Submitted March 1, 2016
From Charleston County Stephanie P. McDonald, Circuit Court
L. Fairbanks, of Beaufort, for Appellant.
Stephen L. Brown, Russell G. Hines, and Perry M. Buckner, IV,
all of Young Clement Rivers, of Charleston, for Respondent.
Delaney appeals the trial court's grant of First
Financial of Charleston, Inc.'s motion to dismiss his
class action complaint for damages and equitable relief under
the Uniform Commercial Code (UCC), alleging the court erred
in (1) dismissing the complaint as time-barred by applying
the incorrect statute of limitations,  and (2)
determining the date the statute of limitations began to run.
October 12, 2007, Delaney entered into a Retail Installment
Contract (the Contract) to purchase a truck from Coliseum
Motors. The Contract was assigned to First Financial, making
it a secured party under the UCC. After Delaney failed to
make payments, First Financial repossessed the vehicle. On
May 2, 2008, First Financial sent Delaney a "Notice of
Private Sale of Collateral" (notice of sale) advising
Delaney of its intention to sell the vehicle. On December 15,
2008, First Financial sold the vehicle.
October 4, 2011, Delaney, as a putative member of a class,
filed this class action, alleging (1) the notice of sale was
insufficient under the UCC, and (2) he was entitled to relief
under section 36-9-625 of the South Carolina Code (2003)
(providing remedies for a secured party's failure to
comply with the UCC). Delaney sought recovery on behalf of
the class members.
Financial moved to dismiss, arguing Delaney's claim was
barred under the one-year statute of limitations applicable
for statutory penalties set forth in South Carolina Code
§ 15-3-570 (2005) (providing a one-year statute of
limitations for actions based on a statute for a penalty).
Delaney filed a response to the motion to dismiss, arguing
the claim was not a statutory penalty, but it was a remedial
claim for damages under section 36-9-625. Delaney argued that
because the claim is remedial, the UCC's six-year statute
of limitations in section 36-2-725(1) (2003) of the South
Carolina Code governing breaches of contract for the sale of
goods applied. In the alternative, Delaney argued if the
recovery is a penalty rather than a compensable remedy, the
action is governed by the three-year statute of limitations
provided in South Carolina Code section 15-3-540(2) (2005)
(applying to "[a]n action upon a statute for a penalty
or forfeiture when the action is given to the party aggrieved
or to such party and the State, except when the statute
imposing it prescribes a different limitation").
hearing on its motion to dismiss, First Financial argued the
action was for a penalty because no contract was alleged to
have been breached; there was no plea for compensatory
damages; the complaint did not allege a tort; and the plea
for relief consisted of the finance charge and ten percent of
the principal amount under the Contract. According to First
Financial, such a plea was governed by the one-year statute
of limitations provided for in section 15-3-570, which would
be triggered by the "commission of the offense."
First Financial also argued Delaney's claim was
time-barred under the three-year statute of limitations,
which was triggered by the issuance of the notice of sale.
argued neither the one-year nor the three-year statute of
limitations applied, and even if the three-year statute of
limitations in section 15-3-540(2) applied, the time had not
expired at the time of the filing because the statute would
have been triggered "not when the letter [was]
received[, but] . . . only when the collateral was disposed
of." Delaney maintained that setting minimum statutory
damages of ten percent of the contract plus finance charges
ensures compliance by creditors and "that[, ] in and of
itself doesn't turn it into a penalty because it is
clearly a substitute for actual damages."
order filed April 30, 2013, the trial court granted the
motion to dismiss. The court found Delaney's sole cause
of action was a statutory penalty because it requested the
finance charge and ten percent of the principal amount of the
obligation, which is the statutorily-mandated award for a
violation of the notice provision pursuant to section
36-9-625(c)(2). Noting the Official Comment 4 to section
36-9-625(c)(2), which provides the specific relief is to be
awarded "regardless of any injury that may have
resulted[, ]" the court found "this fixed formula
is not remedial in nature but rather serves the purpose of
imposing automatic liability for 'every
noncompliance.'" The trial court noted our supreme
court has interpreted the same provision as a statutory
penalty in several cases, and it further noted other courts
have similarly classified the statutory award based on the
uniform UCC model statute, upon which South Carolina based
court next rejected Delaney's argument that section
36-2-725(1) applied, which provides a six-year limitations
period for a breach of contract for the sale of goods under
the UCC. The court noted Delaney did not plead breach of
contract; thus, section 36-2-725(1) did not apply. The court
found the case concerned the sufficiency of notice prior to
the disposition of collateral; thus, the case dealt
"entirely with Article 9's provisions concerning
secured transactions. Article 2's provisions pertaining
to the sale of goods [were] wholly irrelevant." The
court also found general rules of statutory construction
prevented the application of the six-year limitations period.
The court found the "controlling limitations period
should be either S.C. Code Ann. § 15-3-570 or §
15-3-540(2), respectively one or three years." The court
noted general rules of statutory construction require a
specific statute to prevail over a more general statute, and
because Delaney's desired recovery was a statutory
penalty, sections 15-3-570 and 15-3-540(2) spoke "more
directly to the actual allegations in this lawsuit."
the court found Delaney's complaint was time-barred under
either section 15-3-570 or 15-3-540(2). The court found
"[w]hile either statute might be reasonably applied to
this matter, the Court need not decide this inquiry as
[Delaney's] cause of action accrued upon receipt of the
alleged noncompliant Notice of Sale and either statute would
therefore serve as a bar to . . . recovery." As to
section 15-3-570,  the statute specifically states the
commission of the offense serves as the date of accrual. The
court found the statute began to run in May 2008 and expired
in May 2009.
section 15-3-540(2),  the court noted the statute did not
specifically delineate a date of accrual, and it found
"the alleged commission of the offense should similarly
serve as the commencement of the three year statute of
limitations." The court continued,
Unlike an action for actual or compensatory damages,
[Delaney's] action for a penalty focuses on a specific
act of non-compliance . . . that awards automatic relief. The
right to bring the action and thus the proper date of accrual
should be determined by the date on which that alleged
noncompliance occurred. However, this date of accrual would
also coincide with the date on which [Delaney] either knew or
should have known that a violation had occurred.
Furthermore, I find that the legislature intended
[§§] 15-3-570 and 15-3-540 to have similar dates of
accrual. Both govern actions for a statutory penalty and are
nearly identical in language but for the length of the
limitations period. Given that the legislature specifically
enumerated the date of accrual for penalty actions under
§ 15-3-570 to be the date of the commission of the
offense, this Court sees no logical purpose in creating an
alternative date of accrual for penalty actions under §
court granted First Financial's motion to dismiss. After
a hearing, the court denied Delaney's motion for
reconsideration. This appeal followed.
the trial court err in applying the statute of limitations?
the trial court err in finding the action accrued at the time
the notice of sale was received rather than at the time First
Financial disposed of the collateral?
appeal from the dismissal of a case pursuant to Rule
12(b)(6), an appellate court applies the same standard of
review as the trial court." Rydde v. Morris,381 S.C. 643, 646, 675 S.E.2d 431, 433 (2009). The appellate
court is required to construe the complaint in a light most
favorable to the nonmovant and determine if the facts alleged
and reasonably deducible inferences in the complaint would
entitle the plaintiff to relief on any theory of the case.
Id. The court may sustain the dismissal when the
facts alleged in the ...