Claire T. Manning

US Supreme Court redefines “waters of the United States”

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Dirt lawyers, do you remember studying the cases in first year property classes in law school that defined navigable waters? We discussed the ebb and flow of tides. We talked about whether the water is presently used or had been used in the past or may be susceptible for use in the future for transportation.  I remember discussing whether logs could float and how big a boat must be to make the property qualify as navigable.

When I was in private practice in Columbia representing real estate developers, I ran into significant issues on a routine basis involving the federal government’s jurisdiction over wetlands. One developer was required to add an eight-acre lake to a residential subdivision because a minor portion of the property was soggy. We dealt with the Army Corps of Engineers on these issues, and getting approval for development was tedious at best. And I promise you that those soggy areas were not navigable by any size boat.

The reach of the Clean Water Act (CWA) was significantly constricted when the United States Supreme Court on May 25 issued a decision that narrowed the scope of wetlands and other water subject to the CWA’s protections. The case, Sackett v. EPA*, involved a residential lot in Priest Lake, Idaho.

Mike and Chantell Sackett bought the lot in 2004 for $23,000, intending to build a modest three-bedroom family home. They began building in 2007, and the Environmental Protection Agency (EPA) demanded the construction be halted, claiming it violated the CWA because the property was a federally regulated “navigable water”.

That demand began a 16-year legal battle. The Sacketts sued the EPA, and the case has reached the Supreme Court twice. The first decision involved a procedural matter. The Court decided in 2012 that property owners are entitled to immediate judicial review of EPA compliance orders without waiting for agency to seek judicial enforcement to contest the assertion that properties contain “waters of the United States” subject to CWA jurisdiction.

The case then worked its way through the lower courts until the Supreme Court agreed in 2022 to consider the issue of whether the EPA can define “navigable waters” to include semi-soggy parcels of land.

In January 2023, while the Sackett case was pending, the EPA published a final rule adopting a new definition of “waters of the United States” (WOTUS) to include traditional navigable waters, tributaries, adjacent wetlands and other waters that are not themselves navigable but are either relatively permanent or have a significant nexus to navigable waters. The Sackett case probably invalidates this rule.

The five-person majority held that WOTUS include only: (1) relatively permanent, standing or continuously flowing bodies of water forming geographic features described in ordinary parlance as streams, oceans, rivers and lakes; and (2) adjacent wetlands with continuous surface connection to such waters so that wetlands, as a practical matter indistinguishable from the bodies of water. To prove jurisdiction over a wetland, the EPA must now show that the adjacent body of water constitutes WOTUS (a relatively permanent body of water connected to interstate navigable waters) and that the wetland has a continuous surface connection with that water, making it difficult to determine whether the water ends and the wetland begins.

As I type this, I sit outside on a screen porch listening to birds sing in the previously defined wetlands that adjoin two sides of our house. We bought the lot, in part, because of the beauty and peace provided by wetlands, including the birds, as opposed to human neighbors. I wonder whether our peace and quiet will change.

*U.S. Supreme Court Opinion 21-454 (May 25, 2023)

State Farm will no longer accept new applications for home insurance in California

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My family has a modest second home in North Litchfield Beach. It isn’t close to the ocean. My Fitbit clocks 700 steps to the beach, and most family members prefer to drive a golf cart for that reason. To call it a “raised beach house” is an understatement. Because of flood insurance concerns, the garage level of the house was required to be very tall when we built in 2011.

We can’t paint or power wash with the tallest ladders available to homeowners. If we had a big boat, we could park it in the garage.  My point is that the living area of our house is so far above ground, that if it floods, it is likely that inland Pawleys Island and Georgetown County will also flood.

Thinking all the way back to Hurricane Hugo in 1989, my extended Georgetown County family members evacuated to Columbia to stay with us. Much to everyone’s surprise, our property in Columbia suffered more damage than their properties in Georgetown.

Earlier this year, we received a letter from our insurance agency indicating that it would attempt to obtain insurance for us for the upcoming insurance year, but we should be prepared for difficulty because of the frequency of hurricanes in our area.  There is no reason our house should be difficult to insure other than its location on the beach side of Highway 17.  

