Clyde v. Johnson

• Citation: 742 S.E.2d 6,402 S.C. 458
• Decision Date: 30 January 2013
• Docket Number: No. 5079.,5079.
• Parties: Clyde and Kathy BARNES, Respondents, v. James E. JOHNSON, Appellant. Appellate Case No. 2010–173767.
• Court: Court of Appeals of South Carolina

402 S.C. 458

742 S.E.2d 6

Clyde and Kathy BARNES, Respondents,

v.James E. JOHNSON, Appellant.

Appellate Case No. 2010–173767.

No. 5079.

Court of Appeals of South Carolina.

Heard Sept. 11, 2012.

Decided Jan. 30, 2013.

Oscar W. Bannister, of Bannister & Wyatt, LLC, of Greenville, for Appellant.

Lauren Willoughby Barnwell and Scott Franklin Talley, both of Talley Law Firm, P.A., of Spartanburg, for Respondents.

GEATHERS, J.

In this property matter, heard in equity, James E. Johnson appeals the award of $75,616.17 to Clyde and Kathy Barnes. We reverse.

FACTS/PROCEDURAL HISTORY

Appellant James E. Johnson (Johnson) and Respondent Clyde Barnes (Barnes) are cousins who previously conducted informal business transactions together.¹ On August 25, 2003, Johnson purchased an eight-acre tract of property on New Cut Road in Spartanburg with a “dilapidated” house located on it. Johnson purchased the property for $131,733.61; he made a down payment of $30,733.61 and borrowed $101,000 from BB & T. Two days later, Johnson purchased a “fire policy” from Nationwide Insurance Company, insuring the house from loss due to fire and lightning. The policy listed Johnson as the named-insured of the tenant-occupied home and BB & T as the mortgagee.

Concurrent with Johnson acquiring the real property, Clyde and Kathy Barnes were living in Florida and looking for a Spartanburg-area home. Seeing an opportunity for mutual benefit with a previous business partner, Johnson and Barnes agreed that Barnes would, with the intent and possibility of later purchasing the property from Johnson: (1) move to the Spartanburg property; (2) pay for all maintenance, repairs, taxes, insurance, utilities, and the related mortgage in Johnson's name; (3) improve the home and surrounding acreage, at Barnes' discretion and own expense; ² and (4) be able to purchase the home from Johnson if Barnes obtained his own financing. Beyond these general conditions, fundamental terms of their agreement, such as timing, pricing, and even repayment terms, were unclear.³ In fact, the trial court expressly found “[t]he parties in their testimony disagree as to how the financial arrangements should be handled and as to the exact terms of their agreement.”

The record also reflects testimony alluding to another, related agreement. Barnes testified about an understanding “to sell the property [to a third party], repay Johnson his portion of the proceeds as far as what he invested in the property, and split the profit.” Barnes further described this understanding as an agreement to “split the money.” The record, however, is unclear whether the referenced “profit” consisted of capital gains or proceeds of the sale, i.e., “split the money,” and whether certain previous contributions (down payments, principal payments, on the mortgage, etc.) should be excluded from, or otherwise accounted for within, any such “profit” calculations. Thus, agreements allegedly existed to either: (1) sell the property to Barnes, whereby he would directly benefit from his related improvements; or (2) sell the property to a third-party with Barnes and Johnson splitting any “profits.” Based upon these understandings, Barnes and his wife initially made improvements, beginning in September 2003, and later inhabited the dwelling in 2004.

In July 2005, while Barnes was in arrears as to both utility bills and payments on the mortgage in Johnson's name, a medical emergency necessitated the Barneses' return to Florida. While the home was unoccupied, on July 23, 2005, lightning struck and burned the home beyond repair. Upon finding the home's charred remnants, Barnes retrieved a stove and refrigerator from the debris, removed the fencing, and dismantled the barn he built upon the property.

Thereafter, on October 11, 2005, Johnson used $92,332.12, taken from the $95,000 in insurance proceeds paid to Johnson as the named-insured, to pay off his mortgage held by BB & T. Three days later, Johnson sold the property to Michael McDonald and Jed Aho for $136,000. Johnson did not remit any of these generated funds to Barnes.

On June 19, 2006, Barnes filed this action against Johnson alleging breach of contract, conversion, unjust enrichment and quasi contract, and promissory estoppel. Johnson counterclaimed, contending Barnes: (1) was a tenant who had abandoned the property in July 2005—then $2,618.79 in arrears as to rent payments and $470.32 behind on utility bills; and (2) owed Johnson $45,000 for the dismantled and removed barn. Barnes responded that Johnson's counterclaims were barred by “unclean hands, laches, and estoppel.” Prior to trial, however, Barnes withdrew the breach of contract action.

