McTeer v. Provident Life and Acc. Ins.

• Decision Date: 03 February 1989
• Docket Number: Civ. A. No. 3:88-2167-16,3:88-2168-16.
• Citation: 712 F. Supp. 512
• Court: U.S. District Court — District of South Carolina
• Parties: Thomas B. McTEER, Jr., Plaintiff, v. PROVIDENT LIFE AND ACCIDENT INSURANCE, Defendant. Thomas B. McTEER, Jr., Plaintiff, v. STATE FARM LIFE INSURANCE COMPANY, Defendant.

712 F. Supp. 512

Thomas B. McTEER, Jr., Plaintiff, v. PROVIDENT LIFE AND ACCIDENT INSURANCE, Defendant.

Thomas B. McTEER, Jr., Plaintiff, v. STATE FARM LIFE INSURANCE COMPANY, Defendant.

Civ. A. Nos. 3:88-2167-16, 3:88-2168-16.

United States District Court, D. South Carolina, Columbia Division.

February 3, 1989.

Michael H. Quinn, Quinn, Brown, Arndt & Manning, Columbia, S.C., for plaintiff.

Paul A. Dominick, Nexsen Pruet Jacobs & Pollard, Columbia, S.C., for defendants.

ORDER

HENDERSON, District Judge.

This matter is before the Court on the motion of each defendant in each action for partial summary judgment. The actions have been consolidated pursuant to Rule 42(a), F.R.C.P. In each action the plaintiff alleges three claims, namely, breach of contract, violation of the South Carolina Unfair Trade Practices Act ("UTPA"), §§ 39-5-10 et seq., Code of Laws of South Carolina, 1976, as amended, and conversion. The defendants' motions challenge the UTPA and conversion causes of action, asserting that they are entitled to judgment as a matter of law on these two claims. For the reasons set forth below, the motions are granted in part and denied in part.

I.

On summary judgment the facts must be taken in the light most favorable to the non-movant, here, plaintiff Thomas B. McTeer, Jr. ("McTeer"). United States v. Diebold, Inc., 369 U.S. 654, 655, 82 S.Ct. 993, 996, 8 L.Ed.2d 176 (1962). So taken, the facts reveal that McTeer purchased the Dutch Square Shopping Center ("Dutch Square") in Richland County, South Carolina, in March 1983. In making the purchase, McTeer assumed the payment obligations on two promissory notes owned by defendant Provident Life and Accident Insurance Company ("Provident") and two promissory notes owned by defendant State Farm Life Insurance Company ("State Farm"). The four notes were of equal priority and were secured by first mortgages on Dutch Square. McTeer also gave the sellers, Dutch Square Associates and Germantown Associates, his two promissory notes secured by two second mortgages on the purchased property. South Carolina National Bank ("SCN") acted as the defendants' mortgage banker and correspondent with respect to the property and McTeer made all payments and directed all communications to SCN in connection with the defendants' four notes and mortgages. McTeer then sold Dutch Square to Balcor Realty Investors—83 ("Balcor"), taking as part of the purchase price Balcor's promissory note secured by a third mortgage on Dutch Square.

In October 1987 McTeer and Balcor agreed to Balcor's prepayment of its note and mortgage to McTeer subject to McTeer's prepayment of his notes and mortgages to Provident and State Farm, respectively. By letter dated October 19, 1987, McTeer notified both defendants via SCN that he wanted to prepay the notes as of October 30, 1987. Under the terms of the four notes and mortgages, the defendants were entitled to sixty days' prior written notice of prepayment and were entitled to assess a prepayment penalty. The defendants agreed to waive the sixty days' notice and to accept McTeer's prepayment of the four notes and arranged through SCN the prepayment penalty McTeer was to pay. McTeer agreed to the penalty amount. Neither SCN nor the defendants discussed any other charges with McTeer at that time.

Based on these negotiations, McTeer notified Balcor that he agreed to accept Balcor's prepayment on October 30, 1987, and Balcor agreed to wire the funds to McTeer on that date. McTeer intended to use these funds to prepay the defendants' notes. In the late afternoon of October 29, SCN notified McTeer of the pay-off amount, which amount did not conform to McTeer's figures. Nevertheless, the next day McTeer paid SCN the amount according to SCN's calculations with the understanding that SCN was to furnish McTeer a breakdown of the figures, that he did not agree with the figures and that he paid the amount subject to confirmation.

Subsequently McTeer learned that the defendants charged him eighty-three days' interest, sixty days of which was charged for their waiver of the notice requirement.¹ McTeer made demand on the defendants for the return of a portion of the interest paid, the defendants refused and McTeer then filed these actions.

II.