I share this information with South Carolina dirt lawyers, particularly those who practice in our coastal counties, for discussion purposes only. I’m not pushing a panic button by any means. But the headlines I read last week about State Farm’s decision to pull out of California as to new homeowners’ applications certainly caught my attention.

State Farm pointed to wildfire risks and construction cost inflation to justify its decision. Everyone is suffering from the latter, and, as to the former, the company didn’t attempt to limit the impact of its decision to those areas most affected by wildfires. Other stated concerns were climate change, reinsurance costs affecting the entire insurance industry, and global inflation. All of those concerns also affect all locations.

The company pulled out of the entire state as to new applications. And some news articles reported that State Farm is the largest insurer based on premium.  The fact that the largest insurer pulled out of the third largest state seems impactful.

The announcement did state that existing customers will not be affected and that automobile insurance applications will continue to be accepted.

There doesn’t appear to be anything we should do at this point, other than to keep our eyes and ears open as to developments in the area of insurance for ourselves and our clients.

Owner of Folly Beach lots loses takings case in SC Supreme Court

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Braden’s Folly, LLC v. City of Folly Beach* involves two small, contiguous developed residential coastal properties on the northeast end of Folly Beach. The City of Folly Beach amended an ordinance to require certain contiguous properties under common ownership, like the properties in question, to be merged into a single, larger property.

The ordinance did not impact the existing uses of the contiguous lots as vacation rental properties, but Braden’s Folly challenged the ordinance, claiming it had planned to sell one of the developed properties, and that the merger ordinance interfered with its investment-backed expectation under the Penn Central** test, which states that in regulatory takings cases, courts must examine the economic impact of the regulation on the property owner’s investment-backed expectations, as well as the character of the government action.

Folly Beach denied the claim of an unconstitutional regulatory taking, and pursuant to cross-motions for summary judgment, the circuit court agreed with Braden’s Folly. Folly Beach appealed to the South Carolina Supreme Court, which reversed and remanded the case for entry of judgment in favor of Folly Beach.

The Court stressed that underlying its applicability of the Penn Central test was the distinct fragility of Folly Beach’s coastline, which was subject to such extreme erosion that the General Assembly exempted Folly Beach from parts of the South Carolina Beachfront Management Act. The exemption empowered the City to act instead of the State in protecting the beach.

A portion of the northeast end of Folly beach has a double row of properties. The “A lots” are directly adjacent to the ocean-side of East Ashley Avenue, and the “B lots”—also known as “super-beachfront” lots—are closer to the ocean. There is no road between the A and B lots, so the B lots are accessible only through the A lots. Between beach renourishments, the B lots could be surrounded by the ocean on three sides. Braden’s Folly owns adjacent lots (Lot A and Lot B) on East Ashley Avenue. Both lots are very small.

Braden’s Folly contended that it had always intended to keep one of the lots and sell the other—whichever received the highest offer—to pay for the construction of a house on each lot. When the merger ordinance passed, the City sent a letter to Braden’s Folly requesting it stop marketing the lots separately. In response, Braden’s Folly filed the subject lawsuit.

The Supreme Court found that some facts weighed in favor of finding Braden’s Folly’s investment-backed expectation was reasonable and some facts weighed in favor of finding its expectation unreasonable. The Penn Central balancing test did not weigh in favor of either party, according to the Court.

Folly Beach and its witnesses set out the advantages to local beachfront property owners and the public at large of unwinding the super-beachfront development. The most important of the benefits to local property owners is the continued existence of federal funding for beach renourishment which in turn (1) protects A and B lots—particularly given that all the lots would be underwater if it were not for the continual renourishment; and (2) avoids property owners paying higher taxes if federal funding is extinguished.

The Court held that the merger ordinance was not a taking but responsible land use policy. Braden’s Folly retains, according to the Court, a near-full “bundle of sticks” incident to its ownership of the lots.

