RIM ASSOCIATES v. Blackwell

• Decision Date: 23 February 2004
• Docket Number: No. 3747.,3747.
• Citation: 597 S.E.2d 152,359 S.C. 170
• Parties: RIM ASSOCIATES, a South Carolina general partnership, Respondent, v. John E. BLACKWELL, Appellant.
• Court: South Carolina Court of Appeals

359 S.C. 170

597 S.E.2d 152

RIM ASSOCIATES, a South Carolina general partnership, Respondent, v. John E. BLACKWELL, Appellant.

No. 3747.

Court of Appeals of South Carolina.

Heard October 8, 2003.

Decided February 23, 2004.

Withdrawn, Substituted and Re-Decided May 14, 2004.

G. Dana Sinkler, Mark S. Sharpe, Paul E. Tinkler, and R. Bruce Wallace, all of Charleston, for Appellant.

Richard S. Rosen and Daniel F. Blanchard, III, both of Charleston, for Respondent.

BEATTY, J.:

RIM Associates, a South Carolina general partnership, sued John Blackwell, a partner, seeking contribution for a partnership debt the partnership had incurred as a result of a debt owed to Blackwell. The trial court ordered Blackwell to make a contribution. We reverse.

FACTS

John Blackwell's company, R.I. of North Charleston ("R.I."), owned a Ramada Inn. In 1985, Everett Smith, Joe Edens and James Finley ("the partners") decided to purchase the hotel. Blackwell agreed to sell the hotel for 4.575 million dollars. As part of the purchase price, R.I. accepted a note of 1.3 million dollars ("the Blackwell note"). Blackwell also received a twenty-five percent partnership interest in RIM Associates ("RIM"), the partnership formed by Blackwell and the partners "to invest in, own, and operate" the hotel. The partners financed the transaction by taking out a bank loan for the 3.275 million dollar balance owed to Blackwell. The partners did not place any capital in the transaction, but they guaranteed seventy-five percent of the Blackwell note.

RIM fell behind on its payments on the Blackwell note and, in 1989, Blackwell and RIM renegotiated its terms. Blackwell extended the maturity date of the Blackwell note and the partners guaranteed it one hundred percent. The parties contemporaneously entered into an indemnification agreement ("the 1989 agreement") that provided in part:

The Partners acknowledge and agree that each Partner, as the owner of a twenty-five (25%) interest in the Partnership, is responsible for twenty-five (25%) of the Partnership indebtedness and each Partner agrees to indemnify and hold the others harmless from liability for such Partner's share of any such indebtedness....

Edens, Smith, and Finley have, in the Note Modification, agreed to jointly and severally guarantee the payment of the Note in its entirety. It is agreed, however, that the indebtedness evidenced by the Note and any other Partnership indebtedness in excess of the amounts above set forth shall remain Partnership debts, the payment of which shall continue to be the obligation of the Partnership, but Blackwell shall have no personal liability therefor other than to the extent of his interest in the Partnership and Edens, Smith and Finley shall not have the right to require contribution from Blackwell on account of any payment which they may have to make on the Note. Any such payment(s) shall be deemed to be a capital contribution(s) to the Partnership by the party making the same.¹

(emphasis added).

Notwithstanding the 1989 agreement, RIM again fell behind on its payments. In 1997, Blackwell sued the partners for repayment as guarantors of the Blackwell note. The partners brought a third party complaint against RIM, seeking indemnification for the amounts due under the Blackwell note. The partners then caused RIM to bring suit against Blackwell seeking contribution from him in case RIM was required to indemnify the partners.

The parties reached a settlement in April or June of 1999 ("the 1999 settlement"). The 1999 settlement provided in part:

1) The guarantors would pay $2 million including principal, interest, attorney's fees, and costs, to John and Hazel Blackwell. John and Hazel will satisfy the Note.

2) All of the pending litigation against John and Hazel Blackwell will be dismissed with prejudice.

3) John Blackwell will remain in the Partnership.

4) The Partnership will not attempt to borrow the money to pay John and Hazel except with the prior written approval of John Blackwell.

(emphasis added).

Following the court-ordered 1999 settlement, Blackwell moved to amend the order to include that "John Blackwell cannot be required to respond to a capital call as a result of the settlement found by the Court." The judge refused, reasoning that "[the] issue may have been raised by [Blackwell] but it is a post-settlement issue and not properly before this court at this time." On July 14, Edens and Smith paid two million dollars pursuant to the 1999 settlement. Finley did not contribute any funds.²

On August 5, the trial judge ordered "[t]he action ... ended and dismissed with prejudice as [to] all parties." RIM moved to amend the order. As a result, the trial judge rescinded that order and issued a second order that dismissed with prejudice all causes of action "by and against" Blackwell "asserted within the action," all claims by RIM "in the Amended Fourth Party Complaint," and all actions by Blackwell. The trial judge also dismissed all actions by the individual partners Eden, Smith, and Finley against RIM but without prejudice.

