In re Beard

• Decision Date: 24 May 2004
• Docket Number: No. 3800.,3800.
• Citation: 359 S.C. 351,597 S.E.2d 835
• Court: South Carolina Court of Appeals
• Parties: Ex parte T. Alexander BEARD, Appellant, In re Keith Watkins, Plaintiff, v. Newsome Management Company, Newsome Auto World, John H. Newsome, Jr., and John H. Newsome, III, Defendants of whom Keith Watkins is, Respondent.

359 S.C. 351

597 S.E.2d 835

Ex parte T. Alexander BEARD, Appellant,

In re Keith Watkins, Plaintiff, v. Newsome Management Company, Newsome Auto World, John H. Newsome, Jr., and John H. Newsome, III, Defendants of whom Keith Watkins is, Respondent.

No. 3800.

Court of Appeals of South Carolina.

Heard March 11, 2004.

Decided May 24, 2004.

Rehearing Denied June 25, 2004.

T. Alexander Beard, of Mt. Pleasant, for Appellant.

A. Camden Lewis, of Columbia, for Respondent.

BEATTY, J.:

Attorney T. Alexander Beard appeals an order of the trial court denying his motion for sanctions brought under the Frivolous Civil Proceedings Sanctions Act ("the FCPSA"), S.C.Code Ann. § 15-36-10, et seq. (Supp. 2003) and Rule 11, SCRCP. The trial court found that Beard's motion was time barred under the FCPSA and that the court had no jurisdiction to grant the requested relief. Alternatively, the trial court allowed the motion under Rule 11 and found that the actions at issue were done in good faith and did not constitute sanctionable behavior. We affirm.

FACTS

The initial dispute resulting in this action arose over the operation and ownership of two limited liability companies. Keith Watkins worked for a substantial period of time for John Newsome, Jr., a car dealership owner. Due to various federal tax problems, Newsome was unable to retain sole ownership of four car dealership franchises. Newsome attempted to transfer their ownership to his wife and son, but the manufacturers rejected that attempt because his wife and son were not acceptable as car dealers. Newsome then suggested Watkins. The manufacturers accepted Watkins because of his experience in the field.

In 1996, Newsome transferred the four dealerships to two newly formed L.L.C.s, Imports of Florence and Newsome Automotive. As required by the manufacturers, Watkins was made "dealer-operator" of both companies and given a 15% ownership interest in each. The L.L.C. operating agreements ("the original agreements") called for contributions from Watkins of $40,050 and $13,418. Beard did not represent any of the parties in connection with the original agreements.

In 1997, the parties apparently reached a new agreement and Newsome decided to memorialize that new agreement. Beard drafted the new L.L.C. agreements ("the new agreements"). The new agreements reflected that Watkins had a 15% voting interest and a 1% interest in profits and losses. The new agreements also gave the L.L.C.s the right to redeem Watkins's interests for $1,000 each. In February 1998, all of the changes were underlined in red and sent to the parties for their signature. Accompanying the new agreements was a letter from Beard which included the following explanation:

Everyone needs to know and understand that I am representing you [Newsome] and your interests and not the interests of the LLC members. My limited information indicates that everyone is in agreement with whatever you want to do. To avoid any conflicts of interest or possible misunderstandings, I strongly suggest, by copy of this letter, that the LLC members have their own professionals review these materials.

Watkins understood that Beard was never his personal attorney and was not representing his interest in this matter. He contacted a local attorney about the new agreements, but that attorney had a conflict of interest. Watkins then contacted a second attorney, who recommended a third local attorney and sent the new agreements to his office. That third attorney in fact represented Watkins in the 1998 transactions. Watkins signed the redrafted L.L.C. operating agreements in April 1998.

Eight months later, Watkins was notified that the L.L.C.s were exercising the option to purchase his interests. Watkins consulted his attorney. He then signed both assignment and indemnity agreements and cashed both $1,000 checks. Soon after the buy-back from Watkins, Newsome entered into an asset purchase agreement with Sonic Automotive, Inc. for the purchase of several dealerships owned by the Newsome family, including those owned by the two L.L.C.s at issue. Watkins demanded $250,000 consideration to consent to the purchase. Sonic and Newsome determined that Watkins had no interest in the dealerships and that they did not need his authorization or consent to go forward with the sale. The sale was closed in May 1999. Watkins filed suit in January 2000 against Newsome and the L.L.C.s, claiming, among other things, fraud and unfair trade practices. Beard represented the defendants in that matter.

