Southeastern Site Prep Llc v. Atl. Coast Builders

• Decision Date: 22 June 2011
• Docket Number: No. 4845.,4845.
• Citation: 394 S.C. 97,713 S.E.2d 650
• Court: South Carolina Court of Appeals
• Parties: SOUTHEASTERN SITE PREP, LLC, Southeastern Property Development, LLC, Steve Desimone, and Thomas Viljac, Respondents,v.ATLANTIC COAST BUILDERS AND CONTRACTORS, LLC and James N. Richardson, Jr., Appellants.

394 S.C. 97

713 S.E.2d 650

SOUTHEASTERN SITE PREP, LLC, Southeastern Property Development, LLC, Steve Desimone, and Thomas Viljac, Respondents,

v.ATLANTIC COAST BUILDERS AND CONTRACTORS, LLC and James N. Richardson, Jr., Appellants.

No. 4845.

Court of Appeals of South Carolina.

Submitted March 1, 2011.Decided June 22, 2011.

W.H. Bundy, Jr. and M. Brent McDonald, of Mt. Pleasant, for Appellants.Robert Vaux, Antonia Lucia, and Mark S. Berglind, of Bluffton, for Respondents.SHORT, J.

Atlantic Coast Builders and Contractors, LLC (Atlantic) and James N. Richardson, Jr. (collectively, Appellants) appeal the special referee's denial of their motion for sanctions. We affirm.¹

FACTS

Southeastern Site Prep, LLC (Southeastern), Southeastern Property Development, LLC (SPD), Steve Desimone, and Thomas Viljac (collectively, Respondents) filed this action alleging nine causes of action against Atlantic: (1) breach of contract accompanied by fraudulent act; (2) breach of contract; (3) quantum meruit/unjust enrichment; (4) conversion; (5) fraud and deceit/intentional misrepresentation; (6) breach of fiduciary duty; (7) Unfair Trade Practices Act violation; (8) misappropriation of a trade secret; and (9) tortious interference with contracts.

Respondents alleged that during 2001 and 2002, the parties entered into negotiations for a merger and for Richardson ² to lease or purchase real property owned by SPD, which was owned by Desimone. Southeastern and Atlantic were both suffering from an economic downturn in the construction industry and were in poor financial condition. Southeastern owned dirt pits, which according to Desimone, are “very critical in a site business, which Atlantic didn't have.” Southeastern also owned its own extensive facility and was “fully manned and ready to go for a heavy construction company,” whereas Atlantic rented a facility on a month-to-month basis, and its lease was ending. Southeastern had engineering staff, computer technology, and survey skills, but lacked financial savvy. Also, Southeastern had bond capability of $2 million to $3 million and had been bonded for $1.8 million in the past, whereas Atlantic had bond capability of only $750,000. Desimone testified: “We kind of did the same things, although they were much smaller and they wanted to move into the market. They had something that we needed; we had something that they needed and it just only made sense.”

For five to six months beginning mid–2001, the companies' principals discussed the merger. During the negotiations, Southeastern disclosed “confidential and proprietary business information, including but not limited to, customer lists, notes payable, pending and future contracts, and financial statements.” Southeastern also provided information on its equipment, existing contracts, and possible future contracts.

George J. Akmon, the chief operating officer of the Richardson Group, was responsible for budgets, business plans, personnel, and cash planning for Atlantic. There were between thirty and fifty meetings between Southeastern and Atlantic, and the parties produced numerous memoranda memorializing the agreement. Most of the meetings were between Desimone and Akmon, with Richardson being involved in about ten of the meetings. In January or early February 2002, Akmon, with the knowledge and consent of Richardson, prepared a document embodying the terms of the agreement and an extensive business plan incorporating the merger. According to Southeastern, the parties reached an agreement by January 30, 2002.

Pursuant to the alleged agreement, Richardson, individually, was to lease the property for $15,290.43 per month with an option to purchase for $1.6 million. Southeastern was to contribute approximately $600,000 in equipment equity to Atlantic. Atlantic was to assume the notes payable on the equipment, hire Thomas Viljac of Southeastern as the chief of engineering, and hire Desimone as CEO for $6,000 per month, and eventually, a twenty percent equity interest in the merged company. Respondents maintain the closing documents were scheduled to be completed on February 14, 2002. No documents were ever signed.

On February 6, 2002, Richardson called a meeting of the employees of both companies, announced the merger, and directed the employees of Southeastern to fill out payroll paperwork for Atlantic. Atlantic began paying the employees and met with a bonding company to get a performance bond. Atlantic sent a facsimile to BB & T Bank and requested a draw using two pieces of Southeastern's equipment as collateral. In the days following the February 6 meeting, Atlantic cut locks on the fences located at the property, replaced the Southeastern signs on the property and equipment with Atlantic signs, and moved in. The companies performed business as one during the following two weeks.

