South Carolina

Court of Appeals handles complicated easement/foreclosure case

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In Maybank 2754, LLC v. Zurlo, * South Carolina’s Court of Appeals dealt with issues surrounding whether an easement was created and, if so, whether that easement was wiped out through a foreclosure.

The lawsuit centers around two properties located along Maybank Highway in Charleston County. The dominant estate, owned by Maybank, is occupied by an office building containing leased office spaces. The servient estate, containing sixty acres, was purchased by Penny Creek Associates, a company owned equally by Michael LaPlante and Respondent Zurlo Trust.

Initially, Penny Creek owned all of Maybank’s membership interests. In 2013, those membership interests were transferred to the LaPlante family. Shortly after that transfer, Zurlo Trust and others commenced a derivative and judicial dissolution action against Penny Creek. That matter settled in 2016 with an agreement for Penny Creek to wind up its business, sell its real estate, and terminate its LLC status.

The LaPlante family currently retains all membership interests in Maybank. In its complaint, Maybank alleged that as a part of the transfer of the membership interests, Penny Creek granted the LaPlante family a thirty-foot easement, and that the LaPlante family assigned that easement to Maybank. Zurlo Trust and Michael LaPlante each owned fifty-percent of Penny Creek at the time of the transfer.

In 2017, the servient estate was sold as a part of a foreclosure action Wells Fargo brought against Penny Creek. Respondent 1776, LLC, an entity Maybank alleges is owned entirely by Zurlo Trust, bought the property at the foreclosure sale and sold the portion of the property over which the alleged easement runs to Respondent Beach Fenwick, LLC.

In January 2020, Maybank brought the subject action seeking a declaratory judgment that it has an easement, or, in the alternative, that the private right-of-way is a restrictive covenant. The lawsuit also alleged civil conspiracy and requested a temporary injunction to stop development on the easement.

Respondents filed a motion to refer the 2020 action to the Master on the theory that the Master had retained jurisdiction after the foreclosure. Maybank objected on the grounds that it has requested a jury trial. Maybank also argued that it had not been a party in the foreclosure and, therefore, its rights could not have been extinguished by the foreclosure.

The matter was referred to the Master, and Maybank appealed. The Master held a status conference while that appeal was pending. Maybank objected. The Master sent the matter back to the Circuit Court, and the Respondents filed motions for summary judgment. Maybank filed a motion to amend the Complaint. Respondents then filed a motion with the Court of Appeals to dismiss the appeal.

The Circuit Court held a hearing on the motions for summary judgment, and Maybank filed a Rule 59 (e) motion that the Circuit Court denied. This appeal followed. The Court of Appeals then issued an order denying Respondents’ motion to dismiss the first appeal.

Please refer to the 25-page case for the complicated procedural trial and appeal issues. The Court of Appeals held, for example, that Maybank was entitled to a jury trial.  I’d like to simply make a couple of points involving real estate law.

At the heart of the complaint is the alleged creation of an easement. In 2013, Penny Creek was Maybank’s then sole member. Zurlo Trust and Michael LaPlante executed a Resolution of Sole Shareholder that memorialized Penny Creek’s approval of a sale, transfer and conveyance of Penny Creek’s membership interest in Maybank to the LaPlante family.

The Resolution contained language to the effect that Penny Creek agreed to grant to the LaPlante family, their successors and assigns, a thirty-foot easement for pedestrian and vehicular access, the location and condition of which shall be mutually agreed upon at the completion of a roadway known as Pitch Fork Road. The Resolution was never recorded, and Pitch Fork Road has yet to be competed.

The Circuit Court concluded that the Resolution did not meet the essential elements required to create a property right because it lacked any identifiable location or condition, duration or scope. The Circuit Court concluded that the Resolution created only an agreement to agree. The Court also stated that, even if the Resolution created some form of an easement, it was never recorded, preventing a finding of actual or constructive notice of an easement. And if the easement did exist, it failed to survive the foreclosure.

