Easements don’t typically lead to criminal contempt charges

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These horrible commercial neighbors have fought (and litigated) for years!

Our Advance Sheet from August 10 contained two Court of Appeals easement cases involving adjoining commercial properties in Murrells Inlet. Last week’s blog discussed the first of the two cases, which involved an award of attorneys’ fees*. This week, we’ll take up the second case. A footnote in the first case indicates the parties were heading to trial again immediately after oral arguments. These neighbors are obviously not getting along!

The litigation involves a restaurant property owned by Gulfstream Café, Inc. and an adjoining property containing a marina, a store and a parking lot owned by Palmetto Industrial Development, LLC. Palmetto’s predecessor in title granted four non-exclusive easements in 1986 and 1990 to Gulfstream. The easements allowed for ingress and egress and vehicular parking. It was anticipated that the marina property would use the parking primarily in the daytime and the restaurant property would use the parking primarily in the evening.

The easements included general warranties, the same language that appears in our normal general warranty deeds: “(A) does hereby bind itself and its successors and assigns, to warrant and forever defend, all and singular, the said easement unto (B), its successors and assigns, against itself and its successors and assigns, and all others whomsoever lawfully claiming, or to claim the same or any part thereof.” This language is consistent with South Carolina Code §27-7-10.

This case actually involves a criminal contempt finding in the Circuit Court for parking a golf cart in front of the easement holder’s delivery gate! The golf cart was parked there on multiple occasions in a normal parking spot. But Gulfstream couldn’t orchestrate efficient deliveries while the golf cart blocked its delivery gate. The parties are obviously horrible neighbors.

The second case reveals an interesting fact. The property owner of the burdened property intended to demolish its building and rebuild a larger building on stilts and extending over the parking lot. The owner of the easement was having none of that!

In 2017, the Circuit Court found criminal contempt and ordered a fine of $3,000 or thirty days in jail. In 2018, the parties proceeded to trial, and a jury awarded Gulfstream $1,000 for interference with the easement. The Circuit Court entered a permanent injunction: “(Appellants) are enjoined from preventing (Gulfstream) from enjoying the right(s) granted to it in the recorded nonexclusive joint easement. (Appellants) are restrained and may not expand the outside boundaries of any new building beyond those previously used. The (c)ourt is specifically not talking about height, only the outside boundaries.”

The parties fought on, seeking to clarify the easement, and seeking another criminal contempt finding. The Court amended the injunction for clarification. The Appellants moved again to clarify the injunction and argued that an injunction should not have been granted because the jury awarded monetary relief. Other arguments related to the building’s construction and that the injunction enlarged the easement. The Circuit Court denied the motions and issued a finding that the Appellants “engaged in criminal contempt of court by deliberate and intentional acts by placement of a golf cart which interfered with the proper use of the non-exclusive easement in this matter and was in direct violation of the (c)ourt’s previous order.” Appellants were fined $5,000.

Skipping a little of the very long procedural history, let’s move on to the appeal. To make a very long story shorter, the Court of Appeals held that the Circuit Court did not abuse its discretion in finding Appellants in criminal contempt. You should read these two entertaining cases. Real estate lawyers don’t often have the pleasure of being entertained by published opinions!

*The Gulfstream Café, Inc. v. Palmetto Industrial Development, LLC, South Carolina Court of Appeals Opinion 5935 (August 20, 2022).

** The Gulfstream Café, Inc., vs Lawhon, South Carolina Court of Appeals Opinion 5936 (August 20, 2022).

Murrells Inlet commercial neighbors embroiled in litigation

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Our Advance Sheet from August 10 contained two Court of Appeals easement cases involving adjoining commercial properties in Murrells Inlet. This blog will discuss the first of the two cases*. Next week, we’ll take up the second case. A footnote in the first case indicates the parties were heading to trial again immediately after oral arguments. These neighbors are obviously not getting along!

The litigation involves a restaurant property owned by Gulfstream Café, Inc. and an adjoining property containing a marina, a store and a parking lot owned by Palmetto Industrial Development, LLC. Palmetto’s predecessor in title granted four non-exclusive easements in 1986 and 1990 to Gulfstream. The easements allowed for ingress and egress and vehicular parking. It was anticipated that the marina property would use the parking primarily in the daytime and the restaurant property would use the parking primarily in the evening.

The easements included general warranties, the same language that appears in our normal general warranty deeds: “(A) does hereby bind itself and its successors and assigns, to warrant and forever defend, all and singular, the said easement unto (B), its successors and assigns, against itself and its successors and assigns, and all others whomsoever lawfully claiming, or to claim the same or any part thereof.” This language is consistent with South Carolina Code §27-7-10.

The question in this case is whether the easement holder (the grantee) is entitled to attorneys’ fees in connection with litigation against the easement grantor’s successor in title based on the easement. In many deed warranty cases, the grantee sues the grantor when a third party asserts an interest in the real estate. In this case, the only parties are the owners of the adjoining properties.

The relationship between the parties began to sour in 2016 when Palmetto demolished and started to rebuild its building. Gulfstream brought suit for interference with its easement and received a temporary injunction. Palmetto was subsequently held in criminal contempt for willfully violating the injunction.

In 2018, Gulfstream filed a complaint against Palmetto seeking a declaratory judgment based on interference with the easement and a finding that Palmetto breached its warranty.  This case sought attorneys’ fees and costs. Later in 2018, a jury found for Gulfstream on its claim for interference in the 2016 case.

Both parties moved for summary judgment in the 2018 case. Gulfstream argued that the plain language of the warranties provided for Palmetto’s obligation to defend Gulfstream. Palmetto relied on the language of the warranty provision and a 2004 South Carolina Supreme Court case, Black v. Patel**.

In analyzing the arguments, the Court of Appeals began with the proposition that in South Carolina, the authority to award attorneys’ fees can only come from statute or contract. Next, the Court stated that a warranty of title is a contract on the part of the grantor to pay damages in the event of a failure of title. Generally, when a grantor refuses to defend the title against a third party claiming title, the grantee is allowed attorneys’ fees. The general rule for cases in this context, according to the Court, is that only ‘lawful”—that is successful—claims asserted against title justify an award of attorneys’ fees where the grantor fails to defend the title.

A footnote in the Black case set out an exception to the general rule. The grantor would also be responsible for attorneys’ fees where its wrongful act causes the grantee to be in litigation with a third party.

The question in this case became whether the warranty provision in Gulfstream’s easements provide that Gulfstream is entitled to attorneys’ fees from Palmetto. The Court held that the answer is “no” because Gulfstream’s title is not in issued. Palmetto did not dispute the Gulfstream has easements over Palmetto’s property, rather, Palmetto, at worst, has been infringing upon Gulfstream’s rights. Gulfstream’s actual title was not challenged and there is not a third party involved as contemplated in Black.

The Court did not that its decision does not prevent Gulfstream from seeking attorneys’ fees in future contempt actions as a sanction if Palmetto continues to infringe upon Gulfstream’s rights. In other words, the Court seems confident that litigation between these parties will continue.

I’m going to have to go eat seafood in Murrells Inlet to check out these properties!

*The Gulfstream Café’, Inc. v. Palmetto Industrial Development, LLC., South Carolina Court of Appeals Opinion 5935 (August 10, 2022).

**357 S.C. 466, 594 S.E.2d 162 (2004).