THE STATE OF
In The Court of Appeals
J. Carroll Rushing, Individually and on behalf of Pentaura, Ltd., Inc., Rushing-Marlow Properties, Inc., and Shasta Enterprises, L.L.C., Appellants,
Larry A. McKinney, Ivan Block and Jefferey J. Weiss, and Pentaura Ltd., Inc., Respondents.
Henry F. Floyd, Circuit Court Judge
Opinion No. 4142
Heard November 10, 2005 – Filed July 31, 2006
J. Richard Kelly and Seann Gray Tzouvelekas, both of
Greenville, for Appellants.
Mason A. Goldsmith, of
Greenville, for Respondents.
BEATTY, J.: J. Carroll Rushing brought suit against Larry A. McKinney, Ivan Block, Jeffrey J. Weiss, and Pentaura Ltd., Inc. (collectively Respondents) asserting breach of contract, fraudulent inducement, fraud, negligent misrepresentation, breach of good faith and fair dealing, breach of fiduciary duty, promissory estoppel, and equitable estoppel arising out of the operation of Pentaura. After a bench trial, the trial court entered a verdict in favor of Respondents, and Rushing appeals. We affirm.
Pentaura was a business incorporated on October 16, 1995, by
At some point in 1996, Block approached Rushing to invest in Block’s separate paint coatings business. Although Rushing was not interested in the paint coatings business, he learned more about Pentaura from Weiss and decided to invest in the company. At that time, Pentaura’s balance sheet reflected $500,000 in notes payable to BB&T, $372,309.29 in inventory, a negative total equity, and showed Pentaura was operating at a loss.
On April 23, 1997, Rushing wrote a letter to
After Rushing became a shareholder, he learned Pentaura’s inventory was $277,781 less than he initially believed. Thus, Pentaura’s need for additional funds was greater. He proposed the other shareholders either contribute more to Pentaura or reduce their percentage ownership in the corporation.
The underlying controversy centers on what occurred at a meeting between Rushing, Grant,
On March 2, 1998, Grant wrote a memorandum to Rushing indicating Block was having serious financial problems. Block confirmed this memorandum with a letter to Rushing on April 3, 1998. Block never paid the requested capital contribution from the February Meeting.
Rushing advanced money to Pentaura from Janauary 1, 1998, to September 24, 2001. Rushing evidenced the advances by a series of one hundred and sixty-six demand notes prepared and executed by Grant on behalf of Pentaura. In December of 2001, a schedule of the loans indicated the total outstanding principal and interest were $4,381,747.38 and $895,950.95, respectively. Each note is payable to Rushing and draws interest at a rate of ten percent. No writing evidences any person or entity (other than Pentaura) as being liable for repayment of these loans.
Pentaura continued to operate at a net loss. On August 18, 1999, Rushing wrote to
Pentaura operated at a net loss of $1,043,276.62 during the year 2000. In September 2000, Rushing informed his banker, Barry Maness, that he was going to approach Respondents to determine if they wanted to “retain their ownership interest by putting in their prorata [sic] share of the $3,000,000 which [Rushing] has invested in the company and matching it going forward or by simply getting out by paying off the debt that existed prior to [Rushing’s] entry in to the business which is to BB&T.” (Maness Memo) On December 19, 2000, Rushing wrote
On June 28, 2001, Rushing again wrote to
McKinney and Block both responded by letters dated July 20, 2001.
Rushing filed a complaint on March 1, 2002, an amended complaint on April 10, 2003, and a second amended complaint on April 23, 2003. In his second amended complaint, Rushing asserted causes of action against
The case was tried without a jury in April and May of 2003. The trial court entered an order finding Rushing was not entitled to recover under any of his causes of action against
SCOPE OF REVIEW
This appeal involves both legal and equitable causes of action. When both legal and equitable causes of action are maintained in one suit, each must be analyzed separately according to its own identity as legal or equitable.
Rushing asserted causes of action against McKinney and Block alleging breach of contract, fraudulent inducement, fraud, negligent misrepresentation, breach of good faith and fair dealing, and breach of fiduciary duty arising from this alleged contract. These are legal causes of action. See Electro Lab of Aiken, Inc. v. Sharp Constr. Co. of Sumter, Inc., 357 S.C. 363, 367, 593 S.E.2d 170, 172 (Ct. App. 2004) (“An action for breach of contract is an action at law.”); Bivens v. Watkins, 313 S.C. 228, 230, 437 S.E.2d 132, 133 (Ct. App. 1993) (applying a legal standard of review on appeal from causes of action alleging fraud, negligent misrepresentation, and breach of fiduciary duty). Therefore, the findings of fact of the trial court will not be disturbed on appeal unless found to be without evidence that reasonably supports the court’s findings. Townes, 266 S.C. at 86, 221 S.E.2d at 775.