The Court of Appeals reversed and remanded after Maybank successfully argued that the foreclosure did not affect its rights because it was not a party to that action. The Court of Appeals also agreed with Maybank that the Resolution clearly expressed the parties’ intention to create an easement.

The Court of Appeals discussed the character of the easement (appurtenant, in gross, or in gross commercial) agreeing with Maybank that parol evidence could be properly considered to determine the character to be an appurtenant easement. Summary judgment was held to be improper because the language of the Resolution is ambiguous as to the character of the easement.

Again, I am ignoring many trial and procedural issues. Please read the case! But one point of this litigation for real estate lawyers is the importance of careful drafting and recording documents to create interests in real estate. This case is an example of a real estate lawyer’s nightmare.

*South Carolina Court of Appeal Opinion 6081 (August 7, 2024)

Court of Appeals tackles basic real estate issue

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Last week, this blog discussed a South Carolina Court of Appeals case involving the rule against perpetuities. This week, we look at the Court’s take on another basic real estate issue, King’s and sovereign grants. East Cherry Grove Co., LLC v. South Carolina* involves a dispute over dock permit over tidelands properties in North Myrtle Beach.

Matt Leonhard applied to DHEC for the permit over tidelands property adjacent to his property. East Cherry Grove Co., LLC and Ray & Nixon, LLC (collectively, Respondents) claimed they each owned a portion of the tidelands property, and the Circuit Court agreed.

The State of South Carolina appealed, making several legal arguments, including ownership by the State of navigable waterways, and the propriety of testimony by a real estate lawyer as to title even though he was not a surveyor.

At the Circuit Court’s bench trial, four King’s and sovereign grants were admitted into evidence. William Deschamps, a real estate lawyer, testified he searched the titles of the respective properties back to the grants. He testified he had no doubt that the properties were subject to the grants based on all the survey information and his review of the titles. On cross examination, he admitted he was not a surveyor and clarified that he was not rendering a surveying opinion but was basing his opinion on his title examinations after reviewing the grants in conjunction with the surveys.

A surveyor also testified and was asked if the property in question came from the grants. His response was, “There’s no other place it could have come from.” 

The Circuit Court ruled that the Respondents met their burden of proof by a preponderance of the evidence that they owned their respective properties by virtue of the Grants. On appeal, the State argued that a clear and convincing standard should have been applied instead. The Court of Appeals agreed with the Circuit Court, stating that our case law provides that the State possesses presumptive title of tidelands property, and the person seeking to establish private ownership must present evidence to rebut the presumption.

The Court of Appeals agreed with the State, however, as to small portions of the East Cherry Grove tract that were outside of the grants.

The State argued that the titles should have been based on a particular plat rather than the plats relied upon by the Respondents because of the specificity of the State’s preferred plat. The Court of Appeals concluded that the Circuit Court had not erred in weighing all the evidence of title.

For simplicity, I’m omitting other issues that were argued but failed. Please read the case in its entirety for an interesting discussion of testimony in a real estate case.

*South Carolina Court of Appeals Opinion 6068 (July 3, 2024)

We have a new rule against perpetuities case!

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Dirt lawyers have been known to joke that after decades of successfully practicing real estate law, they have never encountered a true rule against perpetuities situation. Here is one such situation that arose in Columbia and made it to our Court of Appeals this year.

Spring Valley Interests, LLC v. The Best for Last, LLC* involved a perpetual option to purchase a 74.425% undivided co-tenancy interest in real estate located in Columbia.

In 2017, Spring Valley’s predecessor, White Interests Limited Partnership, entered into an agreement with Best through which White loaned Best $800,000. Best used the loan proceeds to purchase the property. As a part of the consideration for the loan, Best granted White the freely assignable perpetual option. The language of the option contains no termination date other than a statement that Best would exercise the option at its sole discretion by delivery of a written notice no later than thirty days before the intended closing.

