Holy Loch Distributors v. Hitchcock, No. 25099.

• Court: United States State Supreme Court of South Carolina
• Writing for the Court: TOAL, Acting Chief Justice
• Citation: 340 S.C. 20,531 S.E.2d 282
• Parties: HOLY LOCH DISTRIBUTORS, INC., George Hart and Ann Law, Respondents, v. R.L. HITCHCOCK, A. Christopher Potts, and Brock & Hitchcock, a South Carolina Partnership, Petitioners.
• Docket Number: No. 25099.
• Decision Date: 27 March 2000

340 S.C. 20
531 S.E.2d 282

HOLY LOCH DISTRIBUTORS, INC., George Hart and Ann Law, Respondents,
v.
R.L. HITCHCOCK, A. Christopher Potts, and Brock & Hitchcock, a South Carolina Partnership, Petitioners

No. 25099.

Supreme Court of South Carolina.

Heard February 2, 2000.

Filed March 27, 2000.

Refiled May 1, 2000.

340 S.C. 21

Susan Taylor Wall and David J. Parrish, of Nexsen Pruet Jacobs Pollard & Robinson, LLP, of Charleston, for petitioners

340 S.C. 22

Daryl G. Hawkins, of Lewis, Babcock & Hawkins, LLP, of Columbia, for respondents

ORDER

The attached opinion is substituted for the opinion previously filed in this matter on March 27, 2000.

/s/Jean H. Toal, C.J FOR THE COURT

TOAL, Acting Chief Justice:

R.L. Hitchcock ("Hitchcock") appeals the Court of Appeals' decision to adopt a breach of an express warranty to obtain a specific result as a new common law cause of action against attorneys in South Carolina. We reverse the Court of Appeals.

FACTS/PROCEDURAL BACKGROUND

In 1991, George Hart and Ann Law, who are both citizens of the United Kingdom domiciled in Scotland, consulted with the law firm Brock & Hitchcock about pursuing a business opportunity involving the distribution of imported beer and related products in Charleston, South Carolina. Attorneys R.L. Hitchcock and A. Christopher Potts incorporated the business as Holy Loch Distributors, Inc. ("Holy Loch") in South Carolina and helped obtain the appropriate visas and immigration documents so that Holy Loch could conduct business legally in the United States. Hitchcock and Potts secured the necessary permits and licenses to distribute imported beer under South Carolina law, but failed to obtain or discover the need for the appropriate permits and licenses required by federal law.

On November 9, 1993, agents of the United States Bureau of Alcohol, Tobacco, and Firearms ("ATF") notified Holy Loch that they were operating in violation of federal law and were charged with: (1) distributing alcohol without a permit; (2) distributing alcohol without paying the applicable special taxes; and (3) engaging in everyday business activities in violation of immigration laws. Holy Loch paid the fines and taxes and applied to the ATF for the appropriate federal permits or

340 S.C. 23

licenses. Hitchcock repeatedly told Holy Loch "not to worry" and assured them that they would be able to obtain the permits and remain in business. Even after the ATF denied Holy Loch's application, Hitchcock continued to assure Holy Loch that they would be able to obtain the documentation needed to remain in business. In reliance on their representation, Holy Loch remained in business, paid the outstanding taxes and fines, and made application for the appropriate permits and licenses with the ATF.

On February 8, 1995, the administrative law judge upheld the denial of the permits. At the hearing, Attorney Potts testified that neither he nor Hitchcock knew a federal license or permit was required for Holy Loch to conduct business in South Carolina. Holy Loch ceased operation of its business after the administrative hearing.

On March 12, 1997, Holy Loch, George Hart, and Ann Law brought this action against attorneys Hitchcock and Potts individually, and against the Brock & Hitchcock law firm. They subsequently filed two amended complaints alleging: (1) professional negligence; (2) breach of fiduciary duty; (3) breach of contract; and (4) breach of warranty. Hitchcock moved for dismissal of the complaint pursuant to Rule 12(b)(6), SCRCP for failure to state facts sufficient to constitute a cause of action. Hitchcock argued the three year statute of limitations on the causes of actions began to run on November 9, 1993, when Holy Loch knew they were in violation of federal alcohol and immigration laws, and had expired prior to the filing of the Complaint. Holy Loch opposed the motion arguing: (1) Hitchcock was estoppped from asserting the statute of limitations as a bar to the complaint because of their repeated assurances that they would be able to obtain the necessary permits and licenses; and (2) since Holy Loch asserted a novel cause of action, breach of warranty in a legal malpractice action, dismissal pursuant to Rule 12(b)(6) was inappropriate. The trial judge granted the motion on the ground the statute of limitations had expired as to all causes of action.

Holy Loch appealed and the Court of Appeals reversed and remanded, holding that a defendant may be estopped from asserting statute of limitations as a defense if the delay that

340 S.C. 24

otherwise would give operation to the statute has been induced by the defendant's conduct, including an express representation that the claim will be settled without litigation or conduct that suggests a law suit is not necessary. Holy Loch Distribs., Inc. v. Hitchcock, 332 S.C. 247, 503 S.E.2d 787 (Ct.App.1998). Additionally, the Court of Appeals recognized a breach of an express warranty to obtain a specific result as a new common law cause of action against attorneys in South Carolina. Id. at 258-61, 503 S.E.2d at 793-94. This Court granted certiorari to address the express warranty cause of action, and the issues on appeal are as follows:

(1) Was the express warranty issue properly preserved for appellate review?

(2) Did the Court of Appeals err in recognizing a new cause of action for legal malpractice based on a breach of an express warranty to obtain a specific result?

LAW/ANALYSIS

I. Issue Preservation

Hitchcock argues that the Court of Appeals erred when it recognized a cause of action for legal malpractice based on breach of express warranty to...