SC Court reverses itself on “active energy” judgment issue

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South Carolina dirt lawyers seldom breathe a sigh of relief when our Supreme Court decides a real estate case. But the November 21 opinion in Gordon v. Lancaster* was greeted with a collective “thank goodness”!  We were living with a less-than-exact term for the viability of a judgment, and we didn’t like it.

The question in this case was whether a creditor may execute on a judgment more than ten years after enrollment when the ten-year statutory period for execution** expires during the course of litigation. The Court overturned its 2010 decision in Linda Mc Co. v. Shore***, which held that, despite the passage of more than ten years, the judgment continued to have “active energy” because the judgment creditor had filed for supplemental proceedings.

In the current case, a judgment was enrolled in 2002 against Rudolph Drews, the now-deceased uncle of the Petitioner Donald Lancaster, in connection with a civil action for violating securities laws in an investment scheme for a new business venture in Charleston. Frank Gordon, the creditor, filed a petition for supplemental proceedings in 2006. During the hearing, Gordon’s counsel became suspicious that Drews’ wife and Lancaster were attempting to shield Drews’ assets from creditors. The hearing was continued when Drews failed to produce tax and financial documents.

Drews died in 2007. Gordon sought to continue supplemental proceedings, but there were delays in the estate administration. In 2010, suspicions were confirmed about hiding assets when Lancaster was deposed. Soon after, one day before her scheduled deposition, Drews’ wife died. Gordon filed this action, asserting Lancaster assisted Drews is hiding assets in violation of the Statute of Elizabeth. In 2011, Drews’ estate confessed judgment in the approximate amount of $300,000, and his wife’s estate settled with Gordon for $60,000.

During a bench trial in 2013, Lancaster moved for a directed verdict based on Gordon’s prior concession that the suit was based on the earlier judgment, which was obviously older than ten years. The trial court and the Court of Appeals disagreed, relying on the holding in Linda Mc: If a party takes action to enforce a judgment within the ten-year statutory period of active energy, the resulting order will be effective even if issued after the ten-year period has expired.

The Court noted that Linda Mc represented a departure from its historic approach and created confusion in what was formerly a well-settled area of the law. (To that I would like to very politely reply “duh”.) The Court overruled itself and returned to the bright-line ten-year rule.

In a footnote, the Court stated that it is overruling Linda Mc prospectively. The same footnote referred to Justice Pleicones’ dissent in Linda Mc, which predicted confusion in a previously settled area of the law.

Justice Few concurred in the result but disagreed with overruling Linda Mc, which he said created a narrow exception to the bright-line ten-year rule for the issuance of an execution on a judgment. There was a discussion in the opinion and the concurring opinion about dictum vs. holding, but, thankfully, nothing concrete came out of that. Justice James concurred in part and dissented in part, agreeing that Linda Mc should be overruled, but believing that Gordon should have received relief because of the prospective nature of the decision.

Pennsatucky AmenAs a title insurance lawyer and title examiner from way back, I am happy to see us return to a common sense, bright-line approach to the ten-year rule. Can I get an “Amen”?

* South Carolina Supreme Court Opinion 27847, November 21, 2018.

** South Carolina Code Section 15-39-30.

*** 390 S.C. 543, 703 S.E.2d 499 (2010).

SC Dirt lawyers: check your documents

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SC Supreme Court issues opinion that may keep us up at night!

Are the words “developed” and “improved” used interchangeably in your form real estate documents?  You might want to pull your documents to check based on a recent South Carolina Supreme Court case.*

The Supreme Court affirmed a Court of Appeals decision finding property had not been developed into discrete lots entitling them to voting rights under a set of restrictive covenants. While the two courts agreed on that determinative point, the Supreme Court felt the need to clarify the Court of Appeals’ opinion that may be read to “conflate” the terms “developed” and “improved”. (The only word that was unclear to me was “conflate”, which I now know means to combine two or more concepts into one.)

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The Supreme Court cited a 2007 Washington state opinion for the definition of “developed”: conversion of raw land into an area suiting for building, residential or business purposes. Improving land is subject to a higher threshold, according to the Court, and would require such actions as installing utilities or buildings.

Chief Justice Pleicones and Justice Few concurred, and the Chief wrote a separate opinion for the sole purpose of expressing concern that dictating the meanings of the terms “developed” and “improved” may inadvertently alter the meaning of documents or create a conflict with legislative enactments. He used a subsection of a statute dealing with mechanics’ liens as an example.

South Carolina Code Section 29-6-10 (2) contains the following definition of “Improve”:

 “Improve means to build, effect, alter, repair, or demolish any improvement upon, connected with, or on or beneath the surface of any real property, or to excavate, clear, grade, fill or landscape any real property, or to construct driveways and roadways, or to furnish materials, including trees and shrubbery, for any of these purposes, or to perform any labor upon these improvements, and also means and includes any design or other professional or skilled services furnished by architects, engineers, land surveyors and landscape architects.”

That definition is written as broadly as possible to protect the interests of any professional who provides labor or services in connection with developing, I mean improving, real estate.

The underlying Court of Appeals opinion** indicated that platting separate lots on paper without further steps did not rise to the level of the term “develop”, which, according to the Supreme Court, is a lower threshold than the term “improve”, which, according to the statute, includes platting. Do you see the Chief’s concern? I certainly do! Good luck with those documents!

*Hanold v. Watson’s Orchard Property Owners Association, Inc, South Carolina Supreme Court Opinion 27702 (February 15, 2017)

**Hanold v. Watson’s Orchard Property Owner’s Association, 412 S.C. 387, 772 S.E.2d 528 (2016)