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)