However, Rushing also asserted rights under the doctrines of estoppel. “[E]quitable estoppel . . . should be tried by the court as an equitable issue.” Gaymon v.
I. Breach of Contract
Rushing argues a contract arose with Respondents at the February Meeting, and thus, the trial court erred in finding he failed to prove the existence of contract. We disagree.
“For a contract to arise there must be an agreement between two or more parties. There must be an offer, there must be an acceptance, and there must be a meeting of the minds of the parties involved.” Hughes v. Edwards, 265 S.C. 529, 536, 220 S.E.2d 231, 234 (1975). “A contract is an obligation which arises from actual agreement of the parties manifested by words, oral or written, or by conduct.” Regions Bank v. Schmauch, 354 S.C. 648, 660, 582 S.E.2d 432, 439 (Ct. App. 2003).
Rushing testified that Respondents were silent at the February Meeting when he proposed that they would be responsible for their pro rata share of the money Rushing put into Pentaura. Thus, he stated, they agreed with his proposal. However, Rushing made various allegations concerning the specifics of the alleged agreement with Respondents. Rushing’s second amended complaint describes the agreement as one in which “Rushing would advance monies from time to time necessary to fund Pentaura operations in the form of loans with the understanding that in the event Pentaura was unsuccessful, the monies would be treated as loans by [the shareholders] based on the percentage ownership interest of each of them in Pentaura.” In his deposition, Rushing stated he “advanced money for other people for capital contributions.” Later in the deposition, Rushing said he had not made loans to individuals, but he had put money into Pentaura on their behalf. He also testified in his deposition that the money was “loaned to Pentaura to use as capital.” On direct examination, Rushing testified he would loan Respondents “some money to put in their part” with the loans coming due only if Pentaura could not pay them off from earnings. Rushing later testified “[t]his [money] was a loan to Pentaura—no, it’s a loan to the shareholders that Pentaura was using” and “Pentaura was the recipient of the money. My loan of the money was to the shareholders.”
Grant and Weiss, who were at the February Meeting, testified that the agreement was that Respondents would “settle up” or “pay the Piper” with Rushing regarding the loans if Pentaura became unsuccessful. Grant admitted that “settle up” was not defined and that the parties had been given options of settling up in the past by making contributions or giving up some percentage of stock.
Respondents denied that anything rendering them personally responsible was proposed or that they agreed to be personally responsible.
The trial court found no oral contract existed because: “(1) the proposal by Rushing, if made, was too vague and uncertain, (2) there was no meeting of the minds, and (3) silence by Defendants McKinney and Block cannot under the present circumstances be deemed acceptance.” The record is replete with evidence reasonably supporting the trial court’s finding.
We agree with the trial court that it is unclear exactly what the alleged agreement entailed. Rushing alternately asserted the money given to Pentaura was either a loan to the company, a loan to Respondents for Pentaura, or a capital contribution on behalf of Respondents. The February Letter, summarizing what occurred at the February Meeting, failed to mention that Respondents agreed to be personally liable for the notes to Pentaura. Even Rushing’s witness, Grant, testified that the agreement to “settle up” was not defined. Further, the summary of Rushing’s statements to his banker in the Maness Memo indicate Rushing was seeking alternative relief from Respondents in the form of a pro rata contribution or giving up a percentage of stock. Contrary to Rushing’s allegation that Respondents agreed to reimburse him, his July 24, 2001 letters to Block and
It is also unusual that Rushing documented other agreements regarding the shareholders and their relationship to Pentaura, but he failed to document the alleged agreement here. Rushing confirmed the agreement with respect to his entry into Pentaura by letter. Rushing wrote a memorandum to Grant with respect to the February Meeting stating: “Did we get minutes and signatures to show that [
Finally, the record reveals significant tension existed between the parties at the time the alleged contract occurred. This tension is inconsistent with Rushing’s assertion he relied on the silence of
The trial court’s determination that no contract arose at the February Meeting is reasonably supported by Rushing’s inability to articulate the alleged agreement between the parties, Respondents’ denial of the existence of the agreement, the lack of a writing evidencing the alleged agreement when Rushing had reduced similar agreements to written form, and the overriding tension between the parties before the alleged agreement occurred.