The circuit court conducted a bench trial on October 6, 2008. At trial, Barnes produced receipts for $9,639.59 in materials purchased to improve the home and property. Barnes also asserted he spent approximately $22,000 in building the barn, which he later dismantled and partially removed.

The trial court concluded that Barnes established the promissory estoppel and unjust enrichment claims against Johnson.⁴ As to the trial court's finding that promissory estoppel existed, this conclusion only related to the parties' initial agreement that Barnes could live in the house with the possibility of later purchasing the home from Johnson if Barnes obtained adequate financing. The trial court did not address whether promissory estoppel existed due to any reasonable reliance and subsequent damages related to the parties' second agreement—selling the home to a third party and splitting the profits.

The trial court awarded Barnes damages of $75,616.17. The trial court subsequently denied Johnson's motions for a new trial, or alternatively, to alter or amend the judgment. This appeal followed.

ISSUES ON APPEAL

I. Did the trial court err in finding that Barnes established the elements of quantum meruit and unjust enrichment?

II. Did the trial court err in finding that Barnes established the elements of promissory estoppel?

III. Did the trial court err in calculating damages payable to Barnes?

IV. Did the trial court err in taking judicial notice of the average appreciation of real property in Spartanburg County?

STANDARD OF REVIEW

“In an action in equity, tried by the judge alone, without a reference, on appeal the [appellate court] has jurisdiction to find facts in accordance with its views of the preponderance of the evidence.” Townes Assocs., Ltd. v. City of Greenville, 266 S.C. 81, 86, 221 S.E.2d 773, 775 (1976) (citing Crowder v. Crowder, 246 S.C. 299, 143 S.E.2d 580 (1965)).

Except where the facts have been settled by a jury, whose verdict has not been set aside, it is the duty of this court in equity cases to review challenged findings of fact as well as matters of law. But such duty on our part does not require that we disregard the findings below, or that we ignore the fact that the trial [j]udge who saw and heard the witnesses is in better position than this court to evaluate their credibility; nor does it relieve the appellant of the burden of convincing this court that the trial [j]udge committed error in his findings of fact.Twitty v. Harrison, 230 S.C. 174, 177–78, 94 S.E.2d 879, 880 (1956) (citations omitted).

LAW/ANALYSIS

I. Unjust Enrichment and Quantum Meruit

Johnson contends the trial court erred in finding Barnes was entitled to damages, under a theory of quantum meruit, because Barnes “conferred no benefit to [Johnson] who recognized no benefit and did not retain any benefit.” We agree.

The South Carolina Supreme Court explained that quantum meruit is a remedy for unjust enrichment:

This Court has recognized quantum meruit as an equitable doctrine to allow recovery for unjust enrichment. Absent an express contract, recovery under quantum meruit is based on quasi-contract, the elements of which are: (1) a benefit conferred upon the defendant by the plaintiff; (2) realization of that benefit by the defendant; and (3) retention by the defendant of the benefit under conditions that make it unjust for him to retain it without paying its value.

Columbia Wholesale Co. v. Scudder May N.V., 312 S.C. 259, 261, 440 S.E.2d 129, 130 (1994) (citations omitted).

“In a case involving improvements to realty, the measure of recovery in restitution is the difference in the fair market value of the property before and after the improvements.” Niggel Assocs., Inc. v. Polo's of N. Myrtle Beach, Inc., 296 S.C. 530, 533, 374 S.E.2d 507, 509 (Ct.App.1988) (citation omitted); see Stringer Oil Co. v. Bobo, 320 S.C. 369, 373–74, 465 S.E.2d 366, 369 (Ct.App.1995) (finding the appropriate measure of a defendant's unjust enrichment is not the costs incurred by the plaintiff in making the improvements; rather, it is the value of the plaintiff's improvements to the defendant); Barrett v. Miller, 283 S.C. 262, 264, 321 S.E.2d 198, 199 (Ct.App.1984) (confining the monetary value of a defendant's unjust enrichment to the increase in market value of the defendant's real property brought about by the plaintiff's efforts).

In his brief, Johnson asserts:

Nothing in the record supports any claim by the Barnes that this increase in value [$4,266.39] was due to their efforts. The barn built by the Barnes was torn down by the new owners and given to the Barnes to remove. The fences were taken down and also given to the Barnes to remove. In conclusion, the record is bare of any improvements upon which a value has been placed and the lack of any such value leaves the Court to simply speculate.

We agree with Johnson's assertion that Barnes failed to introduce evidence showing that his efforts increased the market value of Johnson's property.

Johnson neither benefited from, nor was enriched by, Barnes' work to improve Johnson's property. Although the parties agreed that Barnes would move onto the property and make improvements, the fire consumed any then-existing potential benefit to Johnson that was attributable to Barnes' efforts. Furthermore,...