Scalise Development, Inc. v. Tidelands Investments, LLC

Citations: 707 S.E.2d 440; 392 S.C. 27; 2011 S.C. App. LEXIS 20Docket: 4791

Court: Court of Appeals of South Carolina; February 16, 2011; South Carolina; State Appellate Court

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In the case of Scalise Development, Inc. v. Tidelands Investments, LLC, the South Carolina Court of Appeals addressed a breach of contract dispute. Scalise Development entered into a contract on March 28, 2005, to purchase a property in Murrells Inlet, South Carolina, from Tidelands Investments and Gary Ownbey for $9,400,000. The contract required the Appellants to provide a marketable title and a general warranty deed before the closing date of July 28, 2005. Scalise paid a $50,000 earnest money deposit and had options to extend the closing date twice for an additional $50,000 each time.

Scalise planned to combine the purchased property with an adjoining tract to meet the Georgetown County zoning requirement of a minimum of ten acres for commercial development. However, Ownbey did not acquire the necessary portions of the property until December 15, 2005, after the closing date. Concerns about the title were raised in a letter from Scalise’s counsel in June 2005. Scalise extended the closing date twice but was ultimately denied further extensions by the Appellants, who claimed Scalise's earnest money if the contract was not fulfilled by the closing date.

After the contract expired without resolution, Scalise filed a lawsuit in June 2006, seeking reimbursement of the $150,000 in earnest money, attorney's fees, and damages, alleging breach of contract due to the failure to convey marketable title. In December 2007, Scalise moved for summary judgment, which was granted by the special referee in February 2009. The ruling identified multiple defects in the title, including easement rights, land below the mean high water mark, insufficient acreage, a break in the chain of title, and existing leases that hindered marketability, confirming that the Appellants did not fulfill their contractual obligations.

Scalise was awarded reimbursement for earnest money deposits and accrued interest, along with a hearing for evidentiary damages, by a special referee. The Appellants subsequently appealed this decision. The standard of review for summary judgment motions, as outlined in Rule 56, SCRCP, states that summary judgment is appropriate when no material fact issues exist, requiring the evidence to be viewed favorably towards the non-moving party. 

The Appellants contend that the special referee made errors in granting Scalise's motion for partial summary judgment, specifically regarding five points: 
1. Ruth Street's subjection to Blue Ridge easement rights and claims from Ruth Macklen or her heirs.
2. A portion of the Property being below the mean high water mark.
3. The conveyance of only 8.05 acres.
4. Judge Maring's order disrupting the chain of title.
5. The Property's subjection to commercial casino boat leases.

Regarding Ruth Street, it was established that Ruth and R.W. Macklen were prior titleholders. A recorded plat in 1980 depicted subdivided lots along Ruth Street, leading to subsequent conveyances referencing this plat. The special referee concluded that the Appellants could not convey marketable title to Ruth Street through a general warranty deed, citing it as a classic Blue Ridge easement scenario. According to Blue Ridge case law, subdivided property dedicated as public streets grants adjoining lot owners special property interests that allow them to enforce its use. 

The referee emphasized that a marketable title must be free from encumbrances and reasonable doubts regarding its validity. The Appellants argued that there was no significant risk of litigation concerning Ruth Street and that their contract allowed conveyances subject to recorded easements, provided they did not render the title unmarketable. However, Scalise countered that the Appellants were obligated to convey Ruth Street through a general warranty deed due to potential third-party claims limiting its use.

Scalise's counsel informed the Appellants of a title defect regarding Ruth Street in a letter dated June 9, 2005. Appellants' counsel, Steven Querin, acknowledged the need for a Statutory Road Closing Action to secure marketable title but failed to initiate such action. Although Querin claimed the title was marketable, he conceded that it could not be conveyed free of third-party rights and recommended a quit-claim deed due to these issues. Consequently, it was determined that the Appellants could not convey a marketable title to Ruth Street via a general warranty deed.

