Contract drafters beware!

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SC Supreme Court invalidates builder arbitration clause … and refuses to enforce the severability provision

It’s rare that we read the Advance Sheets and pause to say “wow”, but this is one of those cases! Damico v. Lennar Carolinas, LLC* is a construction defect suit brought by a number of homeowners against their homebuilder and general contractor, Lennar Carolinas, LLC. The case involves new homes in The Abbey, a subdivision in the Spring Grove Plantation neighborhood located in Berkeley County, consisting of 69 single-family homes constructed between 2010 and 2015. The suit alleged, among other things, negligence, breach of contract, and breach of various warranties.

Lennar moved to compel arbitration. The Circuit Court denied the motion to compel, finding the contracts were grossly one-sided and unconscionable and thus the arbitration provisions were unenforceable. The Court of Appeals reversed, citing a United States Supreme Court case** that forbids consideration of unconscionable terms outside of an arbitration (the Prima Paint doctrine).

The South Carolina Supreme Court agreed with the Court of Appeals that the Circuit Court violated the Prima Paint doctrine but agreed with the homeowners that the arbitration provisions, standing alone, contain a number of oppressive and one-sided terms, thereby rendering the provisions unconscionable and unenforceable.  The Court further declined to sever the unconscionable terms from the remainder of the arbitration provisions.

The Court denied severability for two reasons. First, enforcing the severability provision would have required the Court to blue-pencil the agreement regarding a material term of the contract, a result strongly disfavored in contract disputes. Second, as a matter of policy, The Court found severing terms from an unconscionable contract of adhesion discourages fair, arms-length transactions.

The Court said that if it honored the severability clause in such contracts, it would encourage sophisticated parties to intentionally insert unconscionable terms—that often go unchallenged—throughout their contracts, believing the courts would step in and rescue them from their gross overreach. This is not to say, according to the Court, that severability clauses in general should not be honored, because the courts are constrained to enforce a contract in accordance with the parties’ intent.

Rather, the Court said it merely recognized that where a contract would remain one-sided and be fragmented after severance, the better policy is to decline the invitation for judicial severance.

I read this case to be a clear message to lawyers that it doesn’t pay to be too clever in drafting contracts.

The Court defined unconscionability to mean the absence of meaningful choice on the part of one party because of one-sided contract provisions, together with terms that are so oppressive that no reasonable person would make them and no fair and honest person would accept them. The touchstone of the analysis begins with the presence of absence of meaningful choice coupled with unreasonably oppressive terms.

What was so horrible about the contract in question?

One provision gave Lennar the sole discretion to include or exclude its contractors, subcontractors and suppliers, as well as any warranty company and insurer as parties in the arbitration. The Court said that it is a fundamental principle of law that the plaintiff is the master of the complaint and the sole decider of whom to sue for the injuries. Giving Lennar the “sole election” to include or exclude parties strips the homeowners of that right, according to the Court. Taken to its logical conclusion, this provision could require homeowners to litigate with some defendants and arbitrate with others.

Another provision said the homeowners “expressly negotiated and bargained for the waiver of the implied warranty of habitability (for) valuable consideration…in the amount of $0.”

Similarly, the contract specifically stated that the “(l)oss of the use of all or a portion of your Home” is not covered by its warranty to new homebuyers.

Another provision stated, “(T)his Agreement shall be construed as if both parties jointly prepared it”, a blatant falsehood, according to the Court, “and no presumption against one party or the other shall govern the interpretation or construction of any of the provisions of this Agreement.”

The Court found that these and other terms of the contracts to be absurd, factually incorrect, and grossly oppressive.

The Court pointed to the fact that Lennar is significantly more sophisticated than the consumer homeowners, creating a disparity in the parties’ bargaining power and that South Carolina has a deeply-rooted and long-standing policy of protecting new home buyers.

The Court said, “It is clear that Lennar furnished a grossly one-sided contract and arbitration provision, hoping a court would rescue the one-sided contract through a severability clause. We refuse to reward such misconduct, particularly in a home construction setting.”

WOW!

Lawyers who represent consumers should wave this case in the face of parties who claim contracts can never be negotiated. Every contract can be negotiated, and this case is clear evidence that this fact is true in South Carolina. Consumer lawyers, this is your case!

