RFT Mgmt. Co. v. Tinsley & Adams L.L.P.

• Decision Date: 19 September 2012
• Docket Number: No. 27157.,27157.
• Citation: 399 S.C. 322,732 S.E.2d 166
• Court: South Carolina Supreme Court
• Parties: RFT Management Co., L.L.C., Appellant, v. TINSLEY & ADAMS L.L.P. and Welborn D. Adams, Individually, Respondents.

399 S.C. 322

732 S.E.2d 166

RFT Management Co., L.L.C., Appellant,

v.TINSLEY & ADAMS L.L.P. and Welborn D. Adams, Individually, Respondents.

No. 27157.

Supreme Court of South Carolina.

Heard May 23, 2012.

Decided Aug. 15, 2012.

Rehearing Denied Sept. 19, 2012.

Harry A. Swagart, III, of Columbia, for Appellant.

Matthew Holmes Henrikson, of Clarkson Walsh Terrell & Coulter, of Greenville, for Respondents.

Justice BEATTY.

Appellant RFT Management Co., L.L.C. (RFT) brought this action against respondents Tinsley & Adams, L.L.P. and attorney Welborn D. Adams (collectively, Law Firm) based on their legal representation of RFT during the closing of its purchase of two real estate investment properties in Greenwood County. RFT alleged claims for (1) professional negligence (legal malpractice), (2) breach of fiduciary duty, (3) violation of the South Carolina Unfair Trade Practices Act ¹ (UTPA), and (4) aiding and abetting a securities violation in contravention of the South Carolina Uniform Securities Act of 2005 (SCUSA).² The trial court granted a directed verdict in favor of Law Firm on RFT's causes of action regarding the UTPA and SCUSA, and it merged RFT's breach of fiduciary claim with its legal malpractice claim. The jury returned a verdict in favor of Law Firm on RFT's remaining claim for legal malpractice. RFT appealed, and this Court certified the case from the Court of Appeals for its review pursuant to Rule 204(b), SCACR. We affirm.

I. FACTS

RFT is a limited liability company, with David Roatch (Roatch) as its managing member. This action arises out of RFT's purchase of two parcels of property in a residential community near Lake Greenwood known as Planters Row at Palmetto Crossing.

Planters Row was developed by Lake Greenwood Developers, L.L.C. (Developer), which was managed by William Gilbert (Gilbert). The subdivision had 65 lots, and in order to generate sales activity, Developer initially offered “discounts” of from five to ten percent of the purchase price to some buyers, as well as buy-back options in which it agreed to repurchase the lots. The repurchase option was to be exercisedwithin a specified timeframe at a set price that exceeded the purchase price.

On September 25, 2007, RFT entered into agreements to purchase lots 28 and 31 in Planters Row from Developer, for a total purchase price of $570,000 ($290,000 for lot 28 and $280,000 for lot 31). At the time of the sales agreements with RFT, Developer did not own lots 28 and 31. Developer had previously sold lot 28 to Christopher and Susan Grimshaw and had sold lot 31 to Douglas Robertson.

In conjunction with these sales to the Grimshaws and Robertson, Developer had executed contemporaneous agreements to buy back the lots within a specified time period, and the Grimshaws and Robertson had notified Developer that they wished to exercise their options to sell their properties back to Developer. Developer, however, advised the buyers shortly before the scheduled closings that it did not have the funds to repurchase the properties, and it negotiated an extension of time.

Meanwhile, on October 30, 2007, RFT and Developer signed a buy-back agreement regarding lots 28 and 31 in conjunction with RFT's purchase of the two lots. RFT had retained Joe Maddox, a Spartanburg attorney, to review the agreements concerning the purchase of the lots and the buy-back. Maddox negotiated directly with Gilbert and, at the suggestion of Maddox, RFT additionally obtained a second mortgage on the 21 unsold lots in the subdivision in order to secure payment in the event RFT exercised its rights under the buy-back agreement.

Law Firm handled the majority of the real estate closings for Developer, and the closings were usually the responsibility of attorney Welborn D. Adams (Adams). Adams was the closing attorney for the transaction with RFT. Adams coordinated the scheduling of the closings in order to accomplish the repurchases of the two lots from the prior owners and the sale to RFT. RFT's contract for legal services with Law Firm stated Law Firm was being retained solely to perform the ministerial acts associated with the closing:

The undersigned acknowledge that they have not retained the law firm to negotiate the terms of their contract nor are they relying on the law firm to provide substantive advice about how or whether to proceed with this transaction. Rather, the undersigned acknowledge that the law firm has been retained to close the transaction, prepare a deed of conveyance and perform the ministerial act[s] associated with real estate closings.

The closing with RFT took place on October 30, 2007.³ Thereafter, Developer allegedly did not have sufficient capital to complete the amenities in the community.

