Lauren Proctorand Trans-Union Nat'l Title Ins. Co. v. Whitlark & Whitlark, Inc.

• Decision Date: 07 October 2015
• Docket Number: Appellate Case No. 2013–002470.,No. 27580.,27580.
• Citation: 414 S.C. 318,778 S.E.2d 888
• Court: South Carolina Supreme Court
• Parties: Lauren PROCTORand Trans–Union National Title Insurance Company, f/k/a Atlantic Title Insurance Company, Respondents, v. WHITLARK & WHITLARK, INC., d/b/a Rockaways Athletic Club and Pizza Man, Forrest Whitlark, Paul Whitlark, Charlie E. Bishop, and Brett Blanks, Defendants, of whom Whitlark & Whitlark, Inc., d/b/a Rockaways Athletic Club and Pizza Man, Forrest Whitlark and Paul Whitlark are Petitioners.

414 S.C. 318

778 S.E.2d 888

Lauren PROCTORand Trans–Union National Title Insurance Company, f/k/a Atlantic Title Insurance Company, Respondents,

v. WHITLARK & WHITLARK, INC., d/b/a Rockaways Athletic Club and Pizza Man, Forrest Whitlark, Paul Whitlark, Charlie E. Bishop, and Brett Blanks, Defendants,of whom Whitlark & Whitlark, Inc., d/b/a Rockaways Athletic Club and Pizza Man, Forrest Whitlark and Paul Whitlark are Petitioners.

Appellate Case No. 2013–002470.

No. 27580.

Supreme Court of South Carolina.

Oct. 7, 2015.

Rehearing Denied Dec. 4, 2015.

Ariail Elizabeth Kingand James Mixon Griffin, both of Lewis Babcock & Griffin, L.L.P., of Columbia, for petitioners.

Jessica Hanna Lererand Joseph Preston Strom, Jr., both of Columbia, and Mario Anthony Pacella, of Brunswick GA, all of Strom Law Firm, L.L.C., for respondent.

Opinion

Justice BEATTY.

Lauren Proctor and Trans–Union National Title Insurance Company (“Trans–Union”) brought this action against Whitlark & Whitlark, Inc., d/b/a Rockaways Athletic Club (“Rockaways”) and Pizza Man, Forrest Whitlark, Paul Whitlark, Charlie E. Bishop, and Brett Blanks (collectively “Defendants”) seeking to recover money Proctor lost while gambling on video poker machines located at Rockaways and Pizza Man over the course of several years, including a time period following the South Carolina Legislature's ban of video poker in 2000. The circuit court granted Proctor's motion for partial summary judgment on her claim under the South Carolina Unfair Trade Practices Act (“UTPA”) as to the liability of Defendants. In so ruling, the court found the Legislature had abrogated the doctrine of in pari delicto¹with regard to losses sustained by illegal gambling for public policy reasons. The Court of Appeals affirmed. Proctor v. Whitlark & Whitlark, Inc.,406 S.C. 225, 750 S.E.2d 93 (Ct.App.2013). This Court granted Petitioners' request for a writ of certiorari to review the decision of the Court of Appeals.

We find our Legislature has enacted specific gambling loss statutes as the exclusive remedy for a gambler seeking recovery of losses sustained by illegal gambling. Accordingly, we now overrule our decisions that have implicitly authorized recovery beyond these statutes. As a result, we hold that one engaged in illegal gambling cannot recover under UTPA. However, based on the distinct facts of this case, we find that Proctor may pursue the portion of her UTPA claim for the losses she alleged that she sustained between 1999 and July 1, 2000, the day on which the ban on video poker became effective.

I. Factual / Procedural History

Beginning in 1995, Proctor started gambling on video gaming machines at various restaurants and bars in Columbia, South Carolina. From 1999 to 2005, Proctor frequently gambled on video poker machines located in Rockaways and Pizza Man, which are operated by Whitlark & Whitlark, Inc. (“Whitlark”). Forest Whitlark and Paul Whitlark are part owners of Whitlark. At the time, Charlie E. Bishop and Brett Blanks co-owned a limited liability company named Zodiac Distributing, LLC, which placed one coin-operated gaming machine at the Pizza Man restaurant.

According to Proctor, she lost between $1,000 and $5,000 per week while gambling at the restaurants. Proctor claimed the two restaurants provided her cash advances on her credit cards to enable her to fund her gambling, as well as free food, alcohol, and cocaine.²

Proctor also funded her gambling with money illegally obtained from her employer State Title, which her mother owned. State Title provided real estate closing services to attorney Walter Smith. During the time period at issue, Proctor forged her mother's name on checks and stole money from Smith's trust account in order to play the video poker machines. As a result of Proctor's actions, Smith's trust account contained insufficient funds to satisfy the mortgages on several properties at closing. In turn, Trans–Union³paid approximately $550,000 in claims stemming from the shortages in Smith's trust account.

Effective July 1, 2000, the Legislature banned the operation of video poker machines in South Carolina.⁴Proctor continued to gamble despite being aware that her use of the video poker machines was illegal. Pizza Man and Rockaways continued to operate video poker machines in their establishments until a Federal Bureau of Investigation sting operation, in which Proctor assisted, occurred in 2005.