*South Carolina Supreme Court Opinion 28114 (September 14, 2022)

**Prima Paint Corp. v. Flood & Conklin Mfg. Co, 388 U.S. 395 (1967)

FEMA’s action causing many homeowners to drop flood insurance

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Devine St. and Crowson Rd., Columbia, SC during the “1000-year flood” of 2015

If you have clients who are complaining about the rising cost of flood insurance, there may be a good reason for those complaints. This issue came to my attention through The DIRT listserv which I have recommended to South Carolina dirt lawyers several times. If you haven’t already, subscribe to this listserv for interesting discussions of current real estate topics.

In 2021, FEMA announced that the National Flood Insurance Program (NFIP) was shifting to a risk-based premium system. The new system is called Risk Rating 2.0, and it attempts to base premiums on the actual characteristics of individual properties rather than simply referring to “flood maps”. I’d like to refer everyone to this article from ClimateWire dated August 27, 2022.

According to the article, FEMA’s shift was intended to encourage more homeowners to buy flood insurance by showing more precisely the risk that each property faces of being flooded. The shift has apparently caused the opposite result. Many homeowners have dropped FEMA flood insurance based on increasing premiums. It should be noted that many premiums were also reduced.

Closing attorneys understand all too well that properties in high-risk flood zones require flood insurance if the property owners obtain federally backed mortgages. The individuals who are dropping the coverage are not those who have such mortgages. Many of the individuals opting out of flood insurance because of increased costs are low-income individuals in coastal areas.

The article states that the number of NFIP policies dropped from 4.96 million in September of 2021 to 4.54 million in June of 2022. The declining numbers cause concerns that owners whose homes are flooded will not be able to rebuild or recover financially, and that low-income households will suffer the most.

FEMA told the reporter that many factors could influence the drop in policy holders, including the economic impact of the pandemic, inflation, the housing market, and the affordability of purchasing flood insurance from the private market. It is not clear how many people who dropped NFIP policies have bought flood insurance through private insurers. In other words, FEMA does not consider that its change in premium calculations is the sole cause of the problem.

We need to pay attention to this issue as Congress wrestles with possible solutions. It is certainly dangerous to have flood insurance priced in a way that fails to protect low-income homeowners who live in the most precarious areas geographically.

Do you represent residential condominium HOAs or residential lenders? Do you handle residential condominium closings?

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This news from Fannie Mae negatively impacts condo closings

This blog has previously discussed the June 24, 2021 collapse of the 136-unit Champlain Towers South condo project in Surfside, Florida.

South Carolina has many aging condominium projects, particularly along our coast. And we have earthquake issues to consider. Do our local homeowners’ association boards face expensive repair and inadequate reserve dangers like those in Florida? These concerns may impact HOAs, lenders and purchasers. Dirt lawyers should be prepared to assist their clients in navigating these concerns.

Fannie Mae has addressed this issue by issuing Lender Letter (LL-2021-14), which took effect on January 1 of this year. The letter directs lenders that make loans on condominium projects containing five or more attached units to gather information from owners’ associations about potential unsafe conditions.

Dale Whitman, the esteemed retired professor from the University of Missouri School of Law who moderates the national Dirt Real Estate Lawyers Listserv has commented on this letter. He said on a January 24 DIRT entry that HOAs are probably not obligated legally to respond to a lender’s inquiry prompted by Fannie Mae’s letter, but a potential buyer of a unit may not be able to obtain a loan absent a response.  

That’s the crux of the problem. If repair and reserve issues arise in connection with a condominium project, it may become impossible to obtain loans.

DIRT also discussed a December 2021 addendum to the condominium questionnaire of Fannie Mae (Form 1076) that asks if there have been any findings relating to safety, soundness, structural integrity or habitability of the buildings in an inspection report, reserve study or government inspection or if the HOA board knows of such issues. This information is requested whether the issues have been resolved or would be resolved. The form requests information of how funds to make repairs will be obtained.

The lender letter points to a growing concern across the nation about aging infrastructure and significant deferred maintenance issues in condominium projects because a majority of these projects were built more than twenty years ago. Fannie Mae states its condominium standards are designed to support the ongoing viability of these projects.  

Fannie Mae will change the status of deficient condominium projects to “unavailable”, and lenders are able to check the status of projects on Fannie Mae’s “Condo Project Manager™” software.

