Kunst v. Loree

817 S.E.2d 295, 424 S.C. 24
CourtCourt of Appeals of South Carolina
DecidedMay 30, 2018
DocketAppellate Case No. 2015-001536; Opinion No. 5564
StatusPublished
Cited by22 cases

This text of 817 S.E.2d 295 (Kunst v. Loree) is published on Counsel Stack Legal Research, covering Court of Appeals of South Carolina primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Kunst v. Loree, 817 S.E.2d 295, 424 S.C. 24 (S.C. Ct. App. 2018).

Opinion

WILLIAMS, J.:

**32In this civil matter, David Loree appeals the award of actual damages to Scott Kunst on his defamation cause of action. Loree argues the circuit court erred in sustaining the jury's verdict because (1) Loree proved the substantial truth of the allegedly defamatory statements and proved a qualified privilege existed, (2) sufficient evidence did not support the verdict, and (3) the verdict was excessive. We affirm.

**33FACTS/PROCEDURAL HISTORY

This case arose out of David Loree's investigation into the construction of Richard and Barbara Gaby's (the Gabys') home on Lake Keowee, outside of Greenville, South Carolina. In 2004, the Gabys contracted with Kunstwerke Corporation (Kunstwerke) to design and build their residence at The Reserve on Lake Keowee (The Reserve).

Scott Kunst, a former certified public accountant, founded Kunstwerke after he started designing and building custom homes.1 At trial, Kunst explained how his business differed from other firms and contractors, specifically detailing how his unique accounting methods and billing system allowed him to build the custom homes. Instead of utilizing the typical fiduciary construction-account system, Kunstwerke implemented a reimbursement system that allowed the company to advance credit to a client for building materials, which the client later reimbursed.2 To ease the burden on its clients, Kunstwerke compiled daily invoices from vendors and subcontractors into a weekly summary, called a progress billing. It then forwarded the progress billing and copies of the invoices to each respective client every week for reimbursement. Because large amounts of money flowed through Kunstwerke each week, Kunst relied on his clients to trust his ability to manage financial matters involved in constructing their homes.

Because the company advanced credit to its clients, Kunstwerke required its clients to pay their weekly progress billing immediately upon receipt to continue the construction of their homes. Kunst explained any stoppage in payment required Kunstwerke to stop construction to reconcile the client's account. Kunst testified he relied upon Kunstwerke as his only source of income, which he derived from monthly fees3 **34charged to clients for designing and building their homes. Kunst explained that the amount of collected fees remaining after he deducted corporate expenses were available to him as *300a personal draw from Kunstwerke's capital. Consequently, because he did not have a personal checking account, Kunst stated he made personal purchases using personal draws from the Kunstwerke corporate account.

In January 2006, Kunst experienced a "cash crisis." Kunstwerke had numerous projects nearing completion, and while the company was more profitable than it had ever been, Kunstwerke had also extended the most credit in its history. Compounding matters, Kunst claimed that some clients were not making timely payments, and that his bank implemented a new policy that placed ten-day holds on deposits, which prevented deposits from becoming immediately available to Kunstwerke. In February 2006, the Gabys-concerned that Kunst was over budget and not paying subcontractors or vendors-instructed Loree, their employee,4 to investigate the matter. Loree sought to meet with Kunst at The Reserve, and requested that he bring copies of paid invoices and canceled checks-showing the disbursement of funds transferred by the Gabys-to explain what happened to their funds and to reconcile their account. As part of his investigation, Loree contacted numerous vendors, subcontractors, and other Kunstwerke clients to determine the balances of each account and to facilitate timely completion of the Gabys' home.

At trial, Tracy Hilton, Kunst's fiancée, testified she and Kunst received several inquiries from clients and subcontractors asking who Loree was, why he was contacting them, and what was happening with Kunstwerke. Kevin Goad, a vendor, and Glenn Alfonzo, a subcontractor, testified to meeting with Loree in 2006. Both men acknowledged discussing their respective accounting matters related to the Gaby project with Loree, who told them Kunst had taken money from the Gabys and other clients. Goad noted Loree mentioned that Kunst used false invoices to take money from clients and spent client **35money on other projects. Similarly, Alfonzo recalled that Loree claimed Kunst took out an insurance policy on the Gaby project and later canceled the policy to keep the money. Although Loree admitted to contacting numerous vendors, subcontractors, and clients, he denied, or asserted he did not recall, making the statements to Goad or Alfonzo or discussing Kunst's financial matters with anyone.

Upon concluding his investigation, Loree found Kunst had not paid several vendors and subcontractors for some time, despite receiving wire transfers from the Gabys for invoiced amounts.5 To resume construction of their home following Loree's investigation, the Gabys "double paid" and wrote checks directly to certain vendors and subcontractors, even though they allegedly paid Kunst for the same work. In March 2006, the Gabys terminated their contract with Kunst and Kunstwerke. Kunst stated the Gabys stopped paying him during Loree's investigation, and subsequently, other clients stopped making payments as well. As a result, Kunst dissolved Kunstwerke.

In May 2006, the Gabys brought an action (the Gaby Action) against Kunst and Kunstwerke, alleging breach of contract, breach of contract accompanied by fraudulent acts, conversion, and violation of the South Carolina Unfair Trade Practices Act. Kunst and Kunstwerke failed to timely answer the Gabys' complaint, and the circuit court entered default on June 20, 2006. Kunst and Kunstwerke moved for relief from default, but the circuit court denied the motion in December 2006. Following a March 2007 damages hearing, the circuit court issued an order awarding the Gabys actual and punitive damages, and attorney's fees and costs.

After the circuit court denied his motion for relief from default, Kunst brought the current action against the Gabys and Loree on December 19, 2006, alleging defamation, *301tortious interference with contractual relations, unjust enrichment, and intentional infliction of emotional distress. On April 14, 2007, the circuit court issued an order dismissing Kunst's causes of **36action against the Gabys. The court found Kunst's causes of action were compulsory counterclaims under Rule 13(a), SCRCP, that should have been brought in the Gaby Action, and further, were barred under the doctrine of collateral estoppel. Accordingly, only the causes of action against Loree remained.

In March 2009, the circuit court granted summary judgment on Kunst's claims for tortious interference and intentional infliction of emotional distress, leaving only the defamation claim. On September 20, 2010, Loree moved for summary judgment based on collateral estoppel on Kunst's defamation cause of action.

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Bluebook (online)
817 S.E.2d 295, 424 S.C. 24, Counsel Stack Legal Research, https://law.counselstack.com/opinion/kunst-v-loree-scctapp-2018.