White assigned the option to Spring Valley, and in 2019, Spring Valley sent Best a letter exercising the option. Best objected to the purchase of the undivided co-tenancy interest and, instead, insisted that Spring Valley exercise the option by becoming a member of Best. The parties negotiated and nearly came to an agreement except for Spring Valley’s insistence on certain attorneys’ fees.

Spring Valley filed a complaint seeking specific performance of the option. Best filed an answer asserting defenses including that the option was void because it violated the common law rule against perpetuities. Spring Valley asserted that our common law rule was preempted by our statutory rule against perpetuities (S.C. Code § 27-6-10, et seq.), which became effective in 2007.

The common law rule mandates that any interest not certain to vest within a life in being plus 21 years is void. The statutory construction provides for a ninety-year wait-and-see period that would likely save otherwise violative transfers. The statutory construction states that it supersedes the common law rule, but also states that it does not apply to nonvested property interests arising out of nondonative transfers.

Best eventually filed a motion for summary judgment, which the circuit court granted, stating that the statute does not apply to nondonative transfers and, therefore, cannot replace the common law; thus the common law is the appropriate legal standard to conclude that the option is unenforceable. The Court of Appeals affirmed.

The Court of Appeals stated that most states that have adopted a form of the uniform rule seem to conclude that such adoption removes commercial transactions from the common law rule and the uniform rule. But South Carolina was the first state to adopt a form of the uniform act, and the Court said it cannot say with certainty that the abolishment of the common law rule was the legislature’s intent at the time.

Also, according to the Court, the complete abolition of the common law rule without some provision for limitations in commercial transactions risks putting two legal principles at odds—freedom to contract and restrictions on alienability.

Since the Court believed it could construe the statutory construction in a manner that preserved the common law, it affirmed the lower court’s ruling finding the option void under the common law.

I would not be surprised to see this case go to our Supreme Court.

*South Carolina Court of Appeals Opinion 6070 (July 10, 2024).

The State reports Zillow is suing Richland County

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The State newspaper reported on July 2 that the home-buying site Zillow is suing Richland County. The claim is that the County is violating public records laws by failure to reply to a Freedom of Information (FOIA) request for property tax data.

The article reports that in May, Zillow requested property assessment data from Richland County by submitting multiple FOIA requests. The County first responded that it did not have any records matching the request. Then, the County denied the request because the requested information is available online and argued that state law does not require the County to create new documents to fulfill a FOIA request.

Zillow argued, according to the article, that not all the assessment information for every parcel in the County is available online. Zillow had apparently requested an electronic copy of the assessment files for all the parcels instead of the option to search parcels one by one. The company apparently didn’t want to have to search titles in the manner of South Carolina real estate professionals.

Zillow also argued that it had received the requested information in prior years. Before 2022, the company said it had received the assessment date from the County each year in the format the company requested, which was an electronic file that contained all assessment information. The lawsuit claims the company paid about $8,800 per year for that information.

Zillow is now suing for the requested information and demanded that the County pay Zillow’s legal fees if the lawsuit is successful. We’ll see what happens with this one!

SC Legislature provides fix for MV Realty problem

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This blog has previously discussed MV Realty, as title examiners reported finding “Homeowner Benefit Agreements” or “Exclusive Listing Agreements” filed in the public records as mortgages or memoranda of agreement. The duration of the agreements purported to be forty years, and searches revealed hundreds of these unusual documents filed in South Carolina. The documents state they create liens against the real estate in question.

The company behind these documents is MV Realty PBC, LLC which appeared to be doing business in the Palmetto State as MV Realty of South Carolina, LLC. The company’s website indicated the company would pay a homeowner between $300 and $5,000 in connection with its Homeowner Benefit Program. In return for the payment, the homeowner agreed to use the company’s services as listing agent if the decision was made to sell the property during the term of the agreement. The agreements typically provided that the homeowner may elect to pay an early termination fee to avoid listing the property in question with MV Realty.

The company has been the target of litigation and legislation in many states, and, thankfully, Governor McMaster signed South Carolina Code §27-28-10, et seq., into law on May 20. This legislation effectively bans these long-term listing agreements.

