Holy Loch Distributors v. Hitchcock

• Decision Date: 27 March 2000
• Docket Number: No. 25099.,25099.
• Citation: 340 S.C. 20,531 S.E.2d 282
• Court: South Carolina Supreme Court
• 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.

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.

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

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 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 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 obtain a specific result because the validity of this novel theory was not raised to or ruled upon by the trial judge, was not raised before the Court of Appeals by proper exception on appeal, and was not necessary to the determination of the issue on appeal. We disagree.

In order to preserve an issue for appellate review, the issue must have been raised to and ruled upon by the trial court. Wilder Corp. v. Wilke, 330 S.C. 71, 497 S.E.2d 731 (1998). But see I'on v. Town of Mt. Pleasant, 338 S.C. 406, 526 S.E.2d 716 (2000)

(holding it is not always necessary for the lower court to rule on an issue for it to be preserved for appellate review where the issue is raised as an additional sustaining ground). First, Holy Loch specifically raised the express warranty issue in its Second Amended Complaint as their fourth cause of action. In their Second Amended Complaint, Holy Loch alleges:

Immediately after contact with the federal agents of the Bureau of Alcohol Tobacco and Firearms ("ATF"), the Plaintiffs advised Law Firm of the ATF's allegations and an agent and/or representative of Defendants made an express representation, guaranty, and/or warranty that the Plaintiffs had nothing to worry about and would be able to remain in business. Further, that the necessary licenses and/or permits would be acquired and that their visas were appropriate. (emphasis added).

Second, the trial court ruled upon the express warranty issue in the Order of Dismissal with Prejudice. The Order specifically states "Each of the four causes of action, professional negligence, breach of fiduciary duty, breach of contract, and breach of warranty, cannot go forward against Defendants because the statute of limitations has run on all causes of action." (emphasis added). Therefore, breach of express warranty was not only before the trial court for consideration, but it was also specifically ruled on by the trial court.

Hitchcock also argues that the express warranty issue was not properly raised by exception on appeal. Hitchcock argues that the exceptions raised by Holy Loch on appeal address the express warranty cause of action only within the context of the statute of limitations issue. In Holy Loch's final brief to the Court of Appeals they raised the following issue: "Did the Circuit Court err when it dismissed the fourth cause of action for breach of express warranty due to the expiration of the statute of limitations [S.C.Code Ann. § 15-3-535 (Supp. 1996) ]." If a court applies a statute of limitations to a cause of action, it is logical that the court issuing the ruling recognized the applicability of the cause of action. The issue presented by Holy Loch's brief included a discussion of the validity of a breach of express warranty as a cause of action. The issue of breach of express warranty to obtain a specific result was, therefore, properly before the Court of Appeals.

Moreover, Hitchcock addressed the express warranty issue extensively in their brief to the Court of Appeals. In their brief, Hitchcock distinguished the express warranty cases relied on by Holy Loch and argued there was no "basis for Holy Loch to argue that the South Carolina Supreme Court had indicated any allowance for such claim." Hitchcock cannot argue the express warranty issue was not properly before the Court of Appeals when they: (1) never presented this nonpreservation argument to the Court of Appeals; and (2) addressed the validity of the express warranty issue extensively in their brief to the Court of Appeals.

II. Express Warranty

Hitchcock argues that the Court of Appeals erred in creating a new cause of action for legal malpractice based on breach of express warranty to obtain a specific result. We agree.

The Court of Appeals did not need to adopt a new breach of an express warranty claim because Holy Loch had recourse under existing legal malpractice remedies based on negligence, breach of fiduciary duty, and breach of contract. In South Carolina, attorneys are required to render services with the degree...