Edens v. Goodyear Tire & Rubber Co.

• Decision Date: 07 December 1988
• Docket Number: No. 87-2677,87-2677
• Citation: 858 F.2d 198
• Parties: Joe EDENS, Jr.; H. Dan Avant; Lloyd M. Kapp; Thomas B. McTeer, Jr.; Thomas O. Milliken, d/b/a North Strand Investments, a South Carolina General Partnership, Plaintiffs-Appellees, v. GOODYEAR TIRE & RUBBER COMPANY, Defendant-Appellant.
• Court: U.S. Court of Appeals — Fourth Circuit

Page 198

858 F.2d 198

Joe EDENS, Jr.; H. Dan Avant; Lloyd M. Kapp; Thomas B McTeer, Jr.; Thomas O. Milliken, d/b/a North Strand Investments, a South Carolina General Partnership Plaintiffs-Appellees, v. GOODYEAR TIRE & RUBBER COMPANY, Defendant-Appellant.

No. 87-2677.

United States Court of Appeals Fourth Circuit.

Argued April 5, 1988.

Decided Sept. 29, 1988.

Rehearing and Rehearing In Banc Denied Dec. 7, 1988.

William O. Sweeny, III (Rebecca Laffitte, Nelson, Mullins, Riley & Scarborough, Columbia, S.C., on brief), for defendant-appellant.

Charles Porter, Edwin Russell Jeter, Jr. (T. Parkin Hunter, McNair Law Firm, P.A., Columbia, S.C., on brief), for plaintiffs-appellees.

Before PHILLIPS, MURNAGHAN and WILKINS, Circuit Judges.

WILKINS, Circuit Judge:

Goodyear Tire and Rubber Company appeals from a judgment for actual and punitive damages in favor of North Strand Investments for breach of contract accompanied by a fraudulent act. We affirm.

I.

Since Goodyear appeals from a jury verdict and the denial of a motion for judgment notwithstanding the verdict, we consider the evidence in the light most favorable to North Strand Investments. Evington v. Forbes, 742 F.2d 834, 835 (4th Cir.1984). North Strand is a South Carolina general partnership formed in 1979 for the purpose of purchasing the North Strand Shopping Center in North Myrtle Beach, South Carolina which it resold in 1983 to Wespac Investors Trust for approximately $2,000,000.00. North Strand retained title to a lot adjacent to the parking area for the purpose of building a Goodyear tire store on it. Wespac separately contracted to pay $497,500.00 for the lot, if within one year North Strand constructed a building on it and obtained a lease from Goodyear. In the event that a lease was not obtained, title to the lot would be transferred to Wespac without monetary consideration.

After several months of preliminary negotiations, in November 1983 Goodyear presented North Strand with a proposed lease agreement. North Strand signed the lease in December 1983 and returned it to Goodyear. Modification by mutual consent resulted in a final lease being executed in April 1984. The lease imposed on Goodyear the responsibility for providing final plans and specifications for the construction of a building by North Strand. The lease established a completion date of June 1, 1984, but allowed a 90-day extension for delay due to unavoidable contingencies.

Although Goodyear had provided preliminary plans for the building in December 1983 prior to the lease being finalized, final plans were not furnished until June 6, 1984. The plans were subject to North Strand's approval and Goodyear advised North Strand not to begin construction until they were so approved. Negotiations regarding changes continued into September 1984 and the parties never arrived at agreement on the final plans. As a result, construction never commenced.

The June 1 completion date was agreed upon in the early stages of negotiations, but when the finalization of the lease was delayed until April 1984, North Strand requested an extension of the completion date until October 1, 1984. Goodyear did not respond to this request and North Strand did not pursue it. After the final plans were delivered on June 6, North Strand requested an extension until March 1, 1985. Following its somewhat unusual, yet customary procedure, Goodyear drafted a "proposed Lease Amendment" requesting an extension on behalf of North Strand and forwarded it with instructions that all copies be signed by North Strand and returned to Goodyear. In its cover letter of September 5, 1984, Goodyear stated that the extension was "subject to approval and signature by Goodyear Management in Akron Ohio." The proposed amendment specifically requested that "[i]f the foregoing change is acceptable to you, will you please so indicate by signing and returning to the undersigned the attached carbon copy of this letter." Lloyd Kapp signed the proposal on behalf of North Strand and returned the copies to Goodyear on September 10. Paul J. Smith, national director of real estate for Goodyear signed the proposal, but it was never returned to North Strand.

Meanwhile, Goodyear's region management became dissatisfied with the site "due to the lack of viability of the shopping center in which the facility [was] proposed." On or before October 12, 1984, R.W. Frederick, an administrative assistant in the real estate department, met with Dave Siladie of the architectural division and legal counsel Bill Runyan to discuss cancellation of the lease. Frederick documented this discussion in a memorandum as follows: ¹

Runyan felt that if we cancelled using the fact that completion date had not been met we could have a problem with litigation in that an extension of said completion date was in the works.