*South Carolina Supreme Court Opinion 28148 (April 5, 2023)

**Penn Cent. Transp. Co. v. City of N.Y., 438 U.S. 104 (1978)

SC Supreme Court upholds Myrtle Beach’s “family friendly” zoning overlay district

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In Ani Creation, Inc. v. City of Myrtle Beach, * the South Carolina Supreme Court upheld an ordinance that imposed a zoning overlay district intended to bolster the “family friendly” nature of Myrtle Beach’s historic downtown area. The ordinance targeted smoke shops and tobacco stores and the merchandizing of tobacco paraphernalia, products containing CBD, and sexually oriented material.

The opinion begins, “The City of Myrtle Beach (the city) is a town economically driven and funded by tourism.” The facts indicate that the city received frequent criticism from tourists and residents that the proliferation of smoke shops and tobacco stores repelled families from the area. The city passed a comprehensive plan that aimed at increasing tourism and concluded that all businesses needed to encourage and support a “family beach image”.  The city passed an ordinance which created a zoning overlay district known as the Ocean Boulevard Entertainment Overlay District that encompassed the historic downtown area.

The prohibited uses in the district were declared immediately nonconforming when the ordinance was passed on August 14, 2018, but an amortization period was allowed which gave affected businesses until December 31, 2019, to cease the nonconforming portions of their businesses.

The zoning administrator issued citations to the nonconforming businesses. Nine of the 25 affected stories appealed to the Board of Zoning Appeals which found (1) it did not have jurisdiction to declare the ordinance unconstitutional; (2) it could not grant a use variance because it would allow the continuation of a use not otherwise allowed in the district; and (3) the businesses were engaged in one or more of the prohibited uses. On appeal, the circuit court affirmed the Board’s opinion, finding the appellants’ 25 grounds for challenging the ordinance meritless. The businesses appealed directly to the South Carolina Supreme Court.

The appellants raised a “host” of constitutional and procedural challenges, all of which fell on deaf ears at the Supreme Court. The Court held that the ordinance was a valid exercise of the city’s police powers. According to the Court, municipal governing bodies clothed with authority to determine residential and industrial districts are better qualified by their knowledge of the situation to act upon such matters than are the courts, and they will not be interfered with in the exercise of their police power to accomplish their desired end unless there is a pain violation of the constitutional rights of the citizens.

A comment on the Dirt Listserv said, “S. Carolina is OK with cancel culture after all.”  A store selling sexually oriented materials was removed from Garners Ferry Road in Columbia (about three miles from my house) using similar legal arguments. I was delighted to see that store torn down before I had to explain it to my grandchildren! But I do understand the “cancel culture” argument. What do you think?

*South Carolina Supreme Court Opinion 28151 (April 19, 2023)

Beware the Ides of March!

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We have three scary March 15 disciplinary cases

Three disciplinary cases* from March 15 of this year give us some timely reminders of activities we should avoid as lawyers.

Et tu, Brute?

The Brown case may be most on point for dirt lawyers. Attorney Brown practiced in family court. During testimony in a trial, a former client of Brown testified that her signature was not the signature reportedly sworn by a notary seal on the financial declaration filed with the court.

Here’s the scariest part of this story. After the trial, the family court judge reviewed several of Brown’s pending cases and found four documents attested to by Brown or her employee that appeared to be fraudulent. Brown self-reported to the ODC, acknowledged her misconduct, and signed an affidavit in mitigation. The affidavit stated that she had learned an important lesson, that she had attended several educational programs and had availed herself of Bar resources for new attorneys. She attested that she never intended to “mislead, misrepresent, or defraud anyone.” In other words, she was just trying to make things happen as quickly as possible for her clients.

The Court imposed a public reprimand and required Brown to pay the costs of the investigation and prosecution.

Dirt lawyers, no matter how much stress a closing creates, never, never fraudulently witness or notarize any document. You want to be able to testify in any deposition or court proceeding that you always appropriately monitored, witnessed, and notarized your clients’ documents. And it is not an excuse, as this case indicates that there was no intent to mislead, misrepresent or defraud anyone.  Take the time to handle documents appropriately every time.

The Williams case is a simple reminder to file and pay taxes. Williams failed to file and pay state income taxes for the 2015-2018 tax years. He was charged and arrested for this failure and timely self-reported his misconduct. He pled guilty, paid a fine, paid the taxes, and was sentenced to time served.