Consider representing wealthy consumers who may seek to purchase expensive coastal condominium units paying cash. How should a closing attorney advise these clients considering these repair and reserve concerns? This is an issue that should be addressed in residential closing practices.

If affirmative coverage is needed for your closing…

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Be sure to advise your client and paper your file!

This blog recently discussed one of the biggest mistakes I made in private practice.  This edition relates a war story where I (thankfully) did the right thing.

I represented real estate developers and rarely handled residential closings.  When my clients developed residential subdivisions and residential condominium projects, I would gladly handle those cookie-cutter closings. And every now and then, another lawyer in my firm would ask for a favor: “Please close our good client’s purchase of a new home so he won’t choose another lawyer the next time he needs representation for his business….and please close it without charging an attorney’s fee.” I bet 90% of my dirt lawyer friends have fielded similar requests. Maybe you were smart enough to say “no”.

The client in this tale was a doctor. I’ll call him Dr. Roe. There are several doctors in my life that I hold in high esteem, but I have never liked representing doctors in legal matters. My experience is that they are too busy to listen to advice. They prefer for the magic to happen without their involvement.

This particular doctor had recently gone through a nasty divorce, and he had found a new home for himself and his four children who would be with him half of the time. This house was in the Hollywood area of Columbia, and the restrictive covenants contained a reverter clause. The clause stated that a violation of the normal residential restrictions would cause title of the lot to revert to the corporation that had developed the subdivision fifty or so years ago.

The reverter clause posed no problem if there was no violation of the covenants. I ordered a new survey and held my breath. The stars did not align for me, and the survey revealed a very slight violation of the side setback line. By very slight, I mean a couple of inches. The house was several decades old, and the violation may have been caused by settling.

I had a great relationship with my friendly title insurance company underwriter and called him to discuss my problem. He was very reasonable, and because of the minuscule violation, he authorized affirmative coverage for the lender as well as the owner. I was relieved but also concerned about relaying this information to my client. To get his attention, I had to set up an appointment at his office to explain the problem and show him the restrictions and the survey.

The bottom line was that he would obtain insurable title but not marketable title. I had seen marketability issues previously in my practice. In a commercial transaction, I saw a buyer walk away from a closing he had decided was not a good deal for him when his lawyer was able to uncover a questionable title problem that he argued defeated marketable title. I didn’t want that to happen to my client when he decided to sell his house.

He wanted the house! I gave him two pieces of advice: (1) when you decide to sell this house, please come to me, and let me help you with the listing agreement and contract. We will draft both documents to provide for insurable title instead of marketable title; and (2) please do not add onto this house in a way to increase the setback violations.

He said he understood completely. Before the closing, I drafted a letter to explain both problems. His signature at closing evidenced that I had delivered both pieces of advice.  Done deal.

Fast forward about ten years. My office phone rings, and a residential closing lawyer friend calls me and says, “Claire, how did you handle this HUGE setback violation for Dr. Roe when you closed his house?” You know the feeling, dirt lawyers, my heart fell, and I lost several years off my life between that call and the moment I could get my hands on the file to see what had happened ten years previously.

Since I had explained marketability vs. insurability to my client verbally and in writing, I was in the clear. It turns out that Dr. Roe added a pool, a very nice and very big pool house and brick fencing, all of which violated the setbacks.

And I got payback! The lawyer who had asked me to handle the closing free of charge was asked to bring the quiet title action to “fix” the title problem. Luckily, the corporation that had imposed the restrictions was defunct, and no surviving officers or directors could be located. The title was cleared with a simple action served by publication. And Dr. Roe paid attorney’s fees and costs.

Never forget that obtaining affirmative coverage does not “fix” title problems. Affirmative coverage often provides a mechanism for a closing to take place, but your client always must be advised that marketable title is unavailable. And your client must be advised of the consequences of accepting insurable title. In writing!

The hazards of drafting survivorship deeds for consumers

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Pay attention to tricky South Carolina law!

More than a decade has elapsed since our Supreme Court surprised dirt lawyers with Smith v. Cutler,* the case that told us there were already in place two survivorship forms of ownership in South Carolina. We apparently missed that day in law school! The two forms of ownership are joint tenancy (which we knew and loved) and tenancy in common with an indestructible right of survivorship (which slipped by us somehow). This is a mini-history lesson about how we got to this state of the law and a reminder for dirt lawyers to carefully draft deeds.