He suggested that our fieldman (Freed) converse with the Landlord and advise him that because of the delays on the finalization of plans we are no longer interested in this location. If that works we'll need a mutual cancellation agreement. If not we'll have to cancel using completion date and take our chances....

On October 19, 1984, L.J. Thompson, manager of location development, advised Smith of region management's desire to cancel the lease and requested that he "pursue the Law Department for a determination if the lease can be cancelled."

During approximately this same time period, R.K. Freed, southern region real estate manager for Goodyear, informed Michael Edwards, North Strand's real estate agent, that Goodyear had "lost interest in the area and no longer wanted to put a Goodyear store there on [the] site." Edwards subsequently met with Freed in Atlanta, Georgia in late October. Although they discussed the request for the extension at that meeting, Freed did not inform Edwards that Smith had approved and signed the extension. Freed offered mutual cancellation which Edwards refused.

Edwards left the meeting with the impression that Goodyear was going to continue with the deal. However, on December 4, 1984 Thompson reiterated dissatisfaction with the site and directed Frederick to consult the legal department again, stating: "It is desired that every avenue of lease cancellation be pursued." Shortly thereafter on December 10, 1984, Smith notified North Strand of Goodyear's decision to cancel the lease. Goodyear gave as its justification North Strand's failure to complete construction by the June 1 deadline plus the 90-day extension provided for under the original terms of the lease.

North Strand subsequently brought suit, initially alleging breach of contract. After the Goodyear internal memoranda and signed extension were produced during discovery, North Strand amended its complaint to allege a claim for breach of contract accompanied by a fraudulent act, seeking punitive damages. At trial, except for a few documents introduced during cross-examination of witnesses for North Strand, Goodyear presented no evidence and offered no testimony. Consequently, much of the critical testimony given by North Strand's witnesses was uncontradicted. The jury returned a verdict for North Strand, awarding $277,517.00 in actual damages and $675,000.00 in punitive damages. The district court denied Goodyear's motions for judgment notwithstanding the verdict and for a new trial and awarded North Strand prejudgment interest.

Goodyear appeals the judgment on numerous assignments of error, primarily arguing that North Strand failed to establish a prima facie case of breach of contract accompanied by a fraudulent act. Goodyear also challenges certain jury instructions. We find that North Strand presented sufficient evidence to establish its prima facie case and that the district court properly instructed the jury.

II.

The primary question presented is whether, under the law of the State of South Carolina, North Strand has established the essential elements of a claim for breach of contract accompanied by a fraudulent act sufficient to support the award of actual and punitive damages. Erie R.R. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938). Since the turn of the century, it has been well settled in South Carolina that punitive damages may be recovered for breach of contract accompanied by a fraudulent act. ²

Over the years the South Carolina appellate courts have found a wide variety of factual allegations sufficient to constitute a claim for fraudulent breach of contract. Welborn v. Dixon, 70 S.C. 108, 49 S.E. 232 (1904); Blackmon v. United Ins. Co., 233 S.C. 424, 105 S.E.2d 521 (1958); Harper v. Ethridge, 290 S.C. 112, 348 S.E.2d 374 (Ct.App.1986). And they have repeatedly refused to limit the type of acts giving rise to liability for breach of contract accompanied by a fraudulent act, instead providing that:

Fraud assumes so many hues and forms, that courts are compelled to content themselves with comparatively few general rules for its discovery and defeat, and allow the facts and circumstances peculiar to each case to bear heavily upon the conscience and judgment of the court or jury in determining its presence or absence.

Wright v. Public Savings Life Ins. Co., 262 S.C. 285, 289, 204 S.E.2d 57, 59 (1974) (quoting Sullivan v. Calhoun, 117 S.C. 137, 139, 108 S.E. 189 (1921)); see also Harper, 290 S.C. at 119, 348 S.E.2d at 378. In most cases, the courts have affirmed submission of these claims to the jury and affirmed the resulting awards of punitive damages. Davis v. Life Ins. Co. of Virginia, 195 S.C. 406, 11 S.E.2d 433 (1940); Porter v. Mullins, 198 S.C. 325, 17 S.E.2d 684 (1941); West v. Service Life & Health Ins. Co., 220 S.C. 198, 66 S.E.2d 816 (1951); Davis v. Bankers Life & Casualty Co., 227 S.C. 587, 88 S.E.2d 658 (1955); Corley v. Coastal States Life Ins. Co., 244 S.C. 1, 135 S.E.2d 316 (1964); Thompson v. Home Security Life Ins., 271 S.C. 54, 244 S.E.2d 533 (1978); Floyd v. Country Squire Mobile Homes, Inc., 287 S.C. 51, 336...