Johnson v. Little
| Decision Date | 10 April 2019 |
| Docket Number | Appellate Case No. 2016-001689,Opinion No. 5640 |
| Citation | 827 S.E.2d 207,426 S.C. 423 |
| Court | South Carolina Court of Appeals |
| Parties | Robin JOHNSON and CQI Pharmacy Services, LLC, Respondents, v. Robert LITTLE and CQI Oncology/Infusion Services, LLC, Appellants. |
James McKinley Robinson, of Robinson Law Firm, of Easley, for Appellants.
Timothy G. Quinn, and Natalie Joan Quinn, both of Quinn & Hardy, of Columbia, for Respondents.
In this breach of contract action for the sale of a business, Robert Little and his company, CQI Oncology/Infusion Services, LLC, appeal the findings of the Master-in-Equity arguing the master erred (1) by finding Little breached the contract with Robin Johnson and her company, CQI Pharmacy Services, LLC; (2) by requiring he indemnify Johnson against claims arising from the sale of business assets; (3) in granting damages in the amount of $ 50,000; (4) in granting judgment on a theory of successor liability; and (5) in granting judgment against Little individually. We affirm as modified.
The two companies in this case were intertwined. Johnson and Little both worked as an employee at each other's company, but they were the sole owners of their respective companies. Both Johnson and Little were authorized signatories for the other's business checking account. In late March and early April 2013, Johnson paid invoices from vendors in the amount of $ 25,568.59 out of the CQI Oncology account, Little's company. Shortly after, on April 15, 2013, Johnson removed Little as an authorized signatory on CQI Pharmacy's—her company's—checking account. Johnson immediately informed Little of this through a letter. Little subsequently removed Johnson as an authorized signatory on CQI Oncology's—his company's—checking account, which caused the checks used to pay the vendor invoices to fail.
On May 9, 2013, Little entered into a Purchase and Sale Agreement with Johnson in which Little agreed to sell certain assets of his company to Johnson for the purchase price of $ 30,000. The contract provided the sale would include "all contracts, files, clients lists, contacts, and vendor lists." The contract noted "[t]he seller represents and warrants that the Property is free and clear of any liens or encumbrances and that the [s]eller has rightful title to the Property." The contract also contained an indemnity clause that stated "[s]eller agrees that he will defend, indemnify and hold purchaser harmless from any and all actions, causes of action, claims and or demands which arise or are asserted as arising from [s]eller's conduct prior to closing."
Johnson filed suit against Little on October 2, 2013, alleging breach of contract, breach of contract accompanied by a fraudulent act, negligent misrepresentation, fraud, and violation of the South Carolina Unfair Trade Practices Act. Little moved to dismiss, and the master denied the motion. The matter was tried without a jury by the master. The master found for Johnson and awarded damages in the amount of $ 50,000. Little filed a motion for reconsideration, which the master denied following a hearing.1 This appeal followed.
"Our scope of review for a case heard by a [m]aster-in-[e]quity who enters a final judgment is the same as that for review of a case heard by a circuit court without a jury." Tiger, Inc. v. Fisher Agro, Inc. , 301 S.C. 229, 237, 391 S.E.2d 538, 543 (1989). "An action for breach of contract seeking money damages is an action at law." Branche Builders, Inc. v. Coggins , 386 S.C. 43, 47, 686 S.E.2d 200, 202 (Ct. App. 2009) (quoting McCall v. IKON, 380 S.C. 649, 658, 670 S.E.2d 695, 700 (Ct. App. 2008) ). "In an action at law, ‘we will affirm the master's factual findings if there is any evidence in the record which reasonably supports them.’ " Query v. Burgess , 371 S.C. 407, 410, 639 S.E.2d 455, 456 (Ct. App. 2006) (quoting Lowcountry Open Land Tr. v. State , 347 S.C. 96, 101-02, 552 S.E.2d 778, 781 (Ct. App. 2001) ). "In an action at law, tried without a jury, the appellate court standard of review extends only to the correction of errors of law." Pope v. Gordon , 369 S.C. 469, 474, 633 S.E.2d 148, 151 (2006).
Little argues the master erred in finding he breached the contract. He contends because the invoices were issued to Johnson and the contract contained no provision requiring him to pay the invoices, he was not liable for them and therefore did not breach the contract with Johnson. We disagree.