The legislation defines a real estate service agreement as a “written contract between a service provider and the owner or potential buyer of residential real estate to provide services, current or future, in connection with the maintenance, purchase, or sale of residential real estate.” Under the new law, a real estate service agreement is “unfair” and void if it is intended to be effective for more than one year; 1) expressly or implicitly purports to run with the land and bind future owners of the property; 2) allows for the assignment of the services contract without notice or consent of the owner; or 3) creates a lien, encumbrance, or security interest on the property.

Under the legislation, any recorded unfair real estate services contract is no longer effective as a lien, encumbrance or security interest against property. The recording of this type of document no longer serves as constructive notice to any interested party in the real estate. And no additional filing is necessary to void the unfair agreements or to clear the public records.

Further, the property owner of the real estate may collect actual damages, costs and attorneys’ fees resulting from the filing of the contract. Such contracts are expressly stated to be in violation of the South Carolina Unfair Trade Practices Act.

Contact your friendly title insurance company underwriter if you have questions about these documents, but these documents should no longer create title problems for South Carolina dirt lawyers. Some things do work out as they should!

Captain Sam’s Spit is in the news again

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This blog has discussed “Captain Sam’s Spit” in Kiawah Island three times before. Googling that picturesque name will reveal a treasure trove of news, opinion and case law involving the proposed development of a beautiful and extremely precarious tract of pristine beach property on South Carolina’s coast.

In the news, reported by WCSC- TV (Charleston), the town of Kiawah Island, the Kiawah Island Community Association, and the Kiawah Conservancy filed a breach of contract suit against KDP II, LLC, the owner of the spit. According to the reporting, the lawsuit alleges that a 2013 development agreement required KDP to deed a portion of the property to the Kiawah Island Community Association as community open space and to place all remaining undeveloped lands under a conservation easement to be held by the Conservancy.

The most recent blog discussed the 2021 Supreme Court case the latest case* in which the Court refers to the property as one of our state’s only three remaining pristine sandy beaches readily accessible to the general public. The other two beaches are Hunting Island State Park and Huntington Beach State Park. I enjoy the blessing of walking the pristine beach of Huntington Beach State Park on a regular basis, so despite having a career on the periphery of real estate development, I am in favor of maintaining these three state treasures.

The South Carolina Bar’s Real Estate Intensive seminars have included field trips to Captain Sam’s Spit, from a distance at least. Professor Josh Eagle of the University of South Carolina School of Law was an excellent tour guide, and how many opportunities do we, as dirt lawyers, have for field trips? The South Carolina Environmental Law Project, located in Pawleys Island, fights these cases. Amy Armstrong, an attorney with that entity, joined our group to explain the environmental and legal issues.

Here are greatly simplified facts. Captain Sam’s Spit encompasses approximately 170 acres of land above the mean high-water mark along the southwestern tip of Kiawah Island and is surrounded by water on three sides. The Spit is over a mile long and 1,600 feet at its widest point, but the focal point of the latest appeal is the land along the narrowest point (the “neck”), which is the isthmus of land connecting it to the remainder of Kiawah Island. The neck occurs at a deep bend in the Kiawah River where it changes direction before eventually emptying into the Atlantic Ocean via Captain Sam’s Inlet.

The neck has been migrating eastward because of the erosive forces of the Kiawah River. The “access corridor”—the buildable land between the critical area and the ocean-side setback line—has narrowed significantly in the past decade to less than thirty feet. Googling this issue will lead to active maps which show the change over time. The width of the neck is significant because the developer needs enough space to build a road. At the base of the neck is Beachwalker Park, operated by the Charleston County Parks and Recreation Commission. Our fieldtrips were conducted on that Park.

