Justice PLEICONES.
Respondent brought an action against petitioner for negligent misrepresentation, unjust enrichment, and breach of contract. The master-in-equity awarded respondent $10,160.79 in damages. The Court of Appeals affirmed. Atlantic Coast Builders and Contractors v. Lewis, Op. No.2009-UP-042 (S.C. Ct.App. filed Jan. 15, 2009). This Court granted certiorari to review the Court of Appeals' decision. We affirm.
On March 28, 2003, petitioner, acting through a leasing agent, entered into a commercial lease whereby respondent would lease from petitioner property located at 165 Fording Island Road in Beaufort County. The lease provided respondent would lease the property for twelve months at a monthly rate of $3,500. The lease provided in pertinent part:
Although petitioner represented in the lease that the property could lawfully be used for a building and construction office, the property was zoned "rural," meaning virtually all commercial uses were prohibited.
Upon executing the lease agreement, respondent paid petitioner a $3,500 security deposit. Subsequently, respondent occupied the property and made numerous alterations to it. Respondent repaired the ceiling and interior walls, replaced the flooring and electrical wiring, pressure washed the exterior, and installed a telephone system. Respondent made rental payments for April and May 2003.
On May 28, 2003, a Beaufort County zoning official served respondent with notice and warning of two violations for respondent's failure to obtain a certificate of zoning compliance before occupying the premises and its failure to obtain a sign permit before erecting a sign. Respondent vacated the property, relocated its business, and ceased making rental payments.
Respondent instituted this action against petitioner, alleging negligent misrepresentation, unjust enrichment, breach of contract, and breach of the covenant of quiet enjoyment. Petitioner denied these allegations and made a counterclaim for breach of contract. The master in equity entered judgment in favor of respondent.
Petitioner argues the Court of Appeals erred in affirming the master's judgment in favor of respondent on its claims of negligent misrepresentation and breach of contract, and in denying petitioner relief on her counterclaim for breach of contract. We find petitioner's arguments are unreviewable.
"Under the two issue rule, where a decision is based on more than one ground, the appellate court will affirm unless the appellant appeals all grounds because the unappealed ground will become the law of the case." Jones v. Lott, 387 S.C. 339, 346, 692 S.E.2d 900, 903 (2010) (citing Anderson v. Short, 323 S.C. 522, 525, 476 S.E.2d 475, 477 (1996)).
Petitioner did not appeal all grounds on which the master's judgment was based. Namely, she did not challenge the determination that respondent was entitled to recover based on unjust enrichment. Thus, under the two-issue rule, the Court of Appeals should have declined to address the merits of petitioner's argument since petitioner failed to challenge all three grounds on which the master's judgment was based.
Petitioner argues the Court of Appeals erred in holding the issue of the security deposit was not preserved. We disagree.
In his initial order, the master failed to address the return of the security deposit, which respondent had sought to be
On appeal, petitioner argued the master erred in awarding respondent the security deposit. The Court of Appeals found the issue was not preserved for appeal.
Because petitioner never argued until direct appeal that she should retain the security deposit, we find the Court of Appeals properly held the issue was not preserved for appeal.
Because petitioner did not appeal the master's finding of unjust enrichment, and the Court of Appeals properly found the issue of the security deposit was not preserved for appeal, the decision of the Court of Appeals is
Acting Justice G. THOMAS COOPER, JR., concurs. HEARN, J., concurring in part and dissenting in part in a separate opinion in which KITTREDGE, J., concurs. TOAL, C.J., dissenting in a separate opinion.
Respectfully, I concur in part and dissent in part. I agree with the majority that the two-issue rule precludes our review of the master-in-equity's entry of judgment against Laura Lewis on Atlantic Coast Builder's (Atlantic) claims for negligent misrepresentation and breach of contract. However, I do not believe our error preservation rules prevent us from considering whether Lewis was entitled to retain Atlantic's security deposit and would reach the merits of that issue.
