Hall's Reclamation, Inc. v. Apac Carolina, Inc.
| Decision Date | 18 December 1996 |
| Docket Number | No. 95-2870,95-2870 |
| Citation | 103 F.3d 117 |
| Parties | NOTICE: Fourth Circuit Local Rule 36(c) states that citation of unpublished dispositions is disfavored except for establishing res judicata, estoppel, or the law of the case and requires service of copies of cited unpublished dispositions of the Fourth Circuit. HALL'S RECLAMATION, INCORPORATED, Plaintiff-Appellee, v. APAC CAROLINA, INC., Defendant-Appellant. |
| Court | U.S. Court of Appeals — Fourth Circuit |
Mark I. Levy, HOWREY & SIMON, Washington, D.C., for Appellant.
Patricia L. O'Beirne, Timothy K. Armstrong, HOWREY & SIMON, Washington, D.C., for Appellant.
Nathan Maxwell Crystal, Columbia, South Carolina, for Appellee.
James B. Van Osdell, Cynthia Graham Howe, VAN OSDELL, LESTER, HOWE & RICE, P.A., Myrtle Beach, South Carolina, for Appellee.
Before WILLIAMS, MICHAEL, and MOTZ, Circuit Judges.
In this diversity action, APAC-Carolina, Inc. (APAC) appeals a $3.2 million jury verdict in favor of Hall's Reclamation, Inc. (Hall's) for fraud, breach of contract, breach of contract accompanied by a fraudulent act, and violation of the South Carolina Unfair Trade Practices Act (SCUTPA), see S.C.Code Ann. § 39-5-20 (Law.Co-op.1985). We affirm.
Hall's, a trucking company, began providing trucking and hauling services for APAC, an asphalt paving contractor, in 1989. At that time, APAC hauled asphalt to job sites either by hiring outside trucking firms or by using its own in-house fleet of trucks. In June of 1991, after terminating its primary outside trucker, APAC requested that Hall's increase the amount of work it did for APAC. One month later, in July of 1991, APAC vice-president Andy Jones met with Gerald Hall, the owner of Hall's, to discuss the future relationship of the two companies. At that meeting, Jones told Hall that APAC had decided to get out of the trucking business and asked if Hall's would like to buy APAC's truck fleet. Hall declined, noting the age and disrepair of APAC's fleet. Later that year, on December 13, 1991, Jones offered Hall the following deal: if Hall's would purchase APAC's fleet of used trucks and dedicate its entire trucking operation to serving APAC's needs, APAC would guarantee Hall's $4 million worth of business each year. This time, Hall accepted Jones' offer.
Although the agreement was never reduced to writing, Hall's notes from the December 13, 1991 meeting were introduced at trial as documentation of the agreement. In addition, the evidence revealed that Jones orally confirmed the contract to several individuals. On April 21, 1992, Hall's agreement to purchase APAC's trucks was finalized.
The parties agreed that Hall's would pay $215,000 for both the purchase of the trucks and APAC's guarantee of $4 million per year in business.
Hall then proceeded to obtain financing for the transaction from NationsBank. As part of the loan application process, a NationsBank loan officer spoke with Jones by telephone and confirmed that APAC had guaranteed Hall's at least $4 million per year in hauling work as Hall had stated in a letter requesting the loan. NationsBank subsequently approved the loan.
On June 20, 1992, Hall's took possession of the APAC trucks. In addition to purchasing and repairing the used trucks, Hall's made several financial and personnel commitments in anticipation of the expected increase in APAC business. Specifically, Hall's hired drivers, administrative personnel, and a comptroller in preparation for APAC's guaranteed work. Hall's also leased a shop in Florence, South Carolina, near APAC's Florence asphalt plant.
APAC never fulfilled its promise to provide Hall's with $4 million of work per year. During the second half of 1992, Hall's received just $520,000 of work from APAC, a quarter of that due under the agreement. In all of 1993, Hall's received only $1,759,000 worth of APAC work, less than half of the amount guaranteed by APAC. The lack of work placed a financial strain on Hall's. In March 1994, the company closed its business and sold its trucks at auction to pay its creditors.
In January 1994, Hall's filed a complaint in South Carolina state court, alleging that APAC had committed fraud, breached its agreement to provide Hall's with $4 million of work per year, and engaged in unfair trade practices. APAC removed the case to the United States District Court for the District of South Carolina where the case was tried before a jury on August 15-18, 1995. The case was submitted to the jury on four claims: fraud; breach of contract; breach of contract accompanied by a fraudulent act; and violation of SCUTPA. The jury returned a verdict for Hall's on all four claims.