Twice before, the administrative law court (ALC), over the initial objection of DHEC, has granted permits for the construction of an extremely large erosion control device in the critical area. In both cases (citations omitted), the Supreme Court found the ALC erred. The 2021 case arose from the ALC’s third approval of another structure termed “gargantuan” by the Supreme Court—a 2,380-foot steel sheet pile wall designed to combat the erosive forces carving into the sandy river shoreline in order to allow the developer to construct the road to support the development of fifty houses. The Court again reversed and, in effect, shut down the proposed development, at least temporarily. The economic interests of an increased tax base and employment opportunities do not justify eliminating the public’s use of protected tidelands, according to the Court.

I wouldn’t be surprised to see future appellate court cases involving this property.

*South Carolina Coastal Conservative League v. South Carolina Department of Health and Environmental Control, South Carolina Supreme Court Opinion 28031 (June 2, 2021)

Court of Appeals affirms DeBordieu’s groin permit

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Photo from DeBordieu.com

South Carolina’s Court of Appeals affirmed the permit issued by DHEC to DeBordieu Colony Community Association for the construction of anti-erosion groins on DeBordieu Beach*.

In this appeal from the Administrative Law Court, South Carolina Coastal Conservation League contended that the ALC erred in finding the groins would be placed in a high erosion area, that the erosion threatened existing structures, and that the groins would not detrimentally impact the downdrift of sand to other beaches.

The Court defined a groin in footnote 2, referring to DHEC Regulations, as “a structure designed to stabilize a beach by trapping littoral drift. Groins are usually perpendicular to the short and extend from the shoreline into the water far enough to accomplish their purpose.”

The application for the permit was around 2,600 pages, and testimony was solicited by all sides from numerous experts. The Court acknowledged that while differing sides can reasonably debate methods to prevent erosion, our statutes allow the construction of new groins under specified conditions. The Court found that the ALC’s decision, based on probative, substantial, and reliable evidence in the record, is not clearly erroneous nor is it arbitrary or capricious.

An appeal to South Carolina’s Supreme Court is certainly expected in this case.

*South Carolina Coastal Conservation League v. South Carolina Department of Health and Environmental Control, South Carolina Court of Appeals Opinion No. 6058 (May 1, 2024)

Richland County passes short-term rental regulations

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Richland County passed an ordinance on April 9 to attempt to regulate short-term rentals. The ordinance requires Airbnbs, VRBO and other short-term rentals to obtain business licenses and pay a 3% accommodation tax monthly.

The ordinance applies only to unincorporated areas of Richland County, but the City of Columbia previously passed a similar ordinance.  Other South Carolina jurisdictions have similar regulations.

Short-term rentals are described as being 30 days or less in duration. The properties will be subject to safety inspections, according to the ordinance. The properties will be required to have at least two parking spaces, and the operators will be required to keep records of all guests who have stayed at the properties during the past two years. The records must include the contact information of the guests.

The County has estimated that it will have no more than 100 short-term rentals particularly since they are only allowed in a handful of mixed-use and commercially-zoned areas of the county. They are not allowed in single-family neighborhoods. The cost of the business licenses will be determined by the annual revenue of the property.

SC Supreme Court approves nonlawyer representation in eviction defense program

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The S.C. State Conference of the NAACP, the S.C. Advocate Program (“Housing Program”) and three prospective nonlawyer volunteers for the Housing Program petitioned our Supreme Court seeking authorization to allow nonlawyer volunteers to provide free, limited assistance to tenants facing eviction in magistrate courts.*

The petition sought a declaratory judgment in the Court’s original jurisdiction that their proposed activities will not constitute the unauthorized practice of law. Dirt lawyers will recognize the Court’s struggle with the UPL issue because it took 18 pages to reach an affirmative answer. More than three pages were devoted to the history of the UPL issue in South Carolina. Many of us can recite that history from memory.

The petitioners argued that the unmet legal needs of tenants facing eviction is an emergency situation justifying immediate action and that 99% of defendants in eviction cases are not represented by lawyers in the proceedings.

Tenants involved in the program will be advised that the volunteers are nonlawyers. The volunteers are required to limit the information they provide to tenants, and they may only:

  • Confirm that the tenant has a pending eviction;
  • Advise the tenant that they should request a hearing and, based on the text of the eviction notice and checking relevant court records, explain how and when to do so; and
  • Provide the tenant with narrow additional advice about the hearing by flagging common defenses, primarily pertaining to notice, that the tenant might be able to raise.