Atlantic sued Lewis for negligent misrepresentation, breach of contract, and unjust enrichment after Atlantic learned it could not use the premises it leased from Lewis for business purposes, despite the statement in the lease to the contrary. Atlantic learned of this in late May, two months into the one-year lease, and stopped paying rent. However, it remained on the premises through at least July. The master found for Atlantic on all causes of action,
The master found for Atlantic on all three causes of action: negligent misrepresentation, breach of contract, and unjust enrichment. However, Lewis appealed only the finding of liability for negligent misrepresentation and breach of contract, not unjust enrichment. Accordingly, there is a finding of liability from which no appeal was taken, and our consideration of Lewis's arguments that the master erred in entering a judgment against her is barred by the two-issue rule. See Jones v. Lott, 387 S.C. 339, 346, 692 S.E.2d 900, 903 (2010) ("Under the two issue rule, where a decision is based on more than one ground, the appellate court will affirm unless the appellant appeals all grounds because the unappealed ground will become law of the case.").
The thrust of the Chief Justice's argument against the application of this rule is that the master's order does not
On the other hand, I agree with the Chief Justice that the precise issue of whether Lewis is entitled to retain Atlantic's security deposit is preserved for review. The majority declines to reach the merits of this issue because it believes the issue was not raised at trial; Lewis failed to raise it in a Rule 59(e), SCRCP, motion; and Lewis did not argue against Atlantic's Rule 59(e) motion. In its complaint, Atlantic requested a return of the security deposit, which Lewis denied in her answer. Furthermore, and more importantly, Lewis's property manager testified Lewis kept the security deposit because Atlantic remained on the property for two months after it breached the lease by failing to pay rent. When the master failed to rule on Lewis's entitlement to the security deposit, it was necessary for Atlantic to make a motion under Rule 59(e) as the issue had been fully raised at trial yet not ruled upon. Indeed, had it not been raised at trial, the question before us most certainly would be whether it was even proper for Atlantic to make the motion in the first place. Lewis herself
It is also of no consequence that Lewis did not respond to Atlantic's motion. Distilled to its basics, issue preservation requires that an issue be raised to and ruled upon by the trial judge. Wilder Corp. v. Wilke, 330 S.C. 71, 76, 497 S.E.2d 731, 733 (1998). So long as these two elements are met, an issue will be deemed preserved. Rule 59(e) motions fill a special niche in our preservation rules to ensure issues raised to but not ruled upon by the trial judge can be reviewed on appeal. I'On, L.L.C. v. Town of Mt. Pleasant, 338 S.C. 406, 422, 526 S.E.2d 716, 724 (2000). They are not a vehicle through which a party can inject new issues for the court to pass on, and they similarly are not a way to get new arguments in through the back door. See Hickman v. Hickman, 301 S.C. 455, 456, 392 S.E.2d 481, 482 (Ct.App.1990). Here, the parties raised the issue of the security deposit to the master; because the master candidly admitted he just forgot to address it, it was therefore incumbent upon Atlantic to file a post-trial motion. The master then considered the arguments raised during the trial regarding Lewis's entitlement to the security deposit and ruled accordingly. The issue was thus raised to and ruled upon by the trial judge. Requiring Lewis to respond to the motion would be fruitless in these circumstances. Our cardinal error preservation requirements have been met, and I know of nothing in our rules or precedents that would require Lewis to specifically respond to Atlantic's motion or be forever barred from contesting Atlantic's entitlement to the security deposit.