In April 1998, Ruth Macklen attempted to convey Ruth Street and other lots to RCP, LLC, but records showed RCP, LLC was not established until 2003. Scalise's counsel indicated this defect might leave some interest with Macklen or her successors. The special referee noted that the Appellants did not correct this defect before the closing, thereby preventing a valid conveyance. The Appellants admitted the grantee's name was incorrect and suggested a corrective deed might be necessary, but argued that this would not lead to litigation over the easement. Scalise contended that the Appellants’ admission evidenced a break in the title chain, confirming they could not convey marketable title.

Additionally, the State of South Carolina holds presumptive title to tidelands below the mean high water mark, which are held in public trust. The special referee found that 1.16 acres of the Property was below this mark, thus the Appellants could not convey marketable title by general warranty deed. The Appellants asserted that Scalise did not raise issues regarding this land prior to closing and argued that the property had historically been used as a marina, which should mitigate objections to its public use. They also referenced contractual language noting that conveyances are subject to existing easements and regulations. The Appellants compared their situation to a previous case where a court ruled that wetlands were not unmarketable without clear evidence of ownership issues.

Appellants assert ownership of a disputed portion of property, while Scalise counters that there is no evidence supporting this claim, particularly for land below the mean high water mark. Scalise cites an affidavit from attorney Claude Epps, indicating that Georgetown County required Scalise to demonstrate ownership of the tidelands and that the Appellants could not secure fee simple title. Scalise maintains it did not waive objections to title defects, as the contract did not obligate them to notify the Appellants of title issues before closing. The contract required the Appellants to convey at least 9.5 acres of marketable title, which they failed to do, as only 8.05 acres were conveyed. This shortfall was critical for Scalise to obtain a PDD zoning designation. The contract included provisions allowing Scalise to terminate or extend the closing date if necessary approvals were not obtained. The special referee concluded that the Appellants could not convey the required marketable title, which included Ruth Street and the tidelands around Voyager's View Marina. The Appellants argue that the refusal of the Zoning Department to include the disputed land does not render the property unmarketable and that Georgetown County’s approval for PDD zoning was not a contractual contingency. They maintain that the zoning ordinances, while requiring a minimum of ten acres for PDD designation, did not impede Scalise's ability to develop the property or seek other zoning approvals.

The contract stipulates that Scalise's earnest money deposits are non-refundable only if the Appellants are willing and able to perform their obligations. Scalise asserts that the Appellants could not convey the required 9.5 acres due to their inability to provide marketable title, as they did not own portions of the Property below the high water mark, which was essential for the conveyance. An order from Judge David Maring in the mid-1990s, related to a judgment lien against the Player family, determined that any property transferred by the Players retained the same interest post-transfer, leading to a break in the chain of title and rendering it unmarketable. The Appellants acknowledged their failure to obtain a necessary quitclaim deed from Mr. Player, which they argued would have been futile. Scalise contends that this admission, along with the Appellants' efforts to quiet title, indicates the Property was unmarketable. Consequently, the special referee's finding of unmarketable title is upheld. Additionally, the document discusses two lease agreements involving Isadore, including one with Dinner Cruises granting docking rights and another with Palmetto Princess based on gaming revenue, with closing contingent on Scalise receiving verification that the Property is free from existing contractual obligations, particularly relating to casino boat operations.

On April 28, 2005, Scalise's counsel informed the Appellants that resolution of the casino boat lease issue was necessary before the closing of a property transaction. Counsel indicated that either evidence terminating the lease or a court order would be required, emphasizing the Appellants' responsibility to resolve this matter. An email from the Appellants’ counsel on October 11, 2005, confirmed that the lease issue remained unresolved by the closing date. A special referee ruled that the unresolved casino boat leases hindered the Appellants from conveying marketable title via a general warranty deed. The Appellants contended that the Dinner Cruises lease lacked consideration and was illegal when signed. Scalise countered that the issue was unresolved at closing and argued that the Appellants' claims could serve as defenses in litigation but could not preclude Scalise's claims. The special referee's conclusion that the Appellants could not convey marketable title was upheld, with the court affirming the decision. The Appellants did not demonstrate that the lease issue was resolved by the contract’s requirement before closing. Other points noted include various conveyances of the property during the litigation, issues of material fact regarding a subdivision plan, and additional arguments that were not preserved for appellate review.