State ex rel. McLeod v. Brown

Harwell, Justice: The State appeals from an order granting summary judgment to respondent James and dismissing sua sponte its — 283 — complaint against all other respondents. We reverse and remand for trial. Pursuant to South Carolina’s Unfair Trade Practices Act (UTPA), S. C. Code Ann. § 39-5-10, et seq. (1976), the State initiated this action alleging that the respondents were engaged in the manufacturing, promotion, distribution, and sale of transient voltage surge suppressors as devices capable of reducing the amount of electricity used and/or billed for in the average household or business. The State prayed that the court enjoin the respondents from continuing the business and impose a civil penalty of $5,000 for each unfair and deceptive act or practice alleged; that it issue an order requiring respondents to make restitution to anyone in South Carolina who had suffered an ascertainable loss because of respondents’ alleged deceptive acts; and that it award the State costs for bringing the action. Respondents denied any violations of law. The trial court acknowledged a factual question concerning the capacity of transient voltage surge suppressors to reduce electricity bills of purchasers. Nevertheless, the court concluded that respondent James should be awarded summary judgment because (1) he was never a controlling person of the corporation which marketed the devices and (2) any connection he had with the sale of the device had ceased prior to this action’s commencement. Summary judgment should be granted only where it is perfectly clear that no issue of fact is involved. Vaughn, et al. v. A. E. Green Co., Inc., 287 S. E. (2d) 493, S. C., 1982; Murphy v. Hagan, 275 S. C. 334, 271 S. E. (2d) 311 (1980). In his deposition, respondent James attempted to minimize his role in Energymizer System of America, Inc. (EMSA), which was incorporated to own, sell and distribute the energymizer system, and Transcontinental Sales, Inc., which was incorporated to own, operate, market, distribute, buy, and sell energy saving devices. On March 9, 1977, James’ former secretary and lawyer incorporated Transcontinental Sales, Inc. However, James’ secretary stated in her deposition that Mr. James had his lawyer and herself sign the Articles of Incorporation, but that she understood the company was to be Mr. James’ holding company. She had no further knowledge of the company. In a notarized statement, James requested that his — 284 — automobile be registered in the name of his “self-owned” company, Transcontinental Sales, Inc. On June 1, 1977, EMSA was incorporated by respondent Brown and Mrs. Dorothy Irvin. James stated in his deposition that he had no knowledge of EMSA’s incorporation; however, as an initial investor, he owned 25% of EMSA’s stock. Additionally, several people involved with EMSA stated that James was actively involved in running the company. He helped arrange credit financing for the sale of EMSA’s products, told people he was “General Manager” of the company, and had business cards showing him to be in “Regional Sales” for EMSA. At the least, we believe an issue of fact exists concerning James’ role as a controlling person of either or both Transcontinental Sales, Inc. and EMSA. In addition to granting summary judgment to James, the trial court dismissed sua sponte the action against all other respondents. We conclude that the trial court erred by dismissing the action on its own motion without proper notice to appellant. In State v. Parker, 7 S. C. 235 (1875), the trial court had vacated an arrest warrant and dismissed a summons and complaint sua sponte. The Court stated: The circumstance that it was not asked for on behalf of the party for whose benefit it was made cannot properly be passed without notice. It is a dangerous innovation subversive of the conception of the proper limits of judicial authority entertained by our laws. 7 S. C. at 240. We believe that an order substantially affecting a party’s rights should not be made in a case without notice to the party prejudiced by it and an opportunity to be heard. See, Ex Parte Hart, 190 S. C. 473, 2 S. E. (2d) 52 (1939); Varser v. Smith, 187 S. C. 328, 197 S. E, 394(1938); State v. Port Royal & A. R. Co., 45 S. C. 464, 23 S. E. 380 (1895). One ground for both the summary judgment and the dismissal was that the issue was moot because none of the respondents were still engaged in the alleged unlawful practices at the time of the hearing. A review of the Unfair Trade Practices Act rveals that there is no requirement that the defendant still be engaged in the allegedly unlawful acts or practices. S. C. Code Ann. § 39-5-50(a) au — 285 — thorizes the Attorney General to commence an action whenever he has reasonable cause to believe that any person is using, has used, or is about to use any prohibited act or practice. Also, S. C. Code Ann. § 39-5-110(a) authorizes a court to impose a civil penalty against any person who is willfully using or who has willfully used a prohibited method or act. Therefore, this ground for summary judgment and dismissal was based upon an erroneous interpretation of the Act. The trial court’s second ground for dismissal was the State’s alleged inability to prove fraud or to demonstrate irreparable harm or damage to any citizen. Neither of these is a prerequisite to an action under the Unfair Trade Practices Act. The South Carolina Legislature directed that the courts be guided in construing the UTPA by the interpretations given by the Federal Trade Commission and by the Federal Courts to the Federal Trade Commission Act, 15 U.S.C. § 45(a)(1). S. C. Code Ann. § 39-5-20(b). United States Retail Credit Association, Inc. v. F. T. C., 300 F. (2d) 212, 221 (4th Cir. 1962) held that: [I]t is in the public interest generally to prevent the use of false and misleading statements in the conduct of business ... and actual deception need not be shown; a finding of a tendency to deceive and mislead will suffice. And in Royal Oil Corp. v. F. T. C., 262 F. (2d) 741 (4th Cir. 1959), the Fourth Circuit Court of Appeals held that the requisite capacity to deceive could be found without evidence that anyone was actually deceived. Therefore, we conclude the granting of summary judgment to respondent James and the dismissal of the action against all other respondents were error. Reversed and remanded for trial. Lewis, C. J., and Littlejohn and Gregory, JJ., concur. Ness, J., concurs and dissents.