In my opinion, the majority erroneously relies on McCall v. State Farm Mutual Automobile Insurance Co., 359 S.C. 372, 597 S.E.2d 181 (Ct.App.2004), for the proposition that Lewis's failure to respond bars her argument to us. In McCall, the defendant raised the door-closing statute as a defense at the summary judgment stage. Id. at 381, 597 S.E.2d at 186. The plaintiff, however, did not address the defendant's arguments, id., and the circuit court dismissed her complaint, id. at 375, 597 S.E.2d at 185. The court of appeals therefore held the plaintiff could not challenge the application of the door-closing
As to the merits of this issue, the lease provides the security deposit is "security for the performance of [Atlantic]'s obligations under this lease, including without limitation the surrender of possession to [Lewis] as herein provided." The lease also states that upon Atlantic's failure to pay rent and cure the breach after receiving notice, Atlantic must surrender possession of the premises. Because it failed to do so, Lewis's property manager testified Lewis kept the security deposit, precisely as the lease permitted her to do. The master found Lewis would be unjustly enriched if she kept the security deposit, but I cannot find any evidence to support this finding. While Lewis may have been unjustly enriched by receiving the
Therefore, I would affirm the master's entry of judgment for Atlantic based on the two-issue rule. However, I would reduce Atlantic's award by $3,500 and permit Lewis to keep the security deposit.
KITTREDGE, J., concurs.
Chief Justice TOAL:
I take issue with the majority's disposal of this case on issue preservation grounds. For reasons set forth below, I do not believe the "two-issue" rule precludes this Court from deciding whether the master-in-equity's (master) award of improvement costs was valid. Also, I fervently disagree with the majority's contention that an issue argued by each party and
In my opinion, an over-zealous application of appellate preservation rules denigrates the primary purpose of the judiciary, which is to serve the citizens and the business community of this state by settling disputes and promoting justice. To be clear, I do not discount the importance of our issue preservation rules. As an appellate court, we sit to review decisions of lower courts for error. As such, "it is axiomatic that an issue cannot be raised for the first time on appeal." Wilder Corp. v. Wilke, 330 S.C. 71, 76, 497 S.E.2d 731, 733 (1998). However, I do not believe it is our place to scour the records before us for the purpose of avoiding issues or, even worse, to play a "gotcha" game with attorneys by showcasing their alleged mistakes, at the expense of their clients. This practice ignores the fact that behind every party name on a caption is a life-blood litigant or criminal defendant that depends on the court system to protect their economic and liberty interests. In light of my view, I believe that where the question of preservation is subject to multiple interpretations, any doubt should be resolved in favor of preservation. When the opposing party does not raise a preservation issue on appeal, courts are not precluded from finding the issue unpreserved if the error is clear. However, the silence of an adversary should serve as an indicator to the court of the obscurity of the purported procedural flaw.
The majority determined not to reach the merits of Lewis's first issue on appeal by invoking the "two-issue" rule. The master found Atlantic proved its claims of unjust enrichment, negligent misrepresentation, and breach of contract. However, the master based the award of $6,660.79 only on Atlantic's actual pecuniary loss, which is the appropriate measure of damages for negligent misrepresentation and breach of contract. See Quail Hill, LLC v. County of Richland, 387 S.C. 223, 240, 692 S.E.2d 499, 508 (2010) (plaintiff must prove amount of pecuniary loss suffered as result of negligent misrepresentation); Bensch v. Davidson, 354 S.C. 173, 178, 580 S.E.2d 128, 130 (2003) (measure of damages for breach of contract is loss actually suffered by contractee as a result of breach). The proper measure of damages for an unjust
The majority additionally found Lewis failed to preserve the security deposit issue because she did not file a response to Atlantic's 59(e) motion asking the master to increase the amount of judgment to include the $3,500 security deposit. The majority appears to have misconstrued the instances when a party is required to file a post-trial motion to preserve an issue for appellate review and when such filings are merely optional. The following language is instructive:
Elam v. S.C. Dep't of Transp., 361 S.C. 9, 24, 602 S.E.2d 772, 780 (2004) (emphasis in original).
In this case, the sum total of relief requested by Atlantic in its Complaint included the $3,500 security deposit, and Lewis
On the merits, I believe the court of appeals erred in affirming the master's award of damages for Atlantic—an award based on principles of both law and equity. In my opinion, this lease was an illegal contract and, therefore, void and unenforceable. As such, the parties were not entitled to relief under any legal theory, and the Court is constrained to leave the parties as we found them.