In mitigation, Williams stated that his mother’s mental and physical health began to deteriorate in 2012. He acted under  health care powers of attorney for both parents and cared for their needs as best he could while maintaining a busy law practice. He turned to alcohol “as an escape.” His mother died in 2018.  He stated he has been sober since 2019, has completed a six-week impatient treatment program, and regularly attends AA meetings. He also entered into a one-year monitoring contract with the Bar’s Lawyers Helping Lawyers program. He now serves as mentor to others in recovery.

The Court acknowledged its sympathy for Williams’ personal difficulties but imposed a definite suspension of ninety days.

Filing and paying taxes is one of those “black and white” functions that you cannot ignore. I once had a relatively wealthy real estate developer client who failed to file taxes for many years. That man, from a well-known and respected family, went to federal prison for several years. Paying taxes is not a step you can skip!

The Lynn case involved a disbarment for failure to hold unearned attorney’s fees in trust, for misappropriating client funds and for failing to keep clients informed. Read the opinion if you need a real Ides of March cautionary tale. One grave mistake Lynn made was failing to respond to the ODC’s investigation inquiries. Two things our Supreme Court takes very seriously are misappropriating funds and failing to cooperate with the ODC.

Let these sad facts be lessons to all of us! Just don’t do it!

*In the Matter of Brown, South Carolina Supreme Court Opinion 28139 (March 15, 2023), In the Matter of Lynn, South Carolina Supreme Court Opinion 28140 (March 15, 2023), In the Matter of Williams, South Carolina Supreme Court Opinion 28141 (March 15, 2023).

IRS provides safe harbor for conservation easements

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Be aware of the July 24, 2023 deadline!

When I was a title insurance underwriter, I helped many South Carolina lawyers close and insure their clients’ conservation easements, so I know many of these easements are recorded in the public records in South Carolina. I wanted to make sure all dirt lawyers who represent clients with conservation easements are aware of a development in this area of the law.

The Secure 2.0 Act of 2022 authorized the IRS to issue “safe harbor” language for conservation easements to cover situations where the easement is later extinguished because of unexpected circumstances or where a boundary line adjustment is needed. Using the correct “safe harbor” language will avoid the loss of the grantor’s charitable deduction.

Here is the important news: if your client has previously granted a conservation easement, the document can now be amended to add the “safe harbor” language. But the amendment must be recorded by July 24, 2023.

You can read the Treasury Notice here.

You can read the press release here.

Is this a classic case of “bad facts make bad law?”

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Or do you think this JTROS decision is accurate and fair?

This Alabama case* was discussed extensively on the DIRT listserv. I’d love to know how South Carolina lawyers react to the decision.

Here’s the recital of the facts from DIRT:

“Michael Upchurch, his brother Davis Upchurch, and his nephew Jason Upchurch owned several pieces of real property as joint tenants with the right of survivorship. They signed a contract to sell the properties to third parties. However, before closing, Michael died. In this declaratory judgment action, Michael’s widow Carol Upchurch, individual and as executor of Michael’s estate, asserted, among other things, a claim to one-third of the proceeds from that sale. David and Jason filed a motion for a summary judgment, which the circuit court granted. The Alabama Supreme Court held that under the circumstances, Michael, David, and Jason’s decision to enter into a contract to sell the properties severed their joint tenancy and that, as a result Michael’s estate was entitled to one-third of the proceeds from the sale of the properties. The Supreme Court therefore reversed the trial court’s judgment and remanded the case for the entry of a judgment in favor of the estate.”

What do you think about this opinion?  Would a South Carolina court come to the same result?