Under the common law in South Carolina, tenancy in common is the favored form of ownership. A deed to George Clooney and Amal Clooney (whether George and Amal are married or not) will result in a tenancy in common. At the death of George or Amal, the deceased’s fifty percent interest in the property will pass by will or intestacy laws. Joint tenancy was not favored in South Carolina, and there was no tenancy by the entirety that would have saved the property from probate (and creditors) for a married couple.

A rather convoluted 1953 case** interpreted a deed that intended to create a tenancy by the entirety as creating a shared interest in property between husband and wife referred to as a tenancy in common with an indestructible right of ownership. This is the case that the Smith v. Cutler Court referred to as creating the form of ownership we missed.

It’s not technically true that all of us missed this form of ownership. Some practitioners did use the language from the 1953 case to create a survivorship form of ownership. The magic language is “to George Clooney and Amal Clooney for and during their joint lives and upon the death of either of them, then to the survivor of them, his or her heirs and assigns forever in fee simple.”  Other practitioners routinely used the common law language: “to George Clooney and Amal Clooney as joint tenants with rights of survivorship and not as tenants in common.”

Conveying title from a person to himself and another person establishing survivorship was not possible in South Carolina prior to 1996 because the old common law requirement of unities of title could not be met. To create a survivorship form of ownership, the property owner conveyed to a straw party, who would then convey to the husband and wife, complying with the unities of title requirement and establishing survivorship.

A 1996 statutory amendment to §62-2-804 rectified this problem by providing that a deed can create a right of survivorship where one party conveys to himself and another person. The straw party is no longer needed. This statute was given retroactive effect.

In 2000, our legislature added §27-7-40, which provides that a joint tenancy may be created, “in addition to any other method which may exist by law” by the familiar words “as joint tenants with rights of survivorship and not as tenants in common”.  The statute addresses methods for severing joint tenancies which typically results in a tenancy in common. For example, unless the family court decides otherwise, a divorce severs a joint tenancy held by husband and wife, vesting title in them as tenants in common.  A deed from a joint tenant to another severs the joint tenancy. A conveyance of the interest of a joint tenant by a court severs the joint tenancy.

Following the enactment of §27-7-40, most practitioners used the language set out in the statute to create a joint tenancy, “as joint tenants with rights of survivorship and not as tenants in common.” Five years later, Smith v. Cutler required us to examine our drafting practices with fresh eyes. The court held that a joint tenancy with a right of survivorship is capable of being defeated by the unilateral act of one tenant, but a tenancy in common with an indestructible right of survivorship is not capable of being severed by a unilateral act and is also not subject to partition.

Real estate lawyers in the resort areas in our state are often asked to draft survivorship deeds because couples from other states as accustomed to tenancy by the entirety. Until Smith v. Cutler, most practitioners did not believe different estates were created by the different language commonly in use. We believed joint tenancy was created in both cases.

Now, clients should be advised about the different estates and should choose the form of ownership they prefer. I’ve discussed this issue with many lawyers who advise married couples to create the indestructible form of ownership. Others who seek survivorship are often advised to create joint tenancy under the statute.  I see many deeds from the midlands and upstate that use the traditional tenancy in common form of ownership. I’ve heard estate planners prefer tenancy in common so the distribution at death can be directed by will. Lawyers who draft deeds for consumers need to be aware of and need to address the various forms of ownership with their clients.

One final thought on the survivorship issue in South Carolina. Do we now have a form of ownership that protects property from creditors of one of the owners? If a tenancy in common with an indestructible right of survivorship is not subject to partition, then it may not be reachable by the creditors of one of the owners. Let me know if you see a case that makes such a determination. It would be an interesting development.

*366 S.C. 546, 623 S.E.2d 644 (2005)

**Davis v. Davis, 223 S.C. 182, 75 S.E.2d 45 (1953)

We have our second Ethics Advisory Opinion of 2021

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It answers two specific trust account disbursement questions

Ethics Advisory Opinion 21-02 deals with two questions posed by a lawyer concerning a trust account disbursement issue.

The lawyer received settlement funds in a significant amount subject to a valid lien, but the exact amount of the lien has not yet been determined. The parties agreed that the funds will not be disbursed until the lien amount is determined. It is expected that the funds will be held for more than a year. The fee agreement provides that the attorney will receive a contingency fee of a specific percentage plus costs. The client wishes to earn interest of the funds.

