Monday, May 16, 2011

Case Brief: Rhodes v. McDonald

Rhodes v. McDonald, 345 S.C. 500, 548 S.E.2d 220 (Ct. App. 2001), involves the installation of vinyl siding.  It stands for the principle that a plaintiff cannot recover punitive damages in a breach of warranty action.

FACTUAL BACKGROUND: Defendant Bill Gillespie ("Gillespie") owned and operated an insulation company, Defendant Southern Insulation ("SI").  345 S.C. at 502, 548 S.E.2d at 221.  Plaintiffs contracted with SI to install vinyl siding on their mobile home and extend the room over their kitchen.  Id.  After installation, plaintiffs complained that the siding was "wavy looking."  Id.  Despite assurances that it would "settle down," it became worse and began pulling apart.  Id.  It also led to the roof "bowing up."  Id.

PROCEDURE: Plaintiffs brought an action against defendants for breach of contract and breach of certain implied warranties.  345 S.C. at 501, 548 S.E.2d at 221.  A jury awarded plaintiffs $11,464.50 in actual damages and $27,500 in punitive damages.  Id. at 503, 548 S.E.2d at 221.  Defendants appealed. 

ISSUE: Whether the trial court erred in failing to grant defendants' motions for directed verdict (1) as to Gillespie's individual liability and (2) as to the availability of punitive damages in the breach of contract and breach of implied warranty causes of action.  345 S.C. at 501, 548 S.E.2d at 221.  Defendants also contended that the trial court erred in submitting an improper special verdict form to the jury.  Id.

DISPOSITION: Affirmed with regard to individual liability of Gillespie.  Reversed with regard to award of punitive damages.    The special interrogatories question was not preserved for appeal (and moot in light of the punitive damages reversal).

OPINION: With regard to the availability of punitive damages, the court agreed that the trial court should not have submitted this issue to the jury.  345 S.C. at 503-05, 548 S.E.2d at 221-23.  The measure of damages that a buyer may recover under the Uniform Commercial Code ("UCC") is set forth at S.C. Code sections 36-2-714 and 715.  Id. at 503, 548 S.E.2d at 222.  The court reviewed the wording of both statutes and concluded that the plain language of the statutes indicated intent by the legislature to limit damages recoverable for breach of warranty to actual, incidental, and consequential damages.  Id. at 503-04, 548 S.E.2d at 221-22.  There was no provision for punitive damages in either statute.  Id.  This is further supported by S.C. Code section 36-1-106(1), which provides, in part, that "neither consequential or special nor penal damages may be had except as specifically provided in the act or by other rule of law."  Id. at 505, 548 S.E.2d at 222.  Again, the court pointed out that the UCC does not include such a provision.  Id.  Although punitive damages are allowed in South Carolina in a breach of contract action where the breach is accompanied by a fraudulent act, there was no such evidence in the case.  Id. at 505, 548 S.E.2d at 222-23.

With regard to the trial court's failure to direct a verdict for Gillespie as to his individual liability, the court disagreed.  Id. at 505, 548 S.E.2d at 223.  SI was not incorporated at the time of the contract, and the general rule is that owners of unincorporated companies are not entitled to the same protection as owners of incorporated entities.  Id.

Finally, the court held that defendants had not adequately preserved their argument relating to the trial court's submission of special interrogatories to the jury.  Id. at 506, 548 S.E.2d at 223.  Therefore, the court did not address this issue, but also pointed out that it was moot in light of the reversal of the punitive damages award.

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