The volunteers will be instructed to avoid conflicts of interest, abide by confidentiality rules, and refrain from revealing any information about the tenant’s situation except to Housing Program staff. The volunteers must refer tenants to legal service providers when issues are beyond the scope of the program, such as when the tenant has a counterclaim, if the tenant does not have a written lease, if the tenant receives a housing voucher or lives in public housing, or when the tenant seeks information in excess of that permitted under the program.

The petition recited that lawyers have reviewed the program and will work closely with the volunteers, evaluating and assisting them.

The petitioners agreed to share data and information about the successes and failures of the program with the Court to allow the Court to weigh the efficacy of the program to determine whether sufficient safeguards are in place to protect the public.

The Court found that the program appears to provide for sufficient training, safeguards, and lawyer supervision so that the volunteers working within the strict limits set forth in the program’s training manual will not engage in the unauthorized practice of law.

The Court approved the program on a provisional, pilot basis for a term of three years, unless extended or terminated by the Court. Petitioners are required to submit annual reports including the date and metrics discussed in the order as well as a written summary of the activities of the program.

*Appellate Case No. 2023-0016089 (February 8, 2024)

Court of Appeals decides interesting conservation easement case

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The South Carolina Court of Appeals issued an opinion* on January 17 that interpreted a conservation easement as it affected two heirs of the original grantor.

In 2004, Benjamin Franklin Knott executed a will granting each of his daughters, Susan and Betsy, approximately one-half of a 371-acre parcel near Huger in Berkeley County. The property was subject to a conservation easement Mr. Knott had previously granted to Wetlands America Trust, Inc., a non-profit organization affiliated with Ducks Unlimited, Inc.

Conservation easements are creatures of statute in South Carolina and elsewhere. Such easements are defined as nonpossessory interests for the purposes of protecting natural, scenic, and open-space areas, ensuring the availability of property for agricultural, forest, recreation, educational or open-space use, protecting natural resources, maintaining air or water quality, and preserving historical, architectural, archeological or cultural aspects of real property. The grantor of a conservation easement receives a tax benefit.

Mr. Knott died in 2009, and his daughters received deeds of distribution to their respective parcels. The only direct road frontage was Cainhoy Road, adjacent to Betsy’s parcel. There was originally indirect access to Susan’s parcel from Charity Church Road via an easement retained when Susan sold an adjacent parcel, but Susan terminated her easement in 2015.

Three years later, Susan asked Betsy if she could use Betsy’s parcel to access Susan’s parcel. According to Susan, Betsy rejected this request. Susan brought this declaratory judgment action arguing that she had an express access easement under the terms of the conservation easement. The Circuit Court granted a partial summary judgment to Susan. Betsy appealed.

The Circuit Court had concluded that under the terms of the conservation easement, Susan, as owner of approximately half of the property, had the right to use the roads crossing over Betsy’s property to access Susan’s property for all activities permitted under the conservation easement.

Among other rights reserved in the conservation easement was the right to maintain and replace existing roads and to construct new roads.

The Court of Appeals agreed with Betsy that the reservations in the conservation easement did not create rights for Susan to access her property via roads on Betsy’s property. The easement rights granted to the Ducks Unlimited entity did not translate to easement rights in favor of Susan as against Betsy. The Court reasoned that if Susan has the rights to use the roads on Betsy’s property, it logically follows that she must have all the other owner’s rights reserved for the grantor as to Betsy’s parcel.

The Court of Appeals concluded that Susan has no rights in Betsy’s property, and the conservation easement’s language does not convey any new rights to any person who is not the owner of the property over which the conversation easement lies.

The Court of Appeals reversed the partial summary judgment and remanded the case for further action by the Circuit Court.

*Floyd v. Dross, South Carolina Court of Appeals Opinion 6044 (January 17, 2024)