Windsor Properties, Inc. v. Dolphin Head Construction Co.

Citations: 498 S.E.2d 858; 331 S.C. 466; 1998 S.C. LEXIS 42Docket: 24755

Court: Supreme Court of South Carolina; March 6, 1998; South Carolina; State Supreme Court

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The Supreme Court of South Carolina granted a petition for rehearing in the case of Windsor Properties, Inc. v. Dolphin Head Construction Co., Inc., leading to a substitution of the previously issued opinion. The amendment clarified that Linda Liscio failed to provide clear and convincing evidence that the transfer of property was for consideration and bona fide, indicating a violation of the Statute of Elizabeth. The court affirmed part of the lower ruling and reversed another part. The case involved a business relationship where Windsor Properties financed construction projects for Dolphin Head Construction. A key issue arose from the financing of the Brogdon property, which was intended to be renovated and sold for profit. Windsor Properties loaned money secured by Linda Liscio’s equity in her Pointer house. Following the sale of the Pointer house, Ralph Liscio sought to transfer the Brogdon property's title to Linda, but the deed indicated a nominal consideration of five dollars, with no evidence of actual payment. A letter from Ralph to his attorney outlined substantial debts and referenced the Brogdon property, revealing that he had not disclosed the transfer to Blackwell until after the fact.

Ralph negotiated Dolphin Head's debt with Windsor, resulting in an agreement on May 1, 1992, where Dolphin Head executed a promissory note and loan agreement for $110,092, personally guaranteed by Ralph. A confession of judgment was also signed, acknowledging this debt. In August 1993, Ralph and Linda planned to sell the Brogdon property, prompting Blackwell to file a lis pendens. Windsor subsequently sued Dolphin Head, Ralph, Linda, and another party, claiming default on the May 1 note and alleging that Ralph's transfer of the Brogdon property to Linda was made without consideration, thus hindering Windsor's ability to recover its debt. Dolphin Head and Ralph acknowledged the loan's default and the property transfer in their answer, counterclaiming against Windsor for intentional interference and slander of title. They asserted that Linda had become the property’s owner as of February 6, 1992, and had contracted to sell it on August 19, 1993. Windsor's lis pendens was alleged to have caused Linda $175,000 in damages by clouding the title. A special referee awarded Windsor $107,092 plus interest from Dolphin Head and Ralph, confirmed Linda’s adequate consideration for the property, and canceled the lis pendens, finding no malice in Windsor's actions. Windsor appealed the referee's ruling on the property transfer's legitimacy under the Statute of Elizabeth, which renders fraudulent transfers to hinder creditors void. Linda and Ralph appealed the denial of their slander of title claim.

Conveyances can be set aside under two conditions: when a grantor transfers property with actual intent to defraud creditors, which is also attributable to the grantee, regardless of consideration; and when a transfer occurs without actual intent to defraud but lacks consideration. The current case aligns with the second condition, wherein Dolphin Head's transfer of property to Linda lacked valuable consideration, negating the need to prove fraudulent intent. Evidence shows that Dolphin Head received no consideration for this transfer, as the deed stated a nominal value of five dollars, and the attorney involved confirmed no money changed hands. Linda's claim of consideration through prior payments for the property lacks clear and convincing evidence. Although Linda asserts she paid over $168,000, the maximum verifiable amount is $40,965 for the purchase and $79,528 for other costs, and these claims lack sufficient documentation. The absence of supporting records and the timing of the payments, which occurred while Dolphin Head retained ownership and pledged the property for a loan, further undermine her position. Consequently, Linda bears the legal burden to demonstrate that the transaction was legitimate and involved valuable consideration.

Linda's assertion of providing valuable consideration for the property transfer contradicts her earlier statements, where her attorney emphasized that the argument was based on prior satisfaction rather than consideration. The attorney acknowledged no money was exchanged for the deed, asserting that Mr. Blackwell, not Dolphin Head, purchased the property, and that Linda merely reimbursed him. The argument is further weakened by the Statute of Elizabeth, which aims to prevent fraudulent asset transfers that hinder creditors. For a conveyance to be valid under this statute, the grantor must retain sufficient assets to satisfy debts, which was not the case here, as the property transfer occurred shortly before significant debts were acknowledged. The referee's finding that the transfer was valid is reversed, with the conclusion that the conveyance is void due to insufficient assets retained by Dolphin Head and Ralph to pay their creditors. The Liscios' cross-appeal regarding Windsor's alleged malicious filing of a lis pendens is affirmed, as they lack title to the property following the reversal of the transfer. Consequently, the order regarding the Statute of Elizabeth violation is reversed, while the order on slander of title remains affirmed.