Karl & Terri Hager, Robert Singleton & Teresa Singleton, Jay & Susan Welborn, Erik Arnold, & Bowers Caravelle, LLC v. Mccabe, Trotter & Beverly, P.C.
| Decision Date | 23 February 2022 |
| Docket Number | Appellate Case No. 2019-000413,Opinion No. 5894 |
| Parties | Karl & Terri HAGER, Robert Singleton & Teresa Singleton, Jay & Susan Welborn, Erik Arnold, and Bowers Caravelle, LLC, derivatively and on behalf of Caravelle Resort Association, Inc. and on behalf of themselves and those similarly situated, Appellants, v. MCCABE, TROTTER & BEVERLY, P.C. and Gold Crown Management Company, Inc., Defendants, Of Which McCabe, Trotter & Beverly, P.C. is the Respondent. |
| Court | South Carolina Court of Appeals |
Andrew Sims Radeker and Sarah Megan Larabee, both of Harrison, Radeker & Smith, P.A., of Columbia, for Appellants.
Andrew W. Countryman, of Countryman Law Firm, of Mount Pleasant, and Robert P. Wood, of Rogers Townsend, LLC, of Columbia, both for Respondent.
The appellants (the owners) in this case are several owners of condominium units at Caravelle Resort (Caravelle) in Myrtle Beach. The circuit court dismissed their claims against a law firm that advised Caravelle's homeowners’ association (the HOA) after a hurricane damaged Caravelle. The owners argue dismissing their claims was error.
The owners attempted to bring two sets of claims against the law firm. In one, the owners purported to sue on their own behalf for damage to personal property taken out of their individual units and stored in a parking garage during Caravelle's repair. In the other, the owners professed to bring derivative claims against the firm on behalf of the HOA. All of these claims share the common basis that the owners allege the firm gave the HOA inaccurate advice in helping the HOA navigate repairing Caravelle.
We hold the circuit court correctly dismissed the owners’ personal claims but erred by dismissing the derivative claims. Though we will identify concerns we have with the derivative claims, we see no defects in how they are pled, and we believe the prudent course is to exercise restraint instead of foreclosing the suit at the start of litigation.
Hurricane Matthew struck Myrtle Beach in October 2016. It destroyed many windows in Caravelle and exposed several units to the elements. McCabe, Trotter & Beverly, P.C. (the law firm) served as counsel for the HOA. The HOA also worked with Gold Crown Management Company (Gold Crown). At that time, Gold Crown was Caravelle's property manager.
The HOA took several actions to repair Caravelle after the storm. Below, we have summarized the actions the owners claim were unlawful and taken on the advice of the law firm and/or Gold Crown.
First, the HOA began gutting and restoring the entire building and hired Delta Restoration, LLC (Delta) to perform these services. Delta removed the personal property from the owners’ units and placed everything in temporary storage in Caravelle's parking garage across the street. The owners claim Caravelle's governing documents did not give the HOA power to remove belongings from units or gut the building without owner approval. They further allege the HOA did not properly notify them it decided on this course of action and the HOA wrongfully prevented them from visiting the property, assessing the situation, and judging the condition of their belongings for themselves.
Second, the HOA billed the owners for costs incurred in the repair process. Owners were charged a "content manipulation fee" to recover the costs of storing their belongings. They were also charged for a "soft goods package" to pay for replacing items like mattresses, linens, and upholstery that had been damaged during the hurricane or while in storage. The owners alleged they did not agree to the HOA storing their property or to having the property replaced. The owners further alleged the law firm and/or Gold Crown misrepresented the amount of damage done to their belongings and inflated the cost of the soft goods package. Finally, the owners claimed the firm and/or Gold Crown wrongfully pressured them into paying these charges by threatening actions against them.
Caravelle's master deed required property owners to purchase insurance covering the personal property, fixtures, decorations, and furnishings in their units. These policies were issued by Lloyd's of London (Lloyd's).
Two letters the law firm sent Lloyd's during the repair process are important to the issues here. First, the firm wrote Lloyd's that the parking garage would soon become an unsuitable location for the owners’ belongings due to the spring and summer weather. The firm sent this letter several months after the storm. Nobody moved the owners’ items from the parking garage. Then, at the end of summer, the firm warned Lloyd's that the HOA "and its members" would hold Lloyd's responsible for not protecting the property.