RFT filed a complaint against Law Firm on October 20, 2008, in which RFT asserted claims for legal malpractice, breach of fiduciary duty, and violations of the UTPA and SCUSA. At trial, RFT's claims centered on its allegations that it was unaware of the status of the lots, that Law Firm engaged in deceptive acts regarding the true owners of the property, and that it suffered damages because its investment properties had a markedly lower value than anticipated. ⁴ Specifically, RFT alleged it was unaware Developer did not own the two lots when it contracted to sell them to RFT. Further, RFT claimed it did not know that the lot owners, the Grimshaws and Robinson, exercisedtheir rights under buy-back agreements, and that Developer was financially unable to perform. RFT maintained Law Firm assisted Developer in selling the two lots to RFT as a “flip transaction,” in which the money Developer received from RFT from the sale of the lots would be used to simultaneously close the repurchase from the Grimshaws and Robinson and enable Developer to deed the two lots to RFT.⁵ RFT asserts none of these facts regarding the simultaneous closing, the “flip transaction,” or the uses of RFT's funds were disclosed to RFT.

At the close of all the evidence, the trial court “merged” RFT's breach of fiduciary duty claim into its claim for legal malpractice and granted Law Firm's motions for a directed verdict on RFT's UTPA and SCUSA claims. Thus, only the claim of legal malpractice went to the jury, which returned a verdict in favor of Law Firm. The trial court denied RFT's post-trial motions.

On appeal, RFT contends the trial court erred in (1) failing to grant its motion for judgment notwithstanding the verdict (JNOV) or a new trial on the issue whether Law Firm engaged in malpractice by representing both RFT and the seller at the closing since there was an unwaivable conflict of interest; (2) failing to grant its motion for JNOV or a new trial on the issue whether Law Firm engaged in malpractice by failing to disclose materials facts, submitting false and misleading documents, and/or arranging the closing as an unlawful “flip transaction”; (3) failing to charge the jury on breach of fiduciary duty and merging this cause of action with its first cause of action for legal malpractice; (4) directing a verdict in favor of Law Firm on RFT's UTPA claim; and (5) directing a verdict in favor of Law Firm on RFT's claim for aiding and abetting a SCUSA violation.

II. LAW/ANALYSISA. Legal Malpractice Claim

RFT first contends the trial court erred in denying its motion for a JNOV on its claim of legal malpractice because Law Firm committed malpractice as a matter of law. Alternatively, RFT argues the trial court erred in denying its request for a new trial on this claim.

RFT asserts Law Firm committed legal malpractice, as a matter of law, in two ways. First, by representing both RFT and Developer at the closing, Law Firm committed legal malpractice because there was an unwaivable conflict of interest. Second, Law Firm committed legal malpractice by failing to disclose material information to RFT, providing false and misleading documents to RFT, and closing a deceptive “flip transaction.”

A plaintiff in a legal malpractice action must establish four elements: (1) the existence of an attorney-client relationship, (2) a breach of duty by the attorney, (3) damage to the client, and (4) proximate causation of the client's damages by the breach. Rydde v. Morris, 381 S.C. 643, 646, 675 S.E.2d 431, 433 (2009); Smith v. Haynsworth, Marion, McKay & Geurard, 322 S.C. 433, 435 n. 2, 472 S.E.2d 612, 613 n. 2 (1996).

A party making a motion for a directed verdict must state the specific grounds relied upon therefor, and the trial court may grant the motion when the case presents only issues of law. Rule 50(a), SCRCP. If the motion is denied, the party may thereafter move for a JNOV in order to have the verdict and judgment set aside and a judgment entered in accordance with the party's directed verdict motion. Rule 50(b), SCRCP. A motion for a new trial may be joined with the JNOV motion or prayed for in the alternative. Id.

“When a party fails to renew a motion for a directed verdict at the close of all evidence, he waives his right to move for JNOV.” Wright v. Craft, 372 S.C. 1, 20, 640 S.E.2d 486, 496 (Ct.App.2006). Moreover, only the grounds raised in the directed verdictmotion may properly be reasserted in a JNOV motion. In re McCracken, 346 S.C. 87, 551 S.E.2d 235 (2001); Gov't Emps. Ins. Co. v. Mackey, 260 S.C. 306, 195 S.E.2d 830 (1973). A motion for a JNOV is merely a renewal of the directed verdict motion. Wright, 372 S.C. at 20, 640 S.E.2d at 496.

When reviewing the trial court's ruling on a motion for a directed verdict or a JNOV, this Court must apply the same standard as the trial court by viewing the evidence and all reasonable inferences in the light most favorable to the nonmovingparty. Elam v. S.C. Dep't of Transp., 361 S.C. 9, 602 S.E.2d 772 (2004).

The trial court must deny a motion for a directed verdict or JNOV if the evidence yields more than one reasonable inference or its inference is in doubt. Strange v. S.C. Dep't of Highways & Pub. Transp., 314 S.C. 427, 445...