Harper v. Ethridge, No. 0790

• Court: Court of Appeals of South Carolina
• Writing for the Court: BELL; SANDERS, C.J., and SHAW
• Citation: 290 S.C. 112,348 S.E.2d 374
• Parties: Floyd I. HARPER, Respondent, v. O.A. ETHRIDGE and George H. Fann, Appellants. . Heard
• Docket Number: No. 0790
• Decision Date: 20 May 1986

Page 374

348 S.E.2d 374 290 S.C. 112 Floyd I. HARPER, Respondent,
v.
O.A. ETHRIDGE and George H. Fann, Appellants. No. 0790. Court of Appeals of South Carolina. Heard May 20, 1986.
Decided Sept. 2, 1986.

Page 375

[290 S.C. 114] Wilburn Brewer, Jr., and Paul A. Dominick, of Nexsen, Pruet, Jacobs & Pollard, Columbia, for appellants.

Page 376

T. English McCutchen, III, and Evans Taylor Barnette, of Whaley, McCutchen, Blanton & Rhodes, Columbia, for respondent.

BELL, Judge:

This is an action arising from a partnership agreement. Floyd I. Harper, one of the partners, sued O.A. Ethridge and George H. Fann, two other partners, alleging three causes of action. The first cause of action alleges breach of fiduciary duty and seeks recovery of a one-third partnership interest in certain real property and contract rights of the partnership. The second cause of action alleges Harper was [290 S.C. 115] wrongfully excluded from the partnership and seeks damages for breach of contract accompanied by a fraudulent act. The third cause of action seeks an equitable accounting among the partners. Ethridge and Fann demurred to the complaint and also made motions to elect and to make more definite and certain. The circuit court overruled the demurrers and denied the motion to require an election between causes of action. The court granted the motion to make more definite and certain as to the second cause of action. Ethridge and Fann appeal. We affirm.

The following facts are established by the well pleaded allegations of the complaint.

Harper was a member of HLH general partnership, formed for the purpose of developing a convention center and commercial complex along the Congaree River in Lexington County. In July 1982, the partnership entered into an option contract with Mount Vernon Mills for the purchase of 15.135 acres of land located along the river. When the partners were unable to obtain financing to complete the purchase of the property, they invited Ethridge to join the partnership in order to provide it with additional financial strength. Ethridge, fully aware of the financial condition of the partnership, agreed to become a partner and thereafter advanced $100,000 to the partnership. Mount Vernon Mills then extended the option period until December 31, 1982, for an additional $10,800 consideration.

On December 23, 1982, Harper and the other partners entered an agreement with Fann whereby Fann purchased the partnership interest of one of the other partners. This agreement also provided that Harper, acting as a partner, would assign the contract on the Mount Vernon Mills property to Ethridge and Fann individually. Ethridge and Fann would then negotiate a purchase money loan, purchase the property, and hold it in trust for the partnership. During the term of the loan, Harper, as a partner, would pay his proportionate share of real estate taxes and interest. When the property was sold, Harper would pay his proportionate share of the loan balance to retire the loan. If Harper failed to pay his proportionate share he would forfeit his interest in the partnership.

The agreement contemplated that the partners would seek [290 S.C. 116] a developer to purchase the land from the partnership. The partners would then use the proceeds of the sale to retire the loan and recover their out of pocket expenses with any profits from the transaction to be divided among the partners. The agreement provided:

should any partner present to HLH a reasonable development plan that would benefit all parties and O.A. Ethridge and George H. Fann withhold approval so as to jeopardize the interests of the other partners, the default provisions of this Agreement shall be suspended until the matter shall be expeditiously arbitrated....

Pursuant to the agreement, Ethridge and Fann obtained a loan and purchased the property in their own names in trust for the partnership. During 1983, Lafayette Columbia, Inc. presented a proposal for development of the property including drawings, studies, designs, plans, and financing. Ethridge and Fann entered into an option contract with Lafayette for which the latter paid a total of $91,000. This payment was applied to reduce principal and interest on the purchase money loan. Harper, on behalf of the partnership, also

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negotiated an agreement to purchase the property with certain British interests represented by one Dennis Bull. Ethridge refused to accept the arrangement. Either the agreement with Lafayette or with Bull would have enabled HLH to retire all outstanding debts of the partnership and recover all out of pocket expenses of the partners

Until December 15, 1983, Harper believed there was a firm contract with Lafayette for purchase of the land. However, Lafayette never consummated the purchase. When the purchase money loan came due on December 30, 1983, Ethridge and Fann, knowing that Harper and the other partners would be unable to obtain alternate financing, refused to renew or extend the note. Instead, they declared Harper in default under the agreement and invoked the forfeiture clause to oust Harper and the other partners from the partnership. They had previously refused Harper's demand for arbitration of the Bull proposal. Thereafter, Ethridge and Fann entered a contract with British interests represented by Dennis Bull. This agreement was based on a development plan similar to the one Harper had negotiated [290 S.C. 117] with Bull and used the same drawings, studies, designs, plans, and financing as had been contemplated in the agreement between HLH and Lafayette.

I.

Ethridge and Fann demurred to the complaint on two grounds: (a) there is a misjoinder of causes of action because the first and third causes of action are inconsistent with and mutually exclusive of the second cause of action; and (b) the second cause of action fails to state facts sufficient to constitute a claim for breach of contract accompanied by a fraudulent act because it fails to allege all the elements of common law deceit.

A.

Under Section 15-13-320(5), Code of Laws of South Carolina, 1976, which was in effect at the time this case was decided by the circuit court, a defendant was permitted to demur to the complaint when it appeared on the face thereof that several causes of action had been improperly united. Causes of action based on inconsistent facts, inconsistent and mutually exclusive legal theories, or inconsistent remedies, could not be joined. McMahan v. McMahon, 122 S.C. 336, 115 S.E. 293 (1922); Tzouvelekas v. Tzouvelekas, 206 S.C. 90, 33 S.E.2d 73 (1945); Thompson v. Watts, 281 S.C. 504, 316 S.E.2d 393 (1984). Thus, a cause of action based on affirmance of a transaction could not be joined with a cause of action based on disaffirmance of the same transaction. Thompson v. Watts, supra.

In this case, Ethridge and Fann argue that Harper's first and third causes of action are predicated on the assumption that Harper is a member of the partnership entitled to a partner's equitable remedies. In other words, these causes of action affirm the partnership agreement. On the other hand, the second cause of action is predicated on the assumption that Harper has been excluded from the partnership and no longer has an interest in partnership assets. In other words, the second cause of action disaffirms the partnership agreement. Thus, Ethridge and Fann contend, the causes of action are inconsistent and have been improperly united in a single complaint.

[290 S.C. 118] During the pendency of this appeal, the statute on which Ethridge and Fann base the demurrer was repealed. See Section 2, Act No. 100, Acts and Joint Resolutions of the General Assembly of South Carolina, Regular Session, 1985, 64 Stat. at Large 277, 279. Under the new rules of civil procedure which replace the statute, a plaintiff may join as...