 I don’t believe our statute answers the question. For your consideration, here are relevant portions of our statute on the subject:

  • § 27-7-40. Creation of joint tenancy; filing; severance
  • (a)(ii) In the event of the death of a joint tenant survived by more than one joint tenant in the real estate, the entire interest of the deceased joint tenant vests equally in the surviving joint tenants who continues to own the entire interest owned by them as joint tenants with right of survivorship.
  • (iv) If all the joint tenants who own real estate held in joint tenancy join in an encumbrance, the interest in the real estate is effectively encumbered to a third party or parties.
  • (vi) If real estate is owned by more than two joint tenants, a conveyance by one joint tenant to all the other joint tenants therein conveys his interest therein equally to the other joint tenants who continue to own the real estate as joint tenants with right of survivorship.
  • (ix) If real estate is owned by two or more joint tenants, a conveyance by all the joint tenants to themselves as tenants in common severs the joint tenancy and conveys the fee in the real estate to these individuals as tenants in common.
  • (c) Except as expressly provided herein, any joint tenancy severed pursuant to the terms of this section is and becomes a tenancy in common without rights of survivorship.

The answer would seem clearer to me if only one joint tenant had entered into a contract. Severance of the joint tenancy would appear to be the correct answer.  But under the facts recited here, I have my doubts.

The intention of the parties is always relevant. We don’t have any clear statement to that effect here. If all three had survived the sale, each joint tenant would have been entitled to his portion of the proceeds. But no document among the owners addressed a death prior to the sale. Originally setting up their interests as JTROS suggests their intent that a death of one would result in ownership by the other two. Did signing the contract evidence their intent to no longer own the properties as joint tenants?

One comment from DIRT suggested the court might have decided that the contract rights of the deceased owner survived his death and passed to his estate. But that’s not what the court held. It held that the JTROS was severed by the contract.

Dirt lawyers, what do you think?

*Upchurch v. Upchurch, Supreme Court of Alabama Case SC-2022-0478 (April 7, 2023)

Virginia court holds HOA assessment invalid

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Dirt lawyers hear stories of dysfunctional homeowners’ associations routinely. I have one for you!

My husband and I built a second home at the beach in a relatively modest subdivision in 2011. Many of the houses are owner occupied, but many are on rental plans. My twenty-something daughter met a neighbor who asked her two questions, (1) “Is this your family’s first vacation home?” and (2) Your parents aren’t going to rent this house, are they?” It wasn’t a good start to our relationship.

We had several issues with ARB approvals during the building process, which were handled by our builder. At one point, he threw his hands in the air in frustration and said, “These people need to understand this isn’t DeBordieu.” In other words, the ARB seemed to believe the subdivision is much more affluent than it is.

When we attended our first (and only as it turns out) annual meeting of the owners, the president of the board promptly threw one of our neighbors out of the meeting for asking a question!  It was during the first five minutes of the meeting. We were shocked and vowed to steer clear of those meetings.

During our first winter, we received a very nasty letter telling us we had a dead tree that must be removed immediately. We were in Columbia, didn’t know about the dead tree, and even when we investigated, we decided the tree didn’t look any worse than the other winter trees. But we quickly took it down! We heard another neighbor received a similar letter telling him his mailbox was dirty and needed to be cleaned immediately.

We decided that we were going to be good neighbors and properly maintain our house and yard, but we would enjoy the beach and the gatherings of our growing family (including the four grandchildren we’ve been blessed with since we built the house) without getting involved with the neighbors.

Believe it or not, this story has a happy ending. Apparently, all the problems were caused by one homeowner who managed to get herself elected to the board and the ARB. She roamed the streets looking for rules violations and wrote the letters herself.  About the time we figured out the problem, she and her husband, thankfully, moved. The trouble among the neighbors immediately improved. Now, we have delightful neighborhood parties and enjoy getting to know our neighbors. And it seems everyone has a story about the bad neighbor. We stand around drinking beer and telling stories.

My guess is that our earlier bad HOA is like the one described in Buckholder v. Palisades Park Owners Ass’n, Inc.*, a Virginia case where the HOA imposed an assessment on all owners to fund the cost of inspecting each property for the purpose of finding violations of the HOA rules. Homeowners sued to have the assessment declared invalid.

Virginia has a statute that provides, “(e)xcept as expressly authorized by the Act, the declaration or as otherwise provided by law, no association shall…make an assessment or impose a charge against a lot owner unless the charge is a fee for services provided or related to use of the common area.”

