Smyth v. Fleischmann

• Decision Date: 02 March 1949
• Docket Number: 16187.
• Parties: SMYTH v. FLEISCHMANN.
• Court: South Carolina Supreme Court

52 S.E.2d 199

214 S.C. 263

SMYTH v. FLEISCHMANN.

No. 16187.

Supreme Court of South Carolina

March 2, 1949

Stoney, Crosland & Pritchard, of Charleston for appellant.

Frank H. Bailey, of Charleston, for respondent.

BAKER Chief Justice.

The appellant in this case, plaintiff below, alleges in her complaint the making of a contract with the respondent, under the terms of which she was employed to work in a bakery establishment conducted by the respondent, and the breach of such contract.

The questions presented on this appeal arise out of allegations of the complaint charging that the alleged breach of the contract by the respondent involved fraud in the inception of the contract as well as in the breach thereof. The issues were presented below by motion on the part of the respondent to strike from the complaint as 'irrelevant, redundant and immaterial' the allegations of the complaint which purport to characterize the respondent's acts as fraudulent and as supporting appellant's claim to punitive as well as compensatory damages. The appeal is from the order of the Circuit Court granting such motion.

The appellant alleges that at the time of the making of the alleged contract with respondent she was employed in a clerical capacity of One Hundred and Fifty ($150.00) Dollars a month, and that while she was so employed the respondent offered her employment as manager of his establishment on the following terms:

The respondent 'would pay her Fifty ($50.00) Dollars per week during the first three months of said employment, of which Thirty-five ($35.00) Dollars would be considered as salary and Fifteen ($15.00) Dollars as bonus and after the first three months of such employment a salary of Fifty ($50.00) Dollars per week; that in addition thereto the plaintiff would receive at the end of one year of such employment a bonus of ten (10%) percent of the net profits of the business during such year, said bonus to be, at all events, not less than Five Hundred ($500.00) Dollars; and that in the event that the said business of the defendant should be incorporated the defendant would give to the plaintiff twenty (20%) percent, of the capital stock of said corporation, the same to be placed in escrow upon such terms and conditions as might be agreed upon between the plaintiff and the defendant.'

It is then alleged that by reason of said 'offer and representations' the appellant was induced to give up her position and accept employment with the respondent; that however, less than three weeks after the making of the alleged contract respondent discharged the appellant 'without any just cause, reason or excuse.' After thus setting forth the circumstances out of which the employment contract arose, the terms thereof and the breach, the complaint then proceeds with the allegations which the lower Court struck out on respondent's motion. Among these are the whole of paragraph Six of the complaint which reads as follows:

'Six: That as the plaintiff is informed and believes, the action of the said defendant in luring the plaintiff from her employment at the Fort Sumter Hotel, and inducing her to accept the employment offered by him, and in subsequently breaching his agreement with the plaintiff as aforesaid, was wilful, wanton and fraudulent, in that the said defendant in fact never intended to live up to his said agreement with the plaintiff, but merely desired to gain for the said Colony Bake Shop the benefit of plaintiff's ability, reputation and popularity; and that the defendant well knew that he did not intend to retain the plaintiff in his employ as he had agreed to, but that on the contrary she would be discharged as soon as it should become evident to the defendant that the said Colony Bake Shop was going to be a successful and renumerative enterprise.'

The lower Court also struck out from other portions of the complaint the words 'willful, wanton and fraudulent' used by the pleader in characterizing the actions of the respondent; the words 'the plaintiff was mislead and induced to give up her former employment, her business experience, reputation and efficiency have been taken advantage of for the benefit of the said defendant'; and the words 'which she entered into in good faith' used by the pleader in characterizing her acceptance of the terms of the alleged contract.

The order of the Circuit Court granting the motion to strike is rested by the Circuit Judge on the holdings of this Court in the cases of Holland v. Spartanburg Herald-Journal Co., 166 S.C. 454, 165 S.E. 203, 205, 84 A.L.R. 1336; Hall v. General Exchange Insurance Corporation, 169 S.C. 384, 169 S.E. 78; and Lilienthal v. South Carolina Public Service Co., 174 S.C. 177, 177 S.E. 98. Quoting from the Holland case the Circuit Judge says in his order:

'It is the settled rule of this State that such damages only are recoverable for the breach of a contract as 'naturally and proximately' result therefrom. Nor will the fact that such contract is breached with willful or fraudulent intent alter this established standard for assessing damages or permit the allowance of punitive damages.'

It is the contention of the appellant that the complaint states either a cause of action ex delicto, based on fraud and deceit, or that it states a cause of action for fraudulent breach of the contract of employment, with a fraudulent act accompanying the breach. She does not undertake to say that the character of the action is one or the other. Her position is that if it is either, punitive damages are recoverable, and that the lower Court was in error in striking out the allegations above referred to, and which it is contended are appropriate to the maintenance of an action for punitive damages in a case founded on or arising out of contract. Implicit in the stated positions of the appellant is the contention that she is not required to elect at this time whether she will proceed on the theory of an action for fraud and deceit or on the theory of an action for fraudulent breach of contract accompanied by a fraudulent act.

Since the respondent did not move to require the appellant to elect, we are not concerned with the question whether such a motion would lie and we think that in passing upon the correctness of the order of the Circuit Court it is our duty to give the appellant the benefit of a construction of her complaint which would entitle her to maintain the action as one for punitive damages, if the allegations of the complaint are appropriate to the construction so adopted.

It is our opinion that the complaint in this case embraces a statement of a cause of action for fraud and deceit, and that the stricken allegations are appropriate to the statement of such a cause of action.

In the case of Flowers v. Price, 190 S.C. 392, 3 S.E.2d 38, 39 (quoting from 26 C.J. at page 1062), this Court states the elements of an actionable fraud as consisting of the following:

'(1) A representation; (2) its falsity; (3) its materiality; (4) the speaker's knowledge of its falsity; (5) his intent that it should be acted upon by the person; (6) the hearer's ignorance of its falsity; (7) his reliance on its truth; (8) his right to rely thereof; (9) and his consequent and proximate injury.' See also 37 C.J.S., Fraud, § 3.

This definition has been repeated in subsequent cases. See, for example, Culbreath v. Investors Syndicate, 203 S.C. 213, 26 S.E.2d 809, 147 A.L.R. 1144.

We think that the complaint contains allegations which bring the case within the above quoted statement of the elements of a cause of action for fraud and deceit. Paragraph Six of the complaint as quoted above discloses representations by the respondent, the falsity of such representations, their materiality in inducing the appellant to enter into the alleged contract, the speaker's knowledge of their falsity, the hearer's ignorance of their falsity, the appellant's reliance upon the truth of res...