The lease agreed to by Lewis and Atlantic was entitled "Commercial Lease." The second clause of the lease states:
It is a well-settled principle of contract law that "a contract to do an act which is prohibited by statute, or which is contrary to public policy, is void, and cannot be enforced in a court of justice." McConnell v. Kitchens, 20 S.C. 430, 437-38 (1884); see also Pendarvis v. Berry, 214 S.C. 363, 369, 52 S.E.2d 705, 707 (1949) ("`Men may enter into any agreements they please and, as between themselves, may either respect or disregard them. When, however, they are submitted to the courts for adjudication, they must be tested and governed by the law.'") (quoting Gilliland v. Phillips, 1 S.C. 152 (1869)). This Court has never addressed the validity of a lease such as this one. However, I believe where the only contemplated use of a lease is for a purpose prohibited by the applicable zoning regulations, the lease is illegal and wholly unenforceable. See Cent. States Health & Life Co. of Omaha v. Miracle Hills Ltd. P'ship, 235 Neb. 592, 456 N.W.2d 474 (1990) (a lease restricting use to a single purpose is unenforceable and relieves the parties of all obligations thereunder). As such, the parties must be left as the court found them. See 17A C.J.S Contracts § 362 (2011) ("As a general rule, both at law and in equity, a court will not aid either party to an illegal contract... but leaves the parties where it finds them.").
Jackson v. Bi-Lo Stores, Inc., 313 S.C. 272, 276, 437 S.E.2d 168, 170 (Ct.App.1993) (quoting McMullen v. Hoffman, 174 U.S. 639, 654, 19 S.Ct. 839, 43 L.Ed. 1117 (1899) (emphasis in original)). The refusal of the courts to entertain litigation based upon an illegal contract can, at times, lead to inequitable results. However, as stated by Lord Mansfield in the landmark case of Holman v. Johnson, the illegality doctrine
Holman (1775) 98 Eng. Rep. 1120, 1121.
Accordingly, in my opinion, Atlantic is not entitled to recover damages in tort, contract, or in equity; and similarly, Lewis cannot recover her counterclaim for attorney's fees and other associated costs. Leaving the parties as they were when litigation ensued, we will not compel Lewis to reimburse Atlantic for its improvement costs or return the security deposit.
The dissent also finds this issue preserved because the master ruled on it after respondent raised the issue in a Rule 59(e) motion. This was not sufficient to preserve the issue because petitioner failed to advance to the master the arguments she raised to the Court of Appeals. See McCall v. State Farm Mut. Auto. Ins. Co., 359 S.C. 372, 597 S.E.2d 181 (Ct.App.2004) (an appellant cannot raise an issue on appeal that was raised by the respondent at trial, but on which appellant advanced no arguments to the trial court; the argument must have been raised by appellant in order for appellant to raise it on appeal).
The dissent suggests finding this issue unpreserved constitutes "an over-zealous application of appellate preservation rules." This observation fails to recognize, however, the importance of our preservation requirements:
I'On, L.L.C. v. Town of Mt. Pleasant, 338 S.C. 406, 422, 526 S.E.2d 716, 724 (2000).
Moreover, it is unclear why the dissent focuses such a substantial portion of its discussion on the preservation of petitioner's arguments when it ultimately states it would reverse the master not based on the arguments forwarded by petitioner, but for a reason not advanced by either party.
Additionally, Lewis's arguments concern only which party breached the lease and the representations contained therein. Although it is axiomatic that we sit to correct errors of law, that broad maxim does not trump the longstanding requirement that any error of law we correct must first be argued to us and supported by authority. Accordingly, I would not reach the issue of the legality of the lease. See Rule 208(b), SCACR.
The lease agreement provided that the security deposit served as "security for the performance of the Lessee's obligations under this lease, including without limitation the surrender of possession of the premises to Lessor...." Lewis clearly made the argument that, because Atlantic defaulted by remaining at the premises without paying rent, Lewis was entitled to apply the security deposit to cure that default. Thus, this issue was fully vented at trial.