Rushing argues the trial court erred in failing to grant equitable relief under theories of equitable estoppel and promissory estoppel. We disagree.
A. Equitable Estoppel
Rushing argues that because Respondents knew Pentaura needed additional funding, he had the right to rely on their silence as assent when he proposed the alleged agreement. Thus, he argues, Respondents are equitably estopped to assert there was no agreement.
“The doctrine of estoppel applies if a person, by his actions, conduct, words or silence which amounts to a representation, or a concealment of material facts, causes another to alter his position to his prejudice or injury.” Hubbard v. Beverly, 197 S.C. 476, 480, 15 S.E.2d 740, 741 (1941). “Prejudice to the other party is an essential element of equitable estoppel.” Janasick v. Fairway Oaks Villas Horizontal Prop. Regime, 307 S.C. 339, 344, 415 S.E.2d 384, 387 (1992). With regard to the party estopped, the elements of equitable estoppel are: (1) conduct amounting to a false representation or concealment of material facts, “or, at least, which is calculated to convey the impression that the facts are otherwise than, and inconsistent with, those which the party subsequently attempts to assert;” (2) the intention or expectation that such conduct shall be acted upon by the other party; and (3) actual or constructive knowledge of the real facts. Southern Dev. Land & Golf Co., v.
The trial court held that the doctrine of estoppel was not available to Rushing because he failed in his corporate duties, had unclean hands, was not justified in relying on McKinney’s or Block’s silence, and should not have proceeded without a clear, unambiguous written agreement.
Rushing did not lack the means of knowledge to discover
B. Promissory Estoppel
Rushing argues Respondents should be estopped from denying the existence of the agreement because they made promises that induced him into paying Pentaura’s operating expenses for years.
The elements of promissory estoppel are:
(1) the presence of a promise unambiguous in its terms; (2) reasonable reliance upon the promise by the party to whom the promise is made; (3) the reliance is expected and foreseeable by the party who makes the promise; and (4) the party to whom the promise is made must sustain injury in reliance on the promise.
Woods v. State, 314 S.C. 501, 505, 431 S.E.2d 260, 263 (Ct. App. 1993).
Rushing failed to show the existence of an unambiguous promise. As discussed above, Rushing could not clearly articulate the terms of the alleged oral contract, including whether the money would be treated as a loan or capital contribution, how much money would ultimately be forwarded to Pentaura, or how Respondents would “settle up.” Moreover, as previously discussed, Rushing’s reliance on the alleged promise of
We hold the evidence reasonably supports the trial court’s conclusion that no agreement arose at the February Meeting that would allow Rushing to advance unlimited money to Pentaura on behalf of
HEARN, C.J., and HUFF, J., concur.
 Weiss defaulted below and is not a party to this appeal.
 Although Rushing points out the funds he advanced to Pentaura were borrowed, the “cost” of these funds to Rushing varied between six percent and 8.875 percent, as evidenced by Rushing’s credit line summary. Therefore, if Pentaura (or
 In addition, Rushing brought causes of action against Pentaura for rent due to Rushing-Marlow Properties, Inc. and Shasta Property, L.L.C., and for collection on the promissory notes of Pentaura payable to Rushing. The court found Rushing could proceed on the action for rent. The current appeal does not concern the rent cause of action.
 The trial court found Rushing had unclean hands because even if the alleged oral agreement existed, it would have meant that Rushing essentially sold either stock or interest in Pentaura’s debt without making full disclosures. Thus, the court found, Rushing’s actions violated the securities laws in effect at the time. See S.C. Code Ann. § 35-1-1210 (Supp. 2004) (holding that it is unlawful for a person to omit material facts in connection with the offer or sale of a security). Rushing also raises this issue on appeal. Because we affirm the trial court’s order based upon his findings that there was no contract and estoppel did not apply, we decline to address this issue.
 Rushing also appeals portions of the trial court’s order finding that: (1) the alleged agreement violated the statute of frauds; (2) the alleged agreement violated the securities laws; (3) McKinney and Block were not personally liable for the payments made on the BB&T notes; and (4) the statute of limitations barred Rushing’s claim on any notes made prior to March 1, 1999. Because we affirm based on the contract and estoppel arguments, we decline to address these additional sustaining grounds.