The questions presented to the Ethics Advisory Opinion are: (1) Is the lawyer permitted to open a separate account for the funds; and (2) Should the entire amount be held in trust or the entire amount minus the attorney’s fees and costs?

The Committee begins with an examination of South Carolina Appellate Court Rule 412 (a)(3) which requires an IOLTA account for “pooled nominal or short-term funds of clients or third persons.” The opinion states that there is no requirement for a long-term trust account to be an IOLTA account.

Rule 412 (d)(1) says a lawyer must exercise good faith judgment in determining whether funds are nominal or short-term. The rule then states that client or third person funds shall be deposited into an IOLTA account unless funds can earn income for the client more than the costs incurred to secure such income. If the funds can be invested in an interest-bearing account for the benefit of the client at an expense less than the costs of securing that income, then a separate account is permitted.

The Committee opined that a separate account is permitted in this case because the funds in question are not nominal, and they are not short-term because they are expected to be tied up for more than a year. The Committee advised that since the attorney has the duty of keeping client funds secure, it would be the best practice to invest the funds in a government insured account. The Committee then reminded the attorney that all normal trust account recordkeeping rules will apply to the separate account.

Finally, the Committee opined that the attorney is free to disburse attorney’s fees and costs immediately. Since those amounts are not subject to the lien, leaving those funds in the account would amount to improper commingling in violation of Rule 1.15(a).

Court of Appeals refiles order setting a timing rule on ATI exemption

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The new rule favors the taxpayer

A case* from the South Carolina Court of Appeals on August 26 concerns South Carolina Code Section 12-17-3135 which allows a 25% property tax exemption when there is an “Assessable Transfer of Interest” of real estate. The issue was one of timing, whether a property owner must claim this exemption during the first year of eligibility.

The order was withdrawn by the Court of Appeals, and a new order with the same result was refiled on December 23, 2020**. In comparing the two orders, I could find only one change, the deletion of a sentence that didn’t appear to affect the result. Perhaps someone involved in the case can point out the reason for withdrawing and refiling the order. Regardless, the Court of Appeals lets the result of its prior decision stand.

The Administrative Law Judge had consolidated two cases. In both cases, the property owner had purchased property during the closing months of 2012. Neither taxpayer claimed the ATI Exemption in 2013, but both claimed it in January of 2014. The Dorchester County Assessor denied the requests, but the ALJ decided the exemptions had been timely claimed.

The statutory language in question provides that the county assessor must be notified before January 31 for the tax year for which the owner first claims eligibility. The taxpayers argued that the plain meaning of this language allows them to choose when to claim the exemption. The Assessor argued that the exemption must be claimed by January 31 of the year following the transfers.

The Court looked at taxation of real property as a whole and held that the legislature intended that all purchasers would have a meaningful opportunity to claim the exemption. Under the Assessor’s interpretation, there would be a much less meaningful opportunity for taxpayers who purchase property later in the calendar year.

The Court also stated that the ATI Exemption is not allowed to override the appraised value set in the statutorily required five-year reassessment scheme, so there would be a built-in time limit for claiming the exemption.

* Fairfield Waverly, LLC v. Dorchester County Assessor, Opinion 5769 (August 26, 2020)

** Fairfield Waverly, LLC v. Dorchester County Assessor, Opinion 5769 (August 26, 2020); Withdrawn, Substituted and Refiled December 23, 2020.

Court of Appeals case may affect title search procedures

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I’m going to talk about this case* gingerly for reasons that will become obvious when you read the caption. I won’t express any opinions, but I want to make South Carolina lawyers aware of this South Carolina Court of Appeals case from last week that seems to create a new wrinkle for title examinations.

At issue in this case are a statute, an ordinance and an official county map.

The statute, S.C. Code §6-7-1220, says “Counties and municipalities may establish official maps to reserve future locations of any street, highway, or public utility rights-of-way, public building site or public open space for the future public acquisition and to regulate structures or changes in land use in such rights-of-way, building sites or open spaces….”

The Ordinance of Horry County, 107-98, passed in 1999, established an official county map to “show the location of existing or proposed public streets, highways and utility rights-of-way, public building sites and public open spaces”.  The ordinance provided that “no building, structure, or other improvement, shall hereinafter be erected, constructed, enlarged or placed within the reservation area…without prior exemption or exception….”

