Circuit Court

Court of Appeals answers novel JTROS question

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In the first Advance Sheet of 2022, our Court of Appeals answered a novel question concerning the severance of a joint tenancy with right of survivorship. The case* involved the estate of a father who owned property in Garden City with his son, one of his five children. Father and son had purchased the property together, each owning a fifty percent interest.  

The facts are simple. The property owners entered into a contract to sell the property in November of 2013, prior to the father’s death on December 20, 2013. The transaction closed on December 27, just seven days after the father’s death. The son, who was also the personal representative, treated the sale as if he was the sole owner and claimed the proceeds of the sale individually. His siblings argued that the contract severed the joint tenancy, entitling the estate to half of the proceeds.

The Probate Court and Circuit Court agreed with the siblings, relying on South Carolina Federal Savings Bank v. San-A-Bel Corporation**, which held that a purchaser under a contract has an equitable lien on the property. The Probate Court reasoned that the sales contract entered into prior to the Decedent’s death encumbered the property, entitling the purchaser possession of the property upon payment of the purchase price and entitling the estate to one-half of the proceeds. The Circuit Court found that the Probate Court had correctly interpreted the law.

Dirt lawyers understand the San-A-Bel case sets up a trap for the unwary lawyer who fails to deal with the equitable lien that case established, but we have never understood that case to affect JTROS severance. The Court of Appeals agrees with us. Since neither San-A-Bel nor the JTROS statutes address the question at hand, the Court decided to look at rulings from other states to address the novel issue of whether a contract of sale severs a joint tenancy.

The Court cited cases from the states of Washington and Florida (citations omitted) and decided to follow the Florida court which held that severance does not automatically occur upon the execution of a contract executed by all joint tenants unless there is an indication in the contract or from the circumstances that the parties intended to sever and terminate the joint tenancy.

The Court found that the contract at issue was silent on the severance issue and no extraneous circumstances indicated severance was intended by the parties, so the joint tenancy was not severed by the contract, and the son was entitled to the sales proceeds.  

Dirt lawyers tend to hold our collective breath when our Courts address a novel real estate issue. But I believe that, this time, we can agree that they got it right. Let me know if you disagree with me!

*In the Matter of the Estate of Moore, South Carolina Court of Appeals Opinion 5887, January 5, 2022.

**307 S.C. 76, 413 S.E.2d 852 (Ct. App. 1992).

Don’t Amend Your Master Deed As A Litigation Strategy

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The South Carolina Court of Appeals was not impressed!

The owners of The Gates at Williams-Brice (a great place to tailgate!) were surprised in 2012 when a maintenance company refused to bid on an exterior caulking/sealant job because of perceived construction defects.  Almost immediately, the owners’ association and an individual owner filed a complaint alleging negligence, gross negligence, breach of warranty and strict liability claims. The defendants were numerous developer and contractor entities.

The plaintiffs demanded a jury trial and sought to establish a class action for the condominium owners. The developer filed a motion for a nonjury trial and to strike the class action allegations. The Circuit Court ruled for the plaintiffs, and the defendants appealed. The Court of Appeals, in an Opinion dated August 31*, reversed.

The case contains several practice pointers for dirt lawyers, especially those who draft master deeds and amendments to master deeds and those who represent owners’ associations.

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The Master Deed establishing The Gates at Williams-Brice contained provisions requiring arbitration, waiving the right to a jury trial, waiving the right to a class action, and eliminating the right to secondary, incidental or consequential damages.

The original complaint was filed in December of 2012. An answer, opposing the certification of a class, was filed in May of 2013. Later that month, the complaint was amended to add defendants. And on May 23, the homeowners amended the Master Deed to remove the provisions that thwarted their litigation efforts.

The Circuit Court found that the provisions at issue were no longer within the Master Deed and that the defendants were precluded from enforcing unconscionable arbitration and alternative dispute resolutions that contained oppressive, one-sided terms.

On appeal, the defendants argued that the Master Deed could not be amended retroactively to remove the provisions at issue. Neither party contested that the homeowners’ actions were taken in anticipation of litigation. The Court of Appeals held that the homeowners knowingly, voluntarily and intelligently waived their rights to a jury trial and to a class action when they signed their deeds.

Citing a North Carolina case**, the Court of Appeals said that to remove the agreed-upon waivers retroactively would effectively substitute a new obligation for the original bargain of the parties. The Court pointed to the cites in the North Carolina case that indicate several jurisdictions apply a reasonableness standard when reviewing amendments to covenants and holding a provision authorizing an owners’ association to amend covenants does not permit amendments of unlimited scope; rather, every amendment must be reasonable in light of the contracting parties’ original intent.

The Court of Appeals discounted several cases involving amendments in condominium projects by the Circuit Court as not controlling. One such case found the developer’s amendment to increase maintenance assessments was enforceable against new purchasers. Another case approved an amendment regarding leasing restrictions. A third case found that an owners’ association properly amended covenants to prohibit the developer from advertising on the property. The final case held that an amendment authorizing the association to suspend utilities for unpaid judgments was properly applied against a unit owner because any alleged retroactivity was proper based on the contractual relationship between the association and the unit owner.

Other cases cited by the Circuit Court were dismissed as neither dealing with amendments to condominium declarations nor to master deeds.

The Court stated that it was unaware of any authority in South Carolina that would permit contracting parties to unilaterally alter agreed upon provisions once litigation has started.

The developer also argued that the amendments were ineffective because they failed to obtain the required permission of lenders and other “bound parties” such as the developer. The Court declined to address that issue because of its other conclusions.

What will the Supreme Court say if it gets the opportunity to rule on this issue?

 

*The Gates at Williams-Brice Condominium Association v. DDC Construction, Inc., S.C. Court of Appeals Opinion 5438 (August 31, 2016)

**Armstrong v. Ledges Homeowners Ass’n, Inc., 633 S.E.2d 78 (N.C. 2006)