On September 10, 2007, Proctor entered into a plea agreement with federal prosecutors and pled guilty to mail fraud pursuant to 18 U.S.C. § 1341. As part of the agreement, Proctor was required to pay restitution in the amount of $565,475.25 to Trans–Union and $195,000 to Smith.

Proctor and Trans–Union brought this action against Defendants to recover the losses they incurred as a result of Proctor's gambling.⁵The Complaint alleged, inter alia,that Defendants violated section 32–1–10⁶of the South Carolina Codeand the legislative prohibition against operating video gaming machines. As a result, Proctor and Trans–Union asserted claims for unjust enrichment, civil conspiracy, violations of UTPA⁷, and negligence.

Defendants filed motions for summary judgment, alleging that (1) Proctor's claims were barred by the doctrine of in pari delicto,(2) Proctor was precluded from recovering her claim for unjust enrichment based on the equitable doctrine of “unclean hands,” and (3) Trans–Union lacked standing. In response, Proctor and Trans–Union filed a cross-motion for partial summary judgment as to the liability of Defendants.

Following a hearing, the circuit court granted Proctor's motion for partial summary judgment.⁸In so ruling, the court found the doctrine of in pari delictohad been abrogated with regard to gambling losses. Specifically, the court found that “the South Carolina legislature abrogated this doctrine in passing a number of statutes, including S.C.Code Ann. §§ 32–1–10, 32–1–20,⁹and the South Carolina Unfair Trade Practices Act.” Further, the court relied on this Court's decision in Johnson v. Collins Entertainment Company,349 S.C. 613, 564 S.E.2d 653 (2002)for the proposition that:

Sections 32–1–10and 32–1–20do not have preclusive effect regarding remedies afforded under the South Carolina Unfair Trade Practices Act because S.C.Code Ann. § 39–5–160provides that powers and remedies under this section are cumulative and supplementary to all powers and remedies provided by existing law.

Additionally, the court granted Defendants' motion for summary judgment on Proctor's unjust enrichment claim based on their unclean hands defense.

After the court denied their motion for reconsideration, Defendants appealed to the Court of Appeals. The Court of Appeals affirmed. Proctor v. Whitlark & Whitlark, Inc.,406 S.C. 225, 750 S.E.2d 93 (Ct.App.2013). Like the circuit court, the Court of Appeals relied on this Court's decision in Johnsonand held that sections 32–1–10and 32–1–20 of the South Carolina Code, which authorize gamblers and affected third parties to recover gambling losses in certain limited circumstances, were viable despite the existence of the in pari delictodoctrine. Id.at 230, 750 S.E.2d at 95. Further, the court ruled that the gambling loss statutes were not the exclusive remedy and, therefore, Proctor could seek to recover her losses under other applicable laws, including UTPA. Id.at 231, 750 S.E.2d at 96.

Although the Court of Appeals acknowledged that the facts in Johnsonwere distinguishable from those in Proctor's case, since video poker was generally legal at the time of the Johnsoncase, it found three tenets recognized by this Court in Johnsonwere instructive and led to the same conclusion as the circuit court that an in pari delictodefense did not bar Proctor's claims. Id.at 230, 750 S.E.2d at 95. The Court of Appeals stated:

First, statutory and case law in South Carolina support the policy of allowing plaintiffs to recover gambling losses as a way of both discouraging illegal gambling and of protecting gamblers and their family members from imprudent gambling activities. See Johnson,349 S.C. at 635, 564 S.E.2d at 664–65(noting that sections 32–1–10and –20 promote a policy of limiting excessive and/or unlawful gambling); S.C.Code Ann. §§ 32–1–10, –20. Second, the owners and operators of video poker machines are not truly in pari delictowith the persons who use the machines for gambling because in many cases, a habitual gambler is acting under the sway of “uncontrollable impulses” and, thus, requires protection from his or her bad judgment. See Johnson,349 S.C. at 635, 564 S.E.2d at 664–65. Finally, sections 32–1–10and –20 are not the exclusive avenues for plaintiffs to recover gambling losses and do not preclude plaintiffs from seeking recovery under other state law theories, including SCUTPA. See Johnson,349 S.C. at 635, 564 S.E.2d at 665(noting that sections 32–1–10& and –20 do not preclude plaintiffs from recovering gambling losses under other remedies provided by law, including SCUTPA). We find these tenets espoused by the supreme court in Johnsonsupport the circuit court's holding that the defense of in pari delictodoes not bar Proctor's claims.

Id.at 230–31, 750 S.E.2d at 95–96.

Following the denial of their petition for rehearing en banc,this Court granted Petitioners' request for a writ of certiorari to review the decision of the Court of Appeals.

II. Standard of Review

When reviewing the grant of a summary judgment motion, an appellate court applies the same standard that governs the trial court under Rule 56(c), SCRCP, which provides that summary judgment is proper when there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. Rule 56(c), SCRCP; Fleming v. Rose,350 S.C. 488, 493, 567 S.E.2d 857, 860 (2002). “Determining the proper interpretation of a statute is a question of law, and this Court reviews questions of law de novo.” Town of Summerville v. City of N. Charleston,378 S.C. 107, 110, 662 S.E.2d 40, 41 (200...