Though the law firm began both letters by noting it represented the HOA, the owners claim the firm was negotiating on their behalf because they, not the HOA, were the named insureds on the Lloyd's policies. The owners claim nothing authorized the HOA or its attorneys to handle issues related to their personal property.
The law firm also sent letters to the owners. In one, the firm explained the storm contaminated many "soft goods"—things like mattresses, linens, and upholstery. This letter discussed coverage under the Lloyd's policies and informed the owners the HOA would dispose of these items and replace them if owners authorized the HOA to do so. Later, the firm wrote individuals who had not authorized the HOA to handle the process and said those owners needed to either have the items moved by a moving company or permit the HOA to move them. This letter also said authorizing the HOA was likely the better option because the cost of moving the items would be at the owners’ individual expense.
Though the firm sent these letters on behalf of the HOA, the owners claim the letters gave them legal advice and could have caused them to reasonably believe the firm represented them as individuals in addition to representing the HOA.
The law firm moved to dismiss the amended complaint under Rule 12(b)(6), SCRCP. The circuit court granted the motion in a Form 4 order after a hearing. The owners filed a motion to reconsider. The circuit court denied reconsideration but issued a formal order with detailed reasons for its earlier ruling. This appeal followed.
Did the circuit court correctly find the owners’ amended complaint failed to state any claims on which relief could be granted?
"On appeal from the dismissal of a case pursuant to Rule 12(b)(6), an appellate court applies the same standard of review as the trial court." Rydde v. Morris , 381 S.C. 643, 646, 675 S.E.2d 431, 433 (2009). "That standard requires the Court to construe the complaint in a light most favorable to the nonmovant and determine if the ‘facts alleged and the inferences reasonably deducible from the pleadings would entitle the plaintiff to relief on any theory of the case.’ " Id. (quoting Williams v. Condon , 347 S.C. 227, 233, 553 S.E.2d 496, 499 (Ct. App. 2001) ). If the facts and inferences would entitle the plaintiff to relief on any theory, then the grant of a motion to dismiss for failure to state a claim is improper. Spence v. Spence , 368 S.C. 106, 116, 628 S.E.2d 869, 874 (2006) ; Clearwater Tr. v. Bunting , 367 S.C. 340, 343, 626 S.E.2d 334, 335 (2006). "Furthermore, the complaint should not be dismissed merely because the court doubts the plaintiff will prevail in the action." Spence , 368 S.C. at 116-17, 628 S.E.2d at 874.
The owners brought claims against the law firm for fraud and conversion. The circuit court correctly found these claims could not survive a motion to dismiss.
"[A]n attorney is immune from liability to third persons arising from the performance of his professional activities as an attorney on behalf of and with the knowledge of his client." Gaar v. N. Myrtle Beach Realty Co. , 287 S.C. 525, 528, 339 S.E.2d 887, 889 (Ct. App. 1986). An exception provides an attorney is not immune if "in addition to representing his client, ... [the lawyer] breaches some independent duty to a third person or acts in his own personal interest, outside the scope of his representation of the client." Stiles v. Onorato , 318 S.C. 297, 300, 457 S.E.2d 601, 602 (1995). Immunity also does not cover two unusual malpractice scenarios we will discuss later.
Immunity is a function of the fact that an attorney acting within the scope of representation is not acting on his or her own behalf, but on the client's behalf. In Gaar , for example, this court affirmed summary judgment on a malicious prosecution claim against two lawyers because the lawyers "acted solely in their capacity as attorneys" when they sued the plaintiff for their client. 287 S.C. at 529, 339 S.E.2d at 889. The proper party to sue for malicious prosecution was "the party to the original action, not the attorney[s] representing him." Id. Stiles recognized that a lawyer can be liable to a third party when the lawyer acts outside the scope of his engagement for a client, but affirmed the case's dismissal against a lawyer (there, the claims were civil conspiracy and allegedly filing a frivolous case) because the "complaint ... fail[ed] to set forth sufficient facts to remove [the attorney] from the ambit [of the general rule of immunity]." 318 S.C. at 300, 457 S.E.2d at 602.
The order in this case specifically noted the owners did not claim the law firm acted outside the scope of its representation of the HOA. This forecloses the firm's liability for fraud and conversion under Gaar and Stiles — an attorney is not liable to a third party merely because the firm gave its client incorrect advice. We agree with the circuit court that no one has alleged the firm acted to serve its own interests rather than or in addition to the HOA's interests. Again, the core allegation is that the firm gave the HOA incorrect advice. That allegation will not support a viable claim for fraud...
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