"The elements for a breach of contract are the existence of a contract, its breach, and damages caused by such breach." Hotel & Motel Holdings, LLC v. BJC Enters., LLC , 414 S.C. 635, 652, 780 S.E.2d 263, 272 (Ct. App. 2015) (quoting S. Glass & Plastics Co. v. Kemper , 399 S.C. 483, 491-92, 732 S.E.2d 205, 209 (Ct. App. 2012) ). "The general rule is that for a breach of contract the [breaching party] is liable for whatever damages follow as a natural consequence and a proximate result of such breach." Id. (alteration by court) (quoting Kemper , 399 S.C. at 492, 732 S.E.2d at 209 ).
The parties do not dispute the contract between them is valid. Thus, we look at the second element to see whether Little breached the contract. The contract provides "[s]eller represents and warrants that the Property is free and clear of any liens or encumbrances and that the [s]eller has rightful title to the Property." "An encumbrance is a right or interest in the land granted ‘which may subsist in third persons to the diminution in value of the estate although consistent with the passing of the fee.’ " Truck S., Inc. v. Patel , 339 S.C. 40, 48, 528 S.E.2d 424, 428-29 (2000) (quoting Martin v. Floyd , 282 S.C. 47, 51, 317 S.E.2d 133, 136 (Ct. App. 1984) ). Black's Law Dictionary defines an encumbrance as "[a] claim or liability that is attached to property or some other right and that may lessen its value, such as a lien or mortgage; any property right that is not an ownership interest." Encumbrance , Black's Law Dictionary (10th ed. 2014). Here, the outstanding invoices constituted an encumbrance on the property. Little argues the invoices did not belong to his business but rather to Johnson's because her name was on the invoices. However, Johnson testified she had worked as an employee at Little's company for over twenty years and she placed the order in her capacity as Little's employee. Andrea Fisher, a former employee of Little, corroborated this. Fisher testified medical supply companies sent the invoices and the products were for Little's company.
Prior to the signing of the contract, Johnson paid the last invoices for Little's company using money from Little's company checking account. Johnson then removed Little as an authorized signatory of her business's checking account. In turn, Little removed Johnson from his business's checking account. However, Little may have also retracted the checks Johnson had used to pay for the invoices. He testified twice he put a stop payment on the checks, but he backtracked during later testimony.
Whether Little personally stopped the checks or not, they were retracted, and therefore, the invoices were not paid before the date of the contract between Johnson and Little. We find this constitutes a breach of contract as the assets were encumbered at the time the parties formed the contract. As a result of the breach, Johnson was not able to do business with the vendors until the invoices were paid. The record implies Johnson personally paid the invoices so she could continue doing business with the vendors. The amount Johnson paid to the vendors satisfies the damages element for a breach of contract claim. Because the record contains evidence Little breached the contract by either retracting the invoice checks or allowing them to be retracted, which allowed an encumbrance to exist on the date the parties formed the contract, the master did not err in finding Little breached the contract. Accordingly, we affirm the master as to this issue.
Little argues because the invoices were issued to Johnson, he had no duty to indemnify her. We disagree.
"Our courts ‘have consistently defined indemnity as that form of compensation in which a first party is liable to pay a second party for loss or damage the second party incurs to a third party.’ " Concord & Cumberland Horizontal Prop. Regime v. Concord & Cumberland, LLC , 424 S.C. 639, 646-47, 819 S.E.2d 166, 170 (Ct. App. 2018) (quoting Laurens Emergency Med. Specialists, PA v. M.S. Bailey & Sons Bankers , 355 S.C. 104, 109, 584 S.E.2d 375, 377 (2003) ). "A right to indemnity may arise by contract (express or implied) or by operation of law as a matter of equity between the first and second party." Id at 647, 819 S.E.2d at 170 (quoting Vermeer Carolina's, Inc. v. Wood/Chuck Chipper Corp. , 336 S.C. 53, 60, 518 S.E.2d 301, 305 (Ct. App. 1999) ). "Typically, courts will construe an indemnification contract ‘in accordance with the rules for the construction of contracts generally.’ " Id. (quoting Campbell v. Beacon Mfg. Co. , 313 S.C. 451, 453, 438 S.E.2d 271, 272 (Ct. App. 1993) ).
The indemnification clause in the contract states "[s]eller agrees that he will defend, indemnify and hold purchaser harmless from any and all actions, causes of action, claims and or demands which arise or are asserted as arising from [s]eller's conduct prior to closing." Little's sole argument on indemnity is because the invoices were issued to Johnson, the claims did not arise from his conduct. However, as stated in the previous section, the invoices were issued to Johnson in her capacity as an employee of Little. Both Johnson and Fisher testified the inventory was purchased for Little's company. Therefore, because the evidence supports the invoices arose from Little's company, the master did not err in finding Little must indemnify Johnson. Accordingly, that finding is affirmed.
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