On February 13, 2002, Desimone went to the office and Atlantic's employee, Paul Fullmore, attacked him, hitting him twice in the head with a radio and grabbing a gun from a truck. Thereafter, Akmon informed Desimone the “deal was on hold.” Richardson, per Akmon, then set a “new deal” requiring Desimone to forego his job and his twenty percent equity interest. Desimone initially refused, but Akmon presented a second revision, and Desimone agreed because he had “held off” creditors based on the merger.

On February 18 and 19, 2002, Atlantic moved out. Shortly thereafter, Southeastern's past-due obligations, allegedly renegotiated based on the merger, became due. Creditors seized Southeastern's computers, and equipment with equity valued at between $400,000 and $856,000. These assets were allegedly resold at low auction prices. Atlantic's actions allegedly prevented Southeastern from servicing existing customers, attracting new customers, and continuing as a viable concern. Respondents alleged other damages including: (1) loss of future jobs; (2) missing equipment; (3) increased interest and attorney's fees on debts; (4) damaged reputation in the community; (5) loss of employees; (6) foregone opportunities to pay off its debt by open market sales, debt consolidation, or other partnerships; (7) personal judgments against Desimone and Viljac; (8) loss of profits on current and future contracts Southeastern had been negotiating, some of which Atlantic performed; and (9) loss of goodwill. Southeastern ceased doing business by August 2002, and Viljac and Desimone faced hundreds of thousands of dollars in judgments. Respondents filed this action in October 2003.

The parties engaged in lengthy and extensive discovery. Appellants filed a motion for summary judgment on May 31, 2005. At the March 7, 2006 hearing on the motion before the Honorable Jackson V. Gregory, Respondents withdrew several causes of action. Respondents' counsel stated: “Your Honor, there are a number of causes of action which I would be willing to withdraw at this point.... [W]e have now gone through a number of depositions and I am willing to ... withdraw ... a number of the causes of action.” Respondents withdrew the actions for quantum meruit/unjust enrichment, conversion, breach of fiduciary duty, Unfair Trade Practices Act violation, and misappropriation of a trade secret. Judge Gregory granted summary judgment to Appellants on the cause of action for tortious interference with contracts and on all causes of action as to the plaintiff Viljac. Respondents moved to amend their complaint. Judge Gregory ruled they could file a subsequent motion with an attached amended complaint.

Respondents also conceded the original individual defendants, James N. Richardson, Jr. and George J. Akmon, were entitled to summary judgment on the breach of contract cause of action. Judge Gregory denied summary judgment as to the remaining causes of action by order dated September 26, 2006. In denying summary judgment, Judge Gregory found “a pretty good question of fact [as to] partial performance ... to take it out of the statute of frauds....” The order also denied Respondents' motion to amend their complaint. However, the order granted leave to proceed in the future on a motion to amend to include the issue of piercing the corporate veil, “at a later time when it would be more appropriate....”

On March 19, 2007, Judge Mullen presided over the hearing on Respondents' motion to amend the complaint, demand a jury trial, and compel Richardson to respond to discovery requests for financial disclosures. Atlantic agreed to the amendment, but objected to the request for a jury trial. Judge Mullen denied the request for a jury trial and granted the motion to amend the complaint.

The Honorable Thomas Kemmerlin, Jr. presided over the bench trial. At the start of the trial, Judge Kemmerlin refused to grant Appellants' renewed motion for summary judgment. After Respondents presented their case, Appellants moved for summary disposition. Judge Kemmerlin took the voluminous record of depositions under advisement. By order dated April 8, 2009, Judge Kemmerlin dismissed the three remaining causes of action, finding the breach of contract causes of action were barred by the statute of frauds, and Respondents failed to prove fraud.

Appellants moved for sanctions under Rule 11, SCRCP, or the South Carolina Frivolous Civil Proceedings Sanctions Act (the Act). In his order denying the motion, Judge Kemmerlin found:

Obviously the mere loss of a case does not subject a party ... to a suit by the winner for Sanctions; if it did, the Court System could not function. And no lawyer should be held to a standard of brilliance in the prediction of the outcome of a lawsuit. Fortunately, the law does not require an attorney to be brilliant; it merely requires him to be competent. Did the Plaintiffs' Attorneys fail to meet this standard? I say “No.”

The case was complicated ... [and the parties] at the early stages of the litigations referred to the result they sought as a “merger.” What was sought was not a merger but some...