In 2002, Horry County Ordinance 88-202 amended the official map to add “the right-of-way identified as Alternative 1 for the proposed Carolina Bays Parkway…”

Both ordinances were recorded in the Register of Deeds and indexed under Horry County.

A developer purchased 131.40 acres in Horry County in 2006 to develop as a residential subdivision. Title insurance was issued to two mortgage lenders through Chicago Title. The developer defaulted in 2007 and the lenders foreclosed. In 2009, the South Carolina Department of Transportation (SCDOT) filed an eminent domain action to take 10.18 acres of the property for the Carolina Bay Parkway. The lenders submitted title insurance claims, which were denied on the basis of the exclusion for zoning restrictions or ordinances imposed by any governmental body.

Summary judgment for Chicago Title was granted at the trial court, but the Court of Appeals reversed, concluding that the ordinance constituted a defect and an encumbrance.

Title examiners do not search ordinances. Should they now? Stay tuned. I hope this case will be appealed!

*Jericho State Capital Corp. of Florida v. Chicago Title Insurance Company, South Carolina Court of appeals Opinion 5731 (June 10, 2020)

Seabrook Island drainage dispute leads to interesting case

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Owners’ association could not act unilaterally to terminate an easement

Seabrook Island map

The South Carolina Court of Appeals reversed an easement decision from the Charleston County Circuit Court last week and remanded the case for a new trial on compensatory and punitive damages in a controversy surrounding a drainage easement on Seabrook Island.*

The case involved a dispute between two couples, the Ralphs and the McLaughlins, who owned residential lots on Seabrook Island. In 1984, developer E.M. Seabrook, Jr. recorded a plat depicting blocks 32 and 33 of Seabook Island. To alleviate draining issues concerning several lots in block 32, the plat reflected a 20-foot drainage easement running between lots 21 and 22 and depicted a no-build area across the back of the lots.

The Ralphs bought lot 23 in 1997. The McLaughlins’ predecessors bought Lot 22 a year or so later and, in 2002, approached the Seabrook Island Property Owners Association (SIPOA) about eliminating the easement and no-build area on their lot. The SIPOA agreed and prepared a new plat entitled “Plat Showing Abandonment of an Existing 20’ Drainage Easement, Lot 22, Block 32”. The plat also indicated the no-build area was to be abandoned.

The McLaughlins bought Lot 22 later in 2002. In 2006, they approached SIPOA’s Architectural Review Board about building a house. The plans were approved with several stipulations, including the requirement that the McLaughlins assume the responsibility for the underground drainage line and the abandoned draining easement.

Over the course of the next year the McLaughlins sought financing for their construction. At some point, they received a call from the chair of the SIPOA legal committee indicating there were issues concerning the drainage pipe. A meeting was scheduled for the owners of lots 21 – 28 to discuss the easement, and several neighbors objected to the removal of the pipe because of the potential adverse effects on drainage.

The neighbors continued to express concerns, and on October 22, 2008, SIPOA sent a letter rescinding the resolution abandoning the easement. In December, the McLaughlins emailed the neighboring property owners asserting that there was no easement on their property, stating they had been patient with SIPOA, and they would begin constructing their home. They then authorized their contractor to remove the pipe. They built part of their home over the no-build area and the area formerly containing the pipe.

In 2011, the Ralphs filed a complaint seeking actual and punitive damages alleging the McLaughlins caused flooding and poor drainage on the Ralphs’ property. The McLaughlins filed an answer and a third-party complaint against SIPOA alleging reliance on representations. The McLaughlin’s case centered on the theory that they had justifiably relied on SIPOA and the purported abandonment of the easement in removing the pipe.

The circuit court granted SIPOA’s motion for summary judgment, finding there was no evidence to show SIPOA had made any promises to the McLaughlins and, as a matter of law, the McLaughlins could not have reasonably relied on SIPOA. The circuit court also directed a verdict in favor of the defendants on punitive damages because, he said, Mr. McLaughlin believed he had the right to remove the pipe.  At trial, the jury awarded the Ralphs $1,000 in damages for trespass.

