Atlantic Coast Builders & Contractors, LLC v. Lewis

722 S.E.2d 213, 396 S.C. 479, 2011 S.C. LEXIS 309

• Court: Supreme Court of South Carolina
• Decided: September 26, 2011
• Docket: 27044
• Status: Published

Opinions

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.

FACTS

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:

2. Use. Lessee shall use and occupy the premises for Building & Const, office. The premises shall be used for no other purpose. Lessor represents that the premises may lawfully be used for such purpose.

5. Ordinances and Statutes. Lessee shall comply with all statutes, ordinances and requirements of all municipal, state and federal authorities now in force, or which may hereafter be in force, pertaining to the premises, occasioned by or affecting the use thereof by Lessee.

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 exteri- or, 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.

I. Did the Court of Appeals err in affirming the master-in-equity’s 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)).

On appeal to the Court of Appeals, petitioner argued the master erred in granting judgment in favor of respondent for negligent misrepresentation and breach of contract. The Court of Appeals affirmed the master pursuant to Rule 220(b), SCACR, finding the master properly granted judgment in favor of respondent.

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.¹ See Jones v. Lott, 887 S.C. 339, 692 S.E.2d 900 (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 the law of the case.”). Accordingly, we affirm the decision of the Court of Appeals.

II. Security Deposit

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 returned from petitioner. Although petitioner filed a Rule 59(e), SCRCP, motion to reconsider the master’s initial order, it did not address the issue of the security deposit. Shortly thereafter, respondent filed a Rule 59(e) motion specifically asking the master to consider this issue. Petitioner did not file anything in response to this motion, and never argued to the master that she should retain the security deposit. In its Amended Order, the master found respondent was also entitled to the security deposit, in addition to the damages already awarded.

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.² See Elam v. S.C. Dep’t of Transp., 361 S.C. 9, 23, 602 S.E.2d 772, 779-80 (2004) (“Issues and arguments are preserved for appellate review only when they are raised to and ruled on by the lower court.”). Accordingly, we hold the Court of Appeals properly found the issue was not preserved for review.

CONCLUSION

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

AFFIRMED.³

Acting Justice G. THOMAS COOPER, JR., concurs.

1 . The dissent concludes it was unnecessary for petitioner to argue unjust enrichment on appeal because the master did not award damages for unjust enrichment. While the dissent correctly notes the proper measure of damages for unjust enrichment is the amount of increase in the fair market value of the subject property after improvements, the conclusion that the master did not award damages for unjust enrichment is purely speculative. In fact, the master states, albeit incorrectly, in his order that the measure of damages for unjust enrichment "would be the amount by [which] the defendant was unjustly enriched.” Although this is the incorrect measure, one which petitioner has never challenged, the fact that the master explicitly outlines the measure of damages for unjust enrichment suggests he did in fact award damages based on this theory. The two-issue rule applies where, as here, it is unclear upon which of the multiple theories the judgment below is based, and the petitioner does not challenge all possible theories.

2 . The dissent would find the issue of the security deposit preserved because petitioner argued at trial she should not be required to return the security deposit because respondent stopped making rent payments in May 2003, but continued to occupy the premises through July 2003, preventing petitioner from renting the property to someone else. Although this argument was raised to the Court of Appeals and to this Court, a close review of the record shows this argument was never made to the master in equity. Further, petitioner’s general denial in her Answer that she should return the security deposit is not sufficient to preserve the specific arguments raised to the Court of Appeals. 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 overzealous application of appellate preservation rules.” This observation fails to recognize, however, the importance of our preservation requirements:

Imposing this preservation requirement on the appellant is meant to enable the lower court to rule properly after it has considered all relevant facts, law, and arguments. (Citation omitted). The requirement also serves as a keen incentive for a party to prepare a case thoroughly. It prevents a party from keeping an ace card up his sleeve — intentionally or by chance — in the hope that an appellate court will accept that ace card and, via a reversal, give him another opportunity to prove his case.

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.

3 . The dissent would vacate the master's order and dismiss the case because it finds the lease agreement constituted an illegal contract, requiring us to leave the parties as we found them. We disagree with this conclusion. It is true some courts have taken the position that a lease of premises for a use conclusively prohibited by a zoning regulation is unenforceable because of either the illegality of the purpose itself or the frustration of purpose resulting from the regulation's existence. See 37 A.L.R.3d 1018, § 2[a] (1971). It is only logical that a court would not enforce a lease of this type, as doing so would require the tenant to violate a zoning ordinance. This does not mean, however, the parties should be "left as they are found,” entitled to no relief. A lease under which the contemplated purpose violates a zoning regulation is far different than a situation where two parties intentionally contract to do an act prohibited by statute, or which is contrary to public policy. Further, in instances such as this, where a lease contains a provision warranting the use of the premises for the contemplated purpose, courts have held a tenant may be entitled to damages for breach of warranty where the contemplated use is prohibited by a zoning regulation. 37 A.L.R.3d 1018, § 2[a].