Jordan v. Holt

• Decision Date: 10 January 2005
• Docket Number: No. 25921.,25921.
• Citation: 608 S.E.2d 129,362 S.C. 201
• Court: South Carolina Supreme Court
• Parties: Arthur Elbert JORDAN, Jr., both Individually and as a Member of Winner's Circle South, L.L.C., Respondent, v. Lawrence Byerly HOLT, Jr., and Gordon Wayne Livingston, both Individually and as Members of Winner's Circle South, L.L.C.; and David Livingston, Third Party Plaintiffs, Petitioners, v. Brian Arthur Jordan, Third Party Defendant, Respondent.

362 S.C. 201

608 S.E.2d 129

Arthur Elbert JORDAN, Jr., both Individually and as a Member of Winner's Circle South, L.L.C., Respondent, v. Lawrence Byerly HOLT, Jr., and Gordon Wayne Livingston, both Individually and as Members of Winner's Circle South, L.L.C.; and David Livingston, Third Party Plaintiffs, Petitioners, v. Brian Arthur Jordan, Third Party Defendant, Respondent.

No. 25921.

Supreme Court of South Carolina.

Heard December 2, 2004.

Decided January 10, 2005.

Henrietta U. Golding, of McNair Law Firm, of Myrtle Beach, for Petitioners.

James B. Richardson, Jr., of Richardson & Birdsong, of Columbia, and Richard M. Lovelace, Jr., of Conway, for Respondents.

Justice BURNETT:

We granted Dr. Lawrence Byerly Holt, Jr., Gordon Wayne Livingston, and David Livingston's (Petitioners') petition for certiorari to review the Court of Appeals' opinion in Jordan v. Holt, Op. No.2003-UP-277 (S.C. Ct.App. filed April 16, 2003) reversing the trial court's award of punitive damages against Dr. Arthur Elbert Jordan, Jr. and his son, Brian Jordan (Respondents). We reverse.

FACTUAL/PROCEDURAL BACKGROUND

In 1995, Dr. Jordan approached Dr. Holt and proposed they invest in a racing theme restaurant in Myrtle Beach, South Carolina. On September 11, 1995, the parties entered into a written agreement (Agreement) to form a limited liability company (LLC) known as Winner's Circle South. The initial members of the LLC were Dr. Jordan, Brian Jordan, Wayne Livingston, and Dr. Holt. The parties also executed an "Agreement to Lease" and a "Memorandum" setting forth the estimated construction cost for the project. Although the parties filed Articles of Organization on September 29, 1995, they never executed an operating agreement. The parties later agreed to operate in accordance with applicable South Carolina statutory law. Pursuant to the Agreement, Dr. Jordan held a 55 percent ownership interest, Brian Jordan a 10 percent interest, Dr. Holt a 25 percent interest, and Wayne Livingston a 10 percent interest.

Winner's Circle restaurant opened in November 1995 with Brian Jordan acting as general manager. In January 1996, Wayne Livingston transferred one-half of his interest to his son, David Livingston. Wayne Livingston's transfer of interest to his son created a voting majority among Wayne Livingston, David Livingston, and Dr. Holt. See S.C.Code Ann. § 33-44-404(a) (Supp.2003).

Dissension among the members developed when it became clear the venture was undercapitalized and constantly in need of additional operating capital. In June 1996, the relationship between the parties was irreparably damaged when Holt, Wayne Livingston, and David Livingston entered the restaurant to speak with Dr. Jordan. A verbal confrontation ensued between Brian Jordan's mother, who was helping with food preparation, and Wayne Livingston. The Jordans continued to operate the restaurant after the incident using personal and LLC funds. In 1997, the Jordans added 15 poker machines to the restaurant and began operating a business known as Competitive Marketing, which leased the additional machines from a third-party company.

The restaurant closed in July 1997. Dr. Jordan brought this action seeking dissolution of the LLC and an accounting. He also alleged causes of action for breach of fiduciary duty, civil conspiracy, breach of written and oral contracts, and slander per se. Holt and Wayne Livingston filed counterclaims and a third party complaint against Brian Jordan. In addition to seeking dissolution of the LLC, they alleged causes of action for breach of fiduciary duty, misappropriation of assets, breach of contract, breach of the duties of good faith and fair dealing, fraud, negligent misrepresentation, and gross negligence.

Following a bench trial, the circuit court dissolved the LLC and awarded it a judgment of about $763,000 against Dr. Jordan and a judgment of $19,945 against Brian Jordan. Petitioners were awarded the difference between the amount of their initial contributions to the LLC and the amount each receives upon dissolution of the LLC. In addition, the circuit court awarded Petitioners punitive damages on their breach of fiduciary duty claim.

Respondents appealed only the punitive damages award. The Court of Appeals reversed the award, holding the facts and circumstances of the case did not warrant an award of punitive damages.

ISSUE

Did the Court of Appeals err in reversing the trial court's punitive damages award on Petitioner's breach of fiduciary duty claim by applying the wrong standard of appellate review?

DISCUSSION

Petitioners argue the Court of Appeals erred in using an equitable standard of review in determining punitive damages were not warranted and that, using the legal standard of review, the evidence supported an award of punitive damages. We agree.

In its opinion, the Court of Appeals noted the case presented two separate and distinct questions: (1) whether an action for dissolution of an LLC is equitable or legal; and (2) whether an action for breach of fiduciary duty, made in conjunction with an action for dissolution, is a legal claim for purposes of determining the remedies available. However, the court concluded it was unnecessary to address these questions because the facts and circumstances of the case did not warrant punitive damages. Jordan v. Holt, supra.

The Court of Appeals improperly found facts in accordance with its own view of the evidence. The Court of Appeals improperly blended Petitioners' breach of fiduciary duty and dissolution actions and reviewed the case under an equitable standard of review, despite its contention it need not determine the appropriate standard of review. The proper analysis is to view the actions separately for the purpose of determining the appropriate standard of review. See Corley v. Ott, 326 S.C. 89, 92, 485 S.E.2d 97, 99 (1997)

(legal and equitable actions, when maintained in one suit, each retain their own identity for purposes of the applicable standard of review on appeal); Future Group, II v. Nationsbank, 324 S.C. 89, 478 S.E.2d 45 (1996). A corporate dissolution is an action in equity. Ward v. Ward Farms, Inc., 283 S.C. 568, 324 S.E.2d 63 (1984). In an action in equity tried without a reference, the appellate court may find facts in accordance with its own view of the preponderance of the evidence. Townes Assoc., Ltd. v. City of Greenville, 266 S.C. 81, 221 S.E.2d 773 (1976). On the other hand, a claim of breach of fiduciary duty is an action at law and the trial judge's findings will be upheld unless without evidentiary support. Future Group, II v. Nationsbank, 324 S.C. 89, 478 S.E.2d 45 (1996). The trial court based its punitive damages award on Petitioners' cause of action for breach of fiduciary duty, not on the dissolution claim. Therefore, the case is one at law and the trial judge's findings will be upheld on appeal unless the findings are without evidentiary support.

The Court of Appeals improperly assessed the facts of this case based on its own view of the evidence instead of determining whether the trial court's findings lacked evidentiary support. The Court of Appeals determined, after its review of the evidence, Respondents' actions were not willful or wanton,...