The Ralphs argued on appeal that the circuit court failed to apply the findings of fact and conclusions of law in the grant of summary judgment to the SIPOA as the law of the case. The Court of Appeals agreed stating that since the defense was significantly based on the theory that the McLaughlins reasonably relied on SIPOA, the finding that this reliance wasn’t reasonable in the summary judgment motion should have applied to the controversy between the Ralphs and the McLaughlins.

The Court of Appeals also held that the directed verdict as to punitive damages was inappropriate because there was more than one reasonable inference that could be drawn from the evidence that the McLaughlins acted with reckless regard for the property rights of the Ralphs.

Significantly for dirt lawyers, the Court of Appeals held that the SIPOA could not have unilaterally abandoned the drainage easement because every lot owner had an ownership interest in the easement as a result of the plat that originally established the easement and the deeds in the respective chains of title that incorporated the plat by reference. The Court made the point that while it is well settled law that an owner of an easement may abandon the easement, it is also well settled that only easement owners are authorized to take such action.

Since the Ralphs had established an ownership interest in the easement as a matter of law, the Ralphs were entitled to enforce the easement, and the case was sent back to the lower court for a determination of damages by the jury.

Ralph v. McLaughlin, Court of Appeals Opinion 5681 (August 21, 2019)

Happy New Year!

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Let’s make 2019 a great year!

2019 Happy New Year small

2018 has been a difficult year for our work family here in Columbia. Almost every person in our office suffered a personal loss or a difficult illness of a family member during the year. We have supported each other to the extent a work family can provide support, and we have collectively decided to turn the corner and to make 2019 our year. We invite you to join us in that resolution.

Abraham Lincoln said, “Most folks are as happy as they make up their minds to be.” My guess is that he used the qualifier “most” because he recognized that outside forces might lead to unhappiness for some people, but I couldn’t agree more with our 16th president that happiness is usually a matter of choice.

Here in the Bible Belt South, some may believe that faith leads to happiness, but experience suggests that people of faith don’t always choose happiness. Experience also suggests that affluence does not create happiness. In fact, it seems that the opposite may be true in many instances.

I write this blog* for South Carolina real estate lawyers and their staff members, and my goal is to keep us all up to date on real estate issues that may affect our practices.

Abe Lincoln Happiness

Early in my career, I decided to focus on real estate law because I chose happiness. I found real estate law to be a happier choice than litigation, especially the domestic litigation I tried for about five minutes. If the economy is good, then everyone should be satisfied at the end of the closing process. The seller should walk away with funds. The buyer should have a new piece of real estate to inhabit, rent or develop. The lender should have a nice income stream. And the players in the marketplace should be paid fairly for their services in connection with the closing.

Those of us who weathered the economic downturn that began in 2007 are well aware that practicing real estate law does not lead to similar happiness when the economy is terrible. Kudos to all of us who survived and came out the other side of that particularly unhappy season. And here’s to hoping we don’t experience a similar downturn any time soon.

Another realization I made early in my career is that to make money, lawyers have to work very hard, often at a speed and pressure that do not benefit their health and happiness. And if lawyers have to work under those circumstances, then their staff members do as well.

So how do we choose happiness in a pressure-filled real estate practice that is dependent on the economy?

I offer Jon Gordon’s “20 Tips for a Positive New Year” as a suggestion. Jon Gordon is a motivational business speaker I enjoy following. Many of his tips for a positive 2019 focus on choosing to be happy. (But I particularly like his tip #8, “Get More Sleep” as I type this piece at 5:30 a.m.) You can download this excellent advice in poster format to keep at your desk or post in your workroom.

I am going to try to follow Abraham Lincoln’s and Jon Gordon’s advice in 2019. And I invite you to join me!

*Thanks to the readers of this blog! I began writing weekly very late in 2014. Readership has increased from just under 2,000 in 2014 to just over 31,000 in 2018. I’d like to take the opportunity of a new year to thank Martha McConnell and Jennifer Rubin, excellent lawyers in our office, who help me with ideas, redirect my thinking, keep me out of trouble and proofread my work. And I’d like to thank Cris Hudson, IT guru extraordinaire in our office, who handles technical issues. It is definitely a team effort, and I am blessed with a great team! My friend and fellow lawyer, Bill Booth, has also supplied me with a steady stream of ideas. Thanks Bill! If you have ideas for me, please contact me through this blog or at claire.manning@ctt.com.