Capital City Ins. Co. v. Bp Staff, Inc.

• Citation: 674 S.E.2d 524
• Decision Date: 13 February 2009
• Docket Number: No. 4502.,4502.
• Parties: CAPITAL CITY INSURANCE COMPANY, Appellant, v. BP STAFF, INC., and Samuel Blanton Phillips, III, Respondents.
• Court: Court of Appeals of South Carolina

674 S.E.2d 524

CAPITAL CITY INSURANCE COMPANY, Appellant, v. BP STAFF, INC., and Samuel Blanton Phillips, III, Respondents.

No. 4502.

Court of Appeals of South Carolina.

Heard January 21, 2009.

Decided February 13, 2009.

Mark A. Cullen, of West Palm Beach, FL, for Appellant.

D. Randle Moody, II, of Greenville, for Respondents.

PIEPER, J.

In this case, the trial court dismissed appellant Capital City Insurance Company's (Capital City) complaint of five counts of breach of contract against BP Staff, Incorporated (BP Staff) and one count of fraud against Samuel Blanton Phillips, III (Phillips), pursuant to Rules 12(b)(1), 12(b)(6), and 12(b)(8), SCRCP. We reverse the trial court's order and remand the case for further proceedings.

FACTS/PROCEDURAL HISTORY

Capital City is a workers' compensation insurance company in Columbia, S.C. BP Staff is an employee leasing company wholly owned by Phillips and based in Greenville, S.C. Phillips was previously employed by SB Phillips Company (SB), attending to payroll and procurement of workers' compensation insurance for that company prior to starting BP Staff in July 2002.

In August 2002, BP Staff sought workers' compensation coverage through the South Carolina Department of Insurance Workers' Compensation Assigned Risk Insurance Plan and submitted an application that was assigned to Capital City. After reviewing the application, Capital City issued a policy in September 2002 to BP Staff and assigned it a higher premium than a new company would usually receive; BP Staff was assigned an "experience modifier" (modifier) of 1.33 rather than 1.0, meaning BP Staff would be charged an extra $33,000 for every $100,000 of payroll. In essence, Capital City viewed BP Staff as a successor company to SB because the overwhelming majority of workers on BP Staff's payroll were formerly at SB. Thus, Capital City applied SB's modifier to BP Staff's insurance policy.

BP Staff acquired two subsequent policies from Capital City in 2003 and 2004 for its South Carolina operations. Additionally, BP Staff acquired two more policies from Capital City in 2004 covering its Virginia, Georgia, and Alabama operations.

From September 2, 2002, through August 23, 2006, BP Staff appealed Capital City's application of the modifier to its policies in several administrative proceedings that culminated in affirmance of the modifier by the Administrative Law Court. BP Staff then appealed the modifier issue to the South Carolina Court of Appeals, which affirmed application of the modifier on January 16, 2008. See BP Staff, Inc. v. Capital City Ins. Co., Op. No.2008-UP-060 (S.C. Ct.App. Filed Jan. 16, 2008). However, at the time Judge Breeden's first order was filed on May 8, 2006, which dismissed Capital City's breach of contract and fraud claims, the modifier issue was still pending administrative appeal before the ALC; by the time he issued the June 3, 2007 order denying the motion to reconsider, the modifier issue had been ruled upon by the ALC and was pending on appeal to this court. We analyze this case based on the record before the trial court.

On July 13, 2005, Capital City commenced the present action, alleging five counts of breach of contract by BP Staff and one count of fraud by Phillips individually. BP Staff and Phillips responded with a motion to dismiss pursuant to Rules 12(b)(1) and 12(b)(6) of the South Carolina Rules of Civil Procedure, asserting the circuit court lacked subject matter jurisdiction, and that Capital City failed to state facts sufficient to constitute a cause of action. Additionally, BP Staff and Phillips later argued in their memorandum in support of dismissal that the case should be dismissed pursuant to Rule 12(b)(8), SCRCP, "because there was another action pending between the parties for the same claim."

At the hearing on November 28, 2005, Capital City argued that although its claimed damages would be impacted by application of the modifier, BP Staff was still in breach of contract for failure to pay any of its premium, with or without the modifier.¹ BP Staff denied it owed Capital City any premiums, including the undisputed amount derived from the 1.0 modifier. Additionally, Capital City contended the administrative court determining the modifier issue was without authority to grant any relief sought for breach of contract or fraud. As such, it asserted the two disputes were substantively different and the case should go forward notwithstanding the pending administrative issue. Alternatively, Capital City asked that the proceedings be stayed until a ruling from the "Appeals Court" was issued.²

On January 12, 2006, the trial court granted the motion to dismiss, but the order was not recorded with the clerk of court until May 8, 2006. After determining the modifier dispute was the "linchpin regarding any and all disputes between the parties," the court found that "the administrative process will afford the parties an opportunity to address their respective positions and seek a compromise of this matter." Consequently, the court held that, "absent an exhaustion of the [administrative] process, the instant action is premature and should be dismissed" pursuant to Rules 12(b)(6), and alternatively, pursuant to 12(b)(1), and 12(b)(8), SCRCP.

