White v. JM Brown Amusement Co., Inc.

• Citation: 601 S.E.2d 342,360 S.C. 366
• Decision Date: 09 August 2004
• Docket Number: No. 25849.,25849.
• Court: United States State Supreme Court of South Carolina
• Parties: Phillip W. WHITE, individually, and Little General Food Stores, Inc., Petitioners, v. J.M. BROWN AMUSEMENT CO., INC., Respondent.

360 S.C. 366

601 S.E.2d 342

Phillip W. WHITE, individually, and Little General Food Stores, Inc., Petitioners, v. J.M. BROWN AMUSEMENT CO., INC., Respondent.

No. 25849.

Supreme Court of South Carolina.

Heard June 22, 2004.

Decided August 9, 2004.

Daniel L. Draisen, Krause & Moorhead, PA, of Anderson, for Petitioners.

Amy G. Richmond, of Love, Thornton, Arnold & Thomason, V. Clark Price, and Dana M. Lahey, both of Roe Cassidy Coates & Price, PA, all of Greenville, and Wade S. Weatherford, III, of Gaffney, for Respondent. Chief Justice TOAL:

The court of appeals reversed the trial court's grant of summary judgment to Phillip W. White and Little General Food Stores, Inc. (collectively "White"). White v. J.M. Brown Amusement Co., Op. No.2003-UP-161 (S.C. Ct.App. filed February 27, 2003). We granted White's petition for a writ of certiorari to review that decision and now reverse.

FACTUAL/PROCEDURAL BACKGROUND

In 1992, White and J.M. Brown Amusement Co. ("Brown") entered into a contract giving Brown exclusive rights to place "certain coin-operated amusement machines" in thirteen of White's stores — which Brown did — all located in Anderson and Oconee counties. The contract was for a term of fifteen years. Under the contract, White agreed "not to allow other machines on the premises without the express written consent of [Brown]."

In 1993, the Legislature enacted a local option law as part of the Video Game Machines Act, permitting counties to hold an individual referendum to determine whether cash payouts for video gaming should remain legal. Act No. 164, Part II, § 19G, 1993 S.C. Acts 1138-1139, formerly codified at S.C.Code Ann. §§ 12-21-2806 and -2808 (repealed effective July 1, 2000). As a result of local referenda held in November 1994, twelve counties, including Oconee and Anderson, voted to ban cash payouts. The South Carolina Department of Revenue revoked the licenses required to operate the machines Brown had placed in White's stores, effective July 1, 1995, as required by the Act. Consequently, Brown removed the video poker machines from White's stores. Brown did not replace the machines with any other coin-operated amusement machines.

In November 1996, this Court struck down the local option law contained in the Act as unconstitutional special legislation. Martin v. Condon, 324 S.C. 183, 478 S.E.2d 272 (1996). Given this Court's ruling, Brown planned to return the video poker machines to White's store, but White informed Brown that the contract was no longer valid. White then initiated the underlying action, seeking to have the contract declared void and unenforceable so that he would be free to sign a contract with another provider of legal video and amusement machines. White also alleged that Brown breached the contract by removing the machines from White's stores and failing to replace them with appropriate machines.

Approximately one month after filing suit, White entered into an agreement with Hughes Entertainment, Inc. (Hughes), giving Hughes exclusive rights to place all video game terminals and all coin operated music and amusement machines in twelve of the same stores listed in the Brown contract.

In its answer to the complaint, Brown denied breaching the contract, arguing that the machines were removed from White's stores in response to Court and legislative proceedings which cast doubt upon the legality of certain coin operated machines such as those supplied by [Brown] to [White] under the terms of the contract. In addition, Brown asserted counterclaims for breach of contract and breach of contract accompanied by a fraudulent act because White contracted with Hughes for placement of machines in White's stores.

A representative of Brown testified in deposition that the subject matter of the contract was the outlawed video poker machines — the only type of machines Brown handled. White testified in deposition that he expected Brown to install other types of legal video games after the video poker machines were outlawed, even though White also testified that the contract involved video poker machines, and he never asked Brown (from July 1995 to November 1996) to place other types of machines in his stores.