The jury awarded Hall's $2.4 million in compensatory damages on each of the claims for fraud, breach of contract, and breach of contract accompanied by a fraudulent act (which were not to be aggregated under the court's instructions); on the unfair trade practices claim, the jury awarded damages of $167,000, which were trebled under SCUTPA, see S.C.Code Ann. § 39-5-140(a) (Law.Co-op.1985). The jury then heard additional evidence and received further instructions regarding punitive damages on the claims for fraud and breach of contract accompanied by a fraudulent act, and awarded punitive damages of $800,000 on each of those two claims (which again were not to be aggregated).
On September 21, 1995, the district court denied APAC's motions for judgment as a matter of law and for a new trial. The court also ruled that the damages awarded on the SCUTPA claim duplicated the damages awarded on the other claims. Accordingly, the district court entered an amended final judgment for Hall's in the amount of $3.2 million ($2.4 million in compensatory damages on each of the claims for fraud, breach of contract, and breach of contract accompanied by a fraudulent act, and $800,000 in punitive damages on the fraud and fraudulent-breach claims). APAC now appeals the district court's denial of its motions for judgment as a matter of law and for a new trial.
On the fraud claim, APAC argues that the district court erred in denying its motion for judgment as a matter of law because Hall's failed to prove anything more than breach of contract at trial. * According to APAC, "Hall's proof of the alleged fraud consisted of nothing more than APAC's failure to give Hall's $4-million worth of business...." (Appellant's Br. at 26.) We review the district court's denial of APAC's motion for judgment as a matter of law de novo. See In re Wildewood Litigation, 52 F.3d 499, 502 (4th Cir.1995); White v. County of Newberry, 985 F.2d 168, 172 (4th Cir.1993). In doing so, we must determine whether the jury's verdict is supported by substantial evidence in the record. See White, 985 F.2d at 172. That is, we must determine whether "a jury, viewing the evidence in the light most favorable to [Hall's], could have properly reached the conclusion reached by this jury." Wildewood, 52 F.3d at 502 (emphasis added); see also Austin v. Torrington Co., 810 F.2d 416, 420 (4th Cir.), cert. denied, 484 U.S. 977 (1987).
In South Carolina, fraud is proven when a party establishes by clear, cogent, and convincing evidence the following elements:
(1) a representation; (2) its falsity; (3) its materiality; (4) either knowledge of its falsity or a reckless disregard of its truth or falsity; (5) intent that the representation be acted upon; (6) the hearer's ignorance of its falsity; (7) the hearer's reliance on its truth; (8) the hearer's right to rely thereon; [and] (9) the hearer's consequent and proximate injury.
M.B. Kahn Constr. Co. v. South Carolina Nat'l Bank, 271 S.E.2d 414, 415 (S.C.1980); see also First State Sav. & Loan v. Phelps, 385 S.E.2d 821, 824 (S.C.1989). While "a mere violation of a contract does not support a fraud claim," Duc v. Orkin Exterminating Co., 729 F.Supp. 1533, 1536 (D.S.C.1990), entering into a contract without the present intention of rendering performance under the contract does, see Thomas & Howard Co. v. Fowler, 82 S.E.2d 454, 456 (S.C.1954); see also Buzhardt v. Cromer, 249 S.E.2d 898, 900 (S.C.1978) (); Woods v. South Carolina Highway Dep't, 431 S.E.2d 260, 263 (S.C.Ct.App.1993) (). Thus, the critical inquiry for the jury was whether APAC's agreement to provide Hall's with $4 million worth of business per year was fraudulent when made. Although breach of an oral agreement does not establish fraud, see Winburn v. Ins. Co. of North America, 339 S.E.2d 142, 146 (S.C.Ct.App.1985), breach of an oral agreement coupled with other evidence is sufficient to establish fraudulent intent not to perform the agreement, see id. ("Nonobservance of a promise may support an inference of a lack of intent to perform only when it is coupled with other evidence."); see also Daily Co. v. American Inst. of Marketing Systems, Inc., 183 S.E.2d 444, 445-46 (S.C.1971).
At trial, Hall's presented evidence establishing that APAC breached the oral agreement to provide Hall's with $4 million of business per year by providing...
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