The trial court denied Capital City's motion to reconsider and reinstate on June 30, 2007. This appeal followed.

ISSUES PRESENTED

I. Did the trial court err in dismissing the complaint pursuant to Rule 12(b)(6) when the complaint sets forth sufficient facts to support claims for breach of contract and for fraud?

II. Did the trial court err in dismissing the case for lack of subject matter jurisdiction pursuant to Rule 12(b)(1) when it did so based on a lack of exhaustion of administrative remedies and when such doctrine of exhaustion is not jurisdictional?

III. Did the trial court err in dismissing the case based on the exhaustion of administrative remedies doctrine because the doctrine does not apply?

IV. Did the trial court err in dismissing the case pursuant to Rule 12(b)(8), based upon the exhaustion of administrative remedies doctrine when only the corporate defendant in this case is a party to the administrative proceedings and when the issues to be decided in the administrative proceeding and the trial court are not the same?

STANDARD OF REVIEW

An appellate court applies the same standard of review as the trial court when reviewing the dismissal of an action pursuant to Rule 12(b)(6), SCRCP. Doe v. Marion, 373 S.C. 390, 395, 645 S.E.2d 245, 247 (2007). In considering a motion to dismiss a complaint based on a failure to state facts sufficient to constitute a cause of action, the trial court must base its ruling solely on allegations set forth in the complaint. Id. The question is whether, in the light most favorable to the plaintiff, and with every doubt resolved in his behalf, the complaint states any valid claim for relief. Plyler v. Burns, 373 S.C. 637, 645, 647 S.E.2d 188, 192 (2007). Dismissal under Rule 12(b)(6) is improper if the facts alleged and inferences reasonably deducible from them, viewed in the light most favorable to the plaintiff, would entitle the plaintiff to relief on any theory. Doe, 373 S.C. at 395, 645 S.E.2d at 247. Moreover, the complaint should not be dismissed merely because the court doubts the plaintiff will prevail in the action. Id. at 395, 645 S.E.2d at 248. The trial court's grant of a motion to dismiss will be sustained only if the facts alleged in the complaint do not support relief under any theory of law. Ashley River Props. I, LLC v. Ashley River Props. II, LLC, 374 S.C. 271, 278, 648 S.E.2d 295, 298 (Ct.App.2007).

Pursuant to Rule 12(b)(1), SCRCP, the movant challenges the power of the court over the subject matter. "The question of subject matter jurisdiction is a question of law for the court." Chew v. Newsome Chevrolet, Inc., 315 S.C. 102, 104, 431 S.E.2d 631 (Ct.App.1993) (citing Bargesser v. Coleman Co., 230 S.C. 562, 96 S.E.2d 825 (1957)). We are free to decide questions of law with no deference to the trial court. Catawba Indian Tribe of S.C. v. State of South Carolina, 372 S.C. 519, 524, 642 S.E.2d 751, 753 (2007).

Pursuant to Rule 12(b)(8), SCRCP, the movant seeks dismissal of a case because another action is pending between the same parties for the same claim. While we utilize the same standard of review as the circuit court in scrutinizing the application of Rule 12(b)(8), each of the components of the rule are determined as a matter of law and thus we apply a de novo standard of review to the grant or denial of this motion. See Miami Sand & Gravel, LLC v. Nance, 849 N.E.2d 671, 676 (Ind.Ct.App.2006). In other words, we may determine whether there is another action involving the same parties, claims (or subject matter), and remedies as a matter of law.

LAW/ANALYSIS

The primary focus of this appeal is whether Capital City was required to exhaust the administrative process concerning the proper modifier to BP Staff's premium before it could proceed on an action for breach of contract and fraud.³ Therefore, we address the threshold issues of subject matter jurisdiction and exhaustion of administrative remedies first even though the trial court apparently treated them as alternative holdings.

Capital City asserts that the trial court erred in dismissing the case for lack of subject matter jurisdiction pursuant to Rule 12(b)(1) based upon the lack of exhaustion of administrative remedies. We agree.

Subject matter jurisdiction is defined as "the power to hear and determine cases of the general class to which the proceedings in question belong." See Skinner v. Westinghouse Elec. Corp., 380 S.C. 91, 93-94, 668 S.E.2d 795, 796 (2008); Ward v. State, 343 S.C. 14, 17 n. 5, 538 S.E.2d 245, 246 n. 5 (2000). This authority is distinct from the doctrine of exhaustion of administrative remedies, which "is generally considered a rule of policy, convenience and discretion,...