In January 2001, Watkins's attorneys, Richard J. Breibart and Richard A. Harpootlian, filed a motion to amend the complaint, attempting to name Beard as a defendant. The amended complaint alleged malpractice and breach of fiduciary duty on the part of Beard. Those allegations were supported by an expert's affidavit from Professor Gregory B. Adams of the University of South Carolina School of Law. He opined that a special relationship and confidence existed between Beard and Watkins, creating an attorney-client relationship. Professor Adams also concluded that Beard had breached that relationship. The trial court denied the motion to amend the complaint on February 6, 2001. In August 2001, the parties reached a settlement and the action was dismissed with prejudice.

On February 4, 2002, Beard filed a motion seeking attorneys' fees under the FCPSA¹ and Rule 11, SCRCP. He also filed a motion to enlarge the ten-day limitation for filing under the FCPSA since that time had expired. Beard claimed that the attempt to name him as a party defendant was for improper purposes and that Breibart and Harpootlian did not reasonably believe the facts upon which the claim was based. Beard alleged that Breibart and Harpootlian admitted that they moved to amend their complaint "because [they] believed they could get more from Beard in a deposition if he were a party and to `drive a wedge' between Beard and his client."

In September 2002, the trial court issued an order denying Beard's motions on the grounds that it did not have jurisdiction to grant the requested relief after ten days under the FCPSA. Alternatively, the court ruled that the attorneys had acted in good faith and therefore Rule 11 sanctions were unwarranted. This appeal followed.

ISSUES

I. Did the trial court err in applying the ten-day limitation for a motion brought under the Frivolous Proceedings Act?

II. Did the trial court err in not ruling on Appellant's motion for enlargement of time under Rule 6?

III. Did the trial court err in finding that the claims against Appellant were made to secure a proper purpose?

IV. Did the trial court err in finding that Respondent's attorneys acted in good faith?

V. Did the trial court err in not considering the issue of an attorney's immunity vis-a-vis a third party?

STANDARD OF REVIEW

An action for attorneys' fees is one in equity. Hanahan v. Simpson, 326 S.C. 140, 156, 485 S.E.2d 903, 912 (1997). In an action in equity tried by a judge alone, the appellate court has jurisdiction to find facts in accordance with its own view of the preponderance of the evidence. Id.; see also Townes Assocs., Ltd. v. City of Greenville, 266 S.C. 81, 86, 221 S.E.2d 773, 775 (1976). However, following the determination of facts, an appellate court applies an abuse of discretion standard in reviewing the decision to award sanctions and the specific sanctions awarded. Father v. SCDSS, 353 S.C. 254, 261, 578 S.E.2d 11, 14 (2003).

LAW / ANALYSIS

I & II. Frivolous Civil Proceedings Sanctions Act

Beard argues that his motion is permissible under the FCPSA since the FCPSA does not specify a statute of limitation. However, Watkins contends that the general ten-day limitation for post-trial motions applies here and bars the action. We agree with Watkins.

This Court addressed the timing of post-trial motions for sanctions in Pitman v. Republic Leasing Co., 351 S.C. 429, 570 S.E.2d 187 (Ct.App.2002). In that case, the defendant moved for sanctions two months after summary judgment had been granted in his favor. The Court vacated the award of attorneys' fees. It held that a trial court cannot entertain a motion for sanctions under the FCPSA where that motion was filed more than ten days after the judgment. Pitman analogized a motion under the FCPSA to post-trial motions under Rule 59(d) and (e), SCRCP, which provide: "[n]ot later than 10 days after entry of judgment, the court of its own initiative may order a new trial for any reason ..."; and "[a] motion to alter or amend the judgment shall be served not later than 10 days after receipt of written notice of the entry of the order." Beard maintains that those are merely rules of limitation and do not affect the jurisdiction of the court. Additionally, Beard argues that the proper time limit in this case is three years, since this is an action for a penalty upon a statute. See S.C.Code Ann. § 15-3-540 (1976). In essence, Beard mounts a direct challenge to Pitman and asks us to overrule that decision.

We agree that the rules limiting post trial motions are rules of limitation, not of jurisdiction. See Standard Fed. Sav. & Loan Ass'n v. Mungo, 306 S.C. 22, 26 n. 1, 410 S.E.2d 18, 20 n. 1 (Ct.App.1991)

("The ten day requirement of Rule [59] is, however, a rule of limitation, not a rule of jurisdiction ... [and] does not affect the jurisdiction of the court."). However, the argument that these are rules of limitation cannot be used to defeat the jurisdictional limit of trial courts. See Rule 82(a), SCRCP, ("These rules shall not be construed to extend or limit the jurisdiction of any court of this State...."). The established case law is that a trial judge loses jurisdiction over a case when the time to file post-trial motions has elapsed. Pitman, 351 S.C. at 432,

570 S.E.2d at 189; Ness v. Eckerd Corp., 350 S.C. 399, 402, 566 S.E.2d 193, 195 (Ct.App.2002) ("Although trial judges retain jurisdiction to alter judgments on their own initiative...