The court invalided the assessment and remanded the case to the lower court.

I read about this interesting case on the DIRT listserv that I recommend routinely. You won’t be sorry if you sign up for the emails!

Professor Dale Whitman who moderates the listserv commented that this is the sort of thing that gives HOAs a bad name. He also commented, “While most states won’t have a statute exactly like Virginia’s, the lesson of the case remains applicable. If an HOA or condo board is going to impose an assessment to be used on anything other than the common areas (or reserves that will ultimately benefit the common areas), it needs to be certain that it has the legal power to do so, either by virtue of an applicable statute or its own declaration. This is particularly true if the assessment is almost certain to irritate and raise the hackles of some owners, as this one was.”

Several lawyers commented about the nature of folks who like to serve on HOA boards. Read the comments if you need a good laugh. The listserv is searchable.

I think I’ll share the case with my neighbors at the beach.

*76 Va. App. 577, 882 S.E.2d 906 (2023)

Foreign ownership of real estate has become a political issue

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Pending legislation in South Carolina may affect your transactions

Remember the Chinese surveillance balloon the United States shot down off the coast of the Palmetto State in February? That incident and other rising tensions between our government and China over several issues (the war in Ukraine, recognition of Taiwan, to name only two) have resulted in politicians proposing to broaden state law bans on foreign ownership of real estate.

According to a New York Times article dated February 7, entitled “How U.S-China Tensions Could Affect Who Buys the House Next Door”, legislation in Texas was proposed after a Chinese billionaire with plans to create a wind farm bought more than 130,000 acres of land near a U.S. Air Force base.

Proposed legislation is also pending in Florida, California and now South Carolina to restrict ownership of real estate by “hostile nations” or “foreign adversaries.” Some have suggested that such bills may run afoul of due process and equal protection issues.

Chicago Title published an Underwriting Memorandum on April 5 entitled “Foreign Ownership of Property in South Carolina” to advise agents of the pending legislation in our state.

You may recall that we have an existing statute (S.C. Code §27-13-30) prohibiting any “alien” or corporation controlled by an “alien” from owning or controlling more than 500,000 acres of land in South Carolina. Recently, the South Carolina Senate passed Senate Bill 576 that amends the existing statute by expressly prohibiting any citizen of a foreign adversary or corporation controlled by a foreign adversary from acquiring any interest in South Carolina property.  The proposed legislation will now be considered by the House.

The term “foreign adversary” is defined in the bill as “any foreign government or nongovernment person determined by the United States Secretary of Commerce to have engaged in a long-term pattern or serious instances of conduct significantly adverse to the national security of the United States or the security and safety of United States citizens.”

And there are other bills pending along the same lines.

Senate Bill 392 would amend our existing statute to reduce the amount of property allowed to be owned by an “alien” to 1,000 acres. House Bill 3566 would add a statute to reduce to 1,000 acres the amount of land that can be owned or controlled by China, the Chinese Communist Party, or an entity whose principal place of business is located within China.  House Bill 3118 would prohibit any company owned or controlled by China or the Chinese Communist Party or that has a principal place of business in China from owning, leasing, possessing, or exercising any control over real estate located within 50 miles of a state or federal military base for the purpose of installing or erecting any type of telecommunications or broadcasting tower.

All dirt lawyers will know immediately that all versions of the proposed legislation will create uncertainty in our market. I have only two pieces of advice at this point. First, let’s all monitor the proposed legislation. And, second, let’s pay attention to guidance provided by our excellent title insurance underwriters.

Who said real estate law is boring?

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Take a look at this “Deed of Child”

My friend and self-professed “fellow title nerd”, Lacey Higginbotham, who practices in Myrtle Beach, sent to me a “Deed of Child” she found in the Horry County records. The document is dated May 10, 1930, recorded June 3. 1930, and purports to convey a child from a father to another family .

Because the document is difficult to read, I’ll squint for you and set it out here for your reading pleasure:

I can imagine Professor Spitz presenting this document to us as an exam in our first- year property law class. He might ask for us to spot all the issues concerning the enforceability of this document. Thanks, Lacey, for this diversion!