In support of its position, defendant has filed a memorandum. Plaintiff, in opposition, also has filed a memorandum; both have been reviewed by the court.

Plaintiff's lawsuit was initiated in the Richland County Court of Common Pleas by service of Summons and Complaint upon the defendant on March 28, 1977. The matter is before this court upon removal by defendant based on diversity of citizenship.

Defendant contends that plaintiff's cause of action alleges a violation of & 62-309 of the Code of Laws of South Carolina (1962), that is now § 35-1-1490 of the Code of Laws of South Carolina (1976), commonly known as South Carolina blue sky law, based upon the purchase of unregistered securities made in April, May and August of 1974.¹

Section 62-151 of the South Carolina Code of Laws (1962) is the same as § 35-1-810 of the South Carolina Code of Laws (1976) and reads:

It is unlawful for any person to offer or sell any security in this state unless (a) it is registered under this chapter or (b) the security or transaction is exempted under § 35-1-310 or 35-1-320.

Section 35-1-1490, of the South Carolina Code of Laws (1976) (formerly 62-309, South Carolina Code of Laws (1962)) reads as follows:

§ 35-1-1490. Liability to buyers for illegal or fraudulent sales or offers.

Any person who:

(1) Offers or sells a security in violation of subsection (2) of § 35-1-170 or § 35-1-410 or § 35-1-810, or of any rule or order under § 35-1-50 which requires the affirmative approval of sales literature before it is used or of any condition imposed under § 35-1-950 or § 35-1-990; or

(2) Offers or sells a security by means of any untrue statement of a material fact or any omission to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they are made, not misleading, the buyer not knowing of the untruth or omission, and who does not sustain the burden of proof that he did not know, and in the exercise of reasonable care could not have known, of the untruth or omission;

Is liable to the person buying the security from him, who may sue either at law or in equity to recover the consideration paid for the security, together with interest at six per cent per year from the date of payment, costs, and reasonable attorneys' fees, less the amount of any income received on the security, upon the tender of the security, or for damages if he no longer owns the security. Damages are the amount that would be recoverable upon a tender less the value of the security when the buyer disposed of it and interest at six per cent per year from the date of disposition.

Defendant contends that plaintiff's cause of action is barred by the statute of limitations. At the time the cause of action arose the applicable period of limitation for bringing an action was two years after the contract of sale pursuant to § 62-313 of the Code of Laws of South Carolina (1962) (§ 35-1-1530 of the Code of Laws of South Carolina (1976)).² This statute was amended by the General Assembly of South Carolina by Act No. 453 of 1976, effective January 23, 1976, which extended the limitation to three years (see § 35-1-1530, Code of Laws of South Carolina (1976 Supp.). The defendant contends that the proper limitation period is that which was in effect at the time the cause of action arose, i.e., two years, and that the two-year statute of limitations is a bar to recovery in this action and is the basis for defendant's motion for summary judgment.

Plaintiff counters by relying upon Act No. 453 of the Acts and Joint Resolutions of the South Carolina General Assembly, 1976, approved January 23, 1976, which extends the period of limitations to three years. Section 35-1-1530. Plaintiff contends that the three-year amended statute of limitations should apply retrospectively. Plaintiff advances the premise citing 51 Am. Jur.2d, Limitation of Actions § 41 that amendments extending statutes of limitations apply to pre-existing claims not already barred.

Plaintiff states that legislative intent is the primary factor to be considered over the applicability of statutes of limitation. Plaintiff submits that the sentence "No person may sue under Sections 35-1-1490 and 35-1-1500 more than three years after the contract of sale" stands for the legislative intention that one may bring an action for a sales violation of the blue sky laws under Sections 35-1-1490, S. C. Code of Laws 1976 (formerly 62-309 and Section 35-1-1500 South Carolina Code of Laws 1976 (formerly 62-310, South Carolina Code of Laws 1962)) three years prior to the effective date of the amendment.

Plaintiff further contends that his knowledge of the passage of the amendment caused him to form an intelligent, good faith opinion that his time to bring an action had extended to three years and that it would be harsh to bar him from recovery.

Fourthly, plaintiff argues that the amended statute is a remedial or procedural type of statute in that it relates to the remedy and manner of procedure and is retrospective in nature.

The pivotal issue in this case is whether an amendment lengthening the statute of limitations for state securities fraud claims may properly be applied to causes of action which are viable at the time of the effective date of that amendment.

The general rule of law in South Carolina appears to be that a statute of limitations is to be applied prospectively. It is stated in Lyles v. Roach, 30 S.C. 291, 9 S.E. 334 (1889):

It may be stated generally, and with reference to all statutes of limitations, both as to actions arising on contracts and also upon torts, trespasses, etc., that the currency of the statute commences when the cause of action accrues, or, as Judge Evans said in Bugg v. Summer: Whenever there is a plaintiff who can sue and a defendant who can be sued, the statute begins to run. A right of action has accrued . . . and the limitation in force at the accrual of the right is the limitation which must govern. This theory is sustained in our recent case of Nichols v. Briggs, 18 S.C. 473 478, where the limitation of force at the time the note fell due was applied, and not the one when the action was brought. And this was not because the subject matter rested on contract, but because the accrual of a right of action set the statute in motion and this was the case whether the cause of action was assumpsit, trespass, trover, debt or whatever else it might be. 30 S.C. at 295, 9 S.E. at 335.

The South Carolina Supreme Court recognizes that the intent of the legislature governs whether a statute of limitations will have a prospective or a retrospective application. The court stated in Curtis v. Renneker, 34 S.C. 468, 13 S.E. 664, 671:

Our first inquiry is whether the legislature intended this statute to have a retroactive operation, so far as mortgages are concerned. The rule that a statute will never be given such construction, unless it is required by the expressed wording of the statute or must necessarily be implied from such words, is too well settled to need citation of any authority to support it.

The defendant further argues in support of his motion for summary judgment that there is a distinction between a true statute of limitations and a statute that creates a substantive right which did not exist at common law and incorporates a condition as to the time of exercise of that right. Defendant, citing 15 Am.Jur.2d, Limitation of Actions, § 15, submits that where the time limitation runs to the right rather than to the remedy, it is the general rule that absent specific language to the contrary, an alteration in the time limit will be given prospective application only. Defendant submits that this court should follow Snyder v. Yoder, 176 F.Supp. 617 (N.D.Ohio 1959) in which a one-year statute of limitations was amended to two years, with an action brought in the interim period. The court stated:

While as a general rule it is true that a period of limitations may be extended by an amendment of the statute of limitations, prior to the expiration of the previously controlling period, the situation is different where the statute creating the right also prescribes the limitation period. In that event, it is also held that compliance with the time limitation is a condition to the bringing of the action, and not just a limitation thereon, and that the limitation called for in the original statute bars the action, notwithstanding any amendment of the statute thereafter. 176 F.Supp. at 623 (citations omitted).

Defendant points out that the distinction between a true statute of limitations and a time limit which runs to the right and the remedy has been recognized by the South Carolina Supreme Court in Dennis v. Atlantic Coastline R.R., 70 S.C. 254, 49 S.E. 869 (1904), a case dealing with the Lord Campbell Act.

The court stated:

It is well settled in this state that the statute of limitations relates to the remedy, and is enforced according to the lex fori. Sawyer v. McCaulay, 18 S.C. 543. But the requirement that the action shall be commenced within one year after the party is killed is not a statute of limitations. At common law there was no right of action for death caused by wrongful act. The requirement as to the time of commencing the action is a part of the statute creating this right. It is incumbent on those

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