White moved for summary judgment on Brown's counterclaims. The trial court granted White's motion, finding that the contract involved the placement and operation of outlawed video poker machines.¹ The trial court concluded that as a matter of law, the contract between White and Brown became void and unenforceable as of July 1, 1995, when video poker machines first became illegal in Anderson and Oconee counties. The trial court subsequently denied Brown's motion to reconsider.

Brown appealed and the court of appeals reversed. The court of appeals reasoned that because this Court had struck down the local option law and referenda as unconstitutional, the validity of the contract must be analyzed as if the local option law had never been enacted, the referenda never held, the county ordinances banning video poker payouts never passed, and the machine licenses never revoked by the Department of Revenue.

We granted certiorari to resolve the following question:²

Did the court of appeals err in reversing the trial court's grant of summary judgment to White, where the trial court found that the contract was void and unenforceable as of July 1, 1995, due to local referenda banning the type of video poker machine that formed the subject matter of the contract?

LAW/ANALYSIS

Standard of Review

When reviewing the grant of summary judgment, the appellate court applies the same standard applied by the trial court pursuant to Rule 56(c), SCRCP. Fleming v. Rose, 350 S.C. 488, 493, 567 S.E.2d 857, 860 (2002). Summary judgment is appropriate when there is no genuine issue of material fact such that the moving party must prevail as a matter of law. Rule 56(c), SCRCP; Tupper v. Dorchester County, 326 S.C. 318, 325, 487 S.E.2d 187, 191 (1997). In determining whether any triable issues of fact exist, the court must view the evidence and all reasonable inferences that may be drawn from the evidence in the light most favorable to the non-moving party. Manning v. Quinn, 294 S.C. 383, 385, 365 S.E.2d 24, 25 (1988).

Discussion

White asserts the court of appeals erred because the trial court correctly held that as a matter of law, the parties' contract became void and unenforceable as of July 1, 1995, the date it became illegal to operate the video poker machines. White also contends that the contract was not revived when the local option law was held unconstitutional. We agree.

The general rule, well established in South Carolina, is that courts will not enforce a contract when the subject matter of the contract or an act required for performance violates public policy as expressed in constitutional provisions, statutory law, or judicial decisions. Berkebile v. Outen, 311 S.C. 50, 53-54, 426 S.E.2d 760, 762 (1993) (stating [a]n illegal contract has always been unenforceable); Batchelor v. American Health Ins. Co., 234 S.C. 103, 107 S.E.2d 36 (1959) (noting that contracts violating public policy as expressed in constitutional provisions, statutes, or judicial decisions are void).

When a contract is originally legal, but performance becomes illegal due to a change in the law, any subsequent performance is against public policy and the party who has agreed to perform is excused from doing so. Some courts analyze such a situation in terms of impossibility of performance, although performance is not literally impossible because it could be done if it were legal. Other courts simply conclude that the duty to perform is excused or discharged because performance would violate public policy as expressed in constitutional provisions, statutes, or judicial decisions. 8 Williston on Contracts § 19:35 (4th ed.1998); 14 Corbin on Contracts § 76.1 (2001); see also Restatement (Second) of Contracts § 264 (1981) (if the performance of a duty is made impracticable by having to comply with a domestic or foreign governmental regulation or order, that regulation or order is an event the non-occurrence of which was a basic assumption on which the contract was made); Restatement (First) of Contracts § 458 (1932) (contractual duty is discharged where performance is subsequently prevented or prohibited by constitutional provision, statute, ordinance, judicial decision, or administrative order); Annot., Modern Status of the Rules Regarding Impossibility of Performance as Defense in Action for Breach of Contract, 84 A.L.R.2d 12, § 7 (1962).

In the present case, both parties were performing as required under the contract until performance of the contract became legally impossible for two reasons. First, the subject matter of the contract — certain video poker machines — became illegal as of July 1, 1995, under the local option law and the resulting local referenda. Second, as mandated by the local option law, the Department of Revenue revoked the licenses required to legally possess and use the machines. Consequently, both parties' duty to perform under the contract was discharged, and after that point, White and Brown were free to enter a new contract involving legal machines or seek other contractual relationships.

Moreover, because the subject matter of the...