The defendants move for summary judgment on the UTPA cause of action on three grounds: (1) the parties' transaction does not come within the UTPA's definition of trade or commerce;² (2) the parties' transaction does not affect the public interest as required by Noack Enterprises v. Country Corner Interiors, Inc., 290 S.C. 475, 351 S.E.2d 347 (Ct.App.1986), and (3) the defendants come within the UTPA's exemption for "actions or transactions permitted under laws administered by any regulatory body or officer acting under statutory authority of this State ... or actions or transactions permitted by any other South Carolina State law." Section 39-5-40(a), Code of Laws of South Carolina, 1976, as amended.

A. Trade or commerce under UTPA.

The defendants assert that their action in charging interest for McTeer's prepayment does not constitute trade or commerce under the UTPA because they "merely calculated the payoff amount on a mortgage loan which had been used by the plaintiff for the construction and maintenance of a shopping center." Memo. in Support of Def. Motion for Partial Summary Judgment 3. They argued alternatively at the motions hearing that, even if the transaction constitutes a sale of property, it is not a consumer transaction. The Court concludes the defendants are wrong in both assertions.

The Court first notes that the UTPA "should be given a liberal construction." Connolly v. People's Life Insurance Co., 294 S.C. 355, 359, 364 S.E.2d 475, 477 (Ct.App.1988). Using that construction, the Court concludes that the parties' transaction fits the UTPA's definition of trade or commerce because it involves the sale of property, that is, the defendants sold, by means of four loans secured by four mortgages on the purchased property, to the original owners of Dutch Square, McTeer's predecessors in interest, the present use of money for a promise to repay in the future, a sale which McTeer completed by repaying the defendants' loans according to the latters' calculations. See Villegas v. Transamerica Financial Services, 147 Ariz. 100, 708 P.2d 781, 783 (Ariz.App.1985).

The defendants' reliance on Connolly, supra, for its holding that a conversion does not constitute a UTPA violation is misplaced here since McTeer's UTPA allegations are directed to the defendants' charging of interest not to the defendants' alleged conversion of that interest once he paid it.

Furthermore, the UTPA does not expressly apply only to consumer transactions. Judicial interpretation of the UTPA, by requiring that a transaction must affect the public interest to be cognizable, may have given a de facto consumer orientation to it. See, e.g., Noack, supra; Glaesner v. Beck/Arnley Corp., 790 F.2d 384, 390 (4th Cir.1986). But the South Carolina UTPA also includes transactions between businesses or commercial entities such as the parties to these actions. That this interpretation of South Carolina's UTPA is correct is necessarily implied by South Carolina decisions involving only non-consumer parties such as Noack, supra, and Key Co., Inc. v. Fameco Distributors, 292 S.C. 524, 357 S.E.2d 476 (Ct.App.1987). If a dispute between non-competing business or commercial entities were not within the UTPA's scope, the court would never have reached the issue of required involvement of the public interest in Noack or the issue of the insufficiency of a mere breach of contract in Fameco. Consequently, the fact that the parties' transaction is not a consumer transaction does not prevent it from giving rise to a UTPA claim.

B. Public interest.

The defendants next assert that the parties' transaction does not affect the public interest. They contend, relying on Noack and Fameco, that McTeer's claim in essence is for breach of contract, an alleged private wrong between two private parties, and therefore not within the UTPA's scope. The Court disagrees.

Noack involved the plaintiff's purchase of an interior decorating business from the defendants. The plaintiff charged the defendants with several deceptive and otherwise unfair acts in connection with the sale. The court held that the plaintiff failed to state a cause of action under the UTPA because it failed to meet the "affecting the people of this State" requirement of section 39-5-10(b). The court explained that to satisfy that requirement, a plaintiff must show that the acts alleged "adversely affect the public." 290 S.C. at 480, 351 S.E. 2d at 350. The court further stated that unfair or deceptive acts or practices have an impact on the public interest if they "have the potential for repetition." 290 S.C. at 480, 351 S.E.2d at 351. In Fameco the court reversed a verdict based on a UTPA violation arising from a contract between an owner of coin-operated video game machines and a nightclub owner. It held that the defendant's acts, while they constituted an intentional or deliberate breach of contract, neither directly or indirectly affected the rights of anyone but the contracting parties. 292 S.C. at 526, 357 S.E.2d at 478. Accordingly, the court concluded that the defendant's action "in breach of its contract ..., without more, does not constitute a violation of the UTPA." Id.³

Here, however, there is evidence sufficient to defeat the defendants' motion that their alleged unfair or deceptive acts have the potential for repetition. First, McTeer so alleges. Compl. ¶ 27. More important, as the defendants' answers to the Court's interrogatories manifest, their challenged acts appear to be their practice in cases of loan prepayment. Def. Ans. to Interr. pursuant to Rule 16(b) Nos. 2 and 5. Accordingly, the Court concludes that the parties' transaction is more than a mere breach of contract and has...