In April 2000, RIM sued Blackwell. RIM's Amended Complaint claimed breach of the partnership agreement and sought contribution and specific performance. Following a bench trial, the court found:

The Partnership did not "borrow" the money to pay the settlement in violation of the settlement agreement and did not receive monies from Smith and Edens.

Blackwell was obligated to make a contribution to the Partnership to fund the expenses of his own settlement.

The 1989 agreement, which expressly prohibits any such contribution, had been rescinded by the Blackwell settlement.

The Partnership did not assert these claims in the prior litigation.

The Partnership claims were not barred by the dismissal with prejudice.

The Partnership was entitled to recover attorneys fees and costs.

The trial judge ruled that Blackwell had breached his contractual and statutory obligations to make contributions under the partnership agreement and the South Carolina Uniform Partnership Act. Blackwell appeals.

ISSUES

Blackwell raises eight exceptions to the trial judge's rulings, but those exceptions can be condensed in the following six issues:

I. Did the trial court err in finding that the partnership was authorized to bring this action?

II. Did the trial court err in holding that Blackwell could be required to contribute to the payment of his own note?

III. Did the trial court err in not finding that the claims of the partnership had previously been dismissed with prejudice?

IV. Did the trial court err in not finding that the partnership borrowed the settlement funds in violation of the settlement agreement and the 1989 agreement?

V. Did the trial court err in allowing this action without first requiring an accounting?

VI. Did the trial court err in awarding attorneys' fees to the partnership?

STANDARD OF REVIEW

RIM alleges two causes of action against Blackwell. RIM characterizes them as "Contribution" and "Breach of Contract / Specific Performance." However, an appellate court is not bound by a party's characterization of the actions. Klippel v. Mid-Carolina Oil, Inc., 303 S.C. 127, 129, 399 S.E.2d 163, 164 (Ct.App.1990) (citing Ariail v. Ariail, 295 S.C. 486, 491, 369 S.E.2d 146, 149 (Ct.App.1988)). Whether an action is at law or in equity is determined by the main purpose of the suit. Mortgage Recovery Fund-Riverbend, Ltd. v. Heritage Clipper Riverbend Trust, 327 S.C. 491, 493, 489 S.E.2d 655, 656 (Ct.App.1997) (citing Baughman v. AT & T, 298 S.C. 127, 130, 378 S.E.2d 599, 600 (1989)). The court should determine the main purpose of an action from the body of the complaint. Carjow, LLC v. Simmons, 349 S.C. 514, 518, 563 S.E.2d 359, 362 (Ct.App.2002) (citing Ins. Fin. Servs., Inc. v. South Carolina Ins. Co., 271 S.C. 289, 293, 247 S.E.2d 315, 318 (1978) ("The main purpose of the action should generally be ascertained from the body of the complaint.")). Whether the action is one at law or in equity is determined by the nature of the pleadings and the character of the relief sought. In re Estate of Holden, 343 S.C. 267, 278, 539 S.E.2d 703, 709 (2000) (citing Bell v. Mackey, 191 S.C. 105, 119, 3 S.E.2d 816, 824 (1939) ("The nature of the issues as raised by the pleadings or the pleadings and proof, and character of relief sought under them, determines the character of an action as legal or equitable.")).

Notwithstanding RIM's characterization of its complaint, RIM alleges only one single cause of action for breach of contract and requests the remedy of specific performance.³ An action for specific performance lies in equity.⁴Ingram v. Kasey's Assocs., 340 S.C. 98, 105, 531 S.E.2d 287, 290 (2000); see also Barnacle Broadcasting, Inc. v. Baker Broadcasting, Inc., 343 S.C. 140, 146, 538 S.E.2d 672, 675 (Ct.App.2000)

(explaining that "[a]n action for specific performance [on a contract] lies in equity"). Because the action is in equity, the appellate court "may find facts in accordance with its own view of the preponderance of the evidence" in reviewing such an action. Id.

LAW/ANALYSIS

I. RIM's authority to bring this action

Blackwell argues that the trial judge erred in ruling that RIM was authorized to bring this action against Blackwell. We disagree.

The partnership agreement states that "[i]f any Partner fails to make contributions to capital as provided for by the terms of this Agreement, the remaining Partners who are not in default shall have the right to seek and obtain damages from the defaulting Partner...." Blackwell argues that language allows only the partners, and not the partnership, to sue Blackwell for damages and specific performance. However, the partnership agreement was signed in 1985, at a time when partnerships could not bring an action in their own name. See Haddock Flying Serv. v. Tisdale, 288 S.C. 62, 64, 339 S.E.2d 525, 526 (Ct.App.1986)

("However, a partnership is not such a legal entity that it may maintain a...