Kiawah Resort Associates, L.P. v. Kiawah Island Community Ass'n
Docket: Appellate Case No. 2015-001146; Opinion No. 5517
Court: Court of Appeals of South Carolina; September 27, 2017; South Carolina; State Appellate Court
Kiawah Resort Associates, L.P. (KRA) and Kiawah Development Partners II LLC (KDP II) appeal a Master-in-Equity’s order that declined to reform a deed given to Kiawah Island Community Association (KICA). KRA argues that the Master erred by not considering KICA's subsequent conduct as evidence of mutual mistake and by concluding that KICA intended to accept a 4.62-acre tract of oceanfront property as common area. Conversely, Kiawah Property Owners Group, Inc. (KPOG) and Inlet Cove Club Homeowners Association (ICCHA) support the Master’s decision to deny reformation but contest the finding that they lacked standing in the action. The appeals court affirmed the Master’s decisions.
The context involves KRA, the developer of Kiawah Island, which entered a Development Agreement in 1994 that required them to convey certain properties to KICA, including a strip of beachfront land. KRA issued a quit claim deed to KICA in 1995, but later realized it inadvertently included the additional 4.62-acre tract, which was not part of the original Development Agreement. KRA sought to reform the deed in 2013, claiming a mutual mistake. However, the Master found insufficient evidence to support this claim, particularly noting KRA's failure to demonstrate KICA's intent regarding the property during the relevant period.
KRA contends that the Master improperly dismissed the evidence of KICA's subsequent conduct and wrongly relied on precedent that limits consideration of extrinsic evidence when a deed is clear on its face.
The master erred in Penza by disregarding parole evidence upon finding the deed unambiguous. In Penza, the plaintiff contested a summary judgment regarding a mortgage covering two tracts, arguing that a factual dispute existed about the mortgage's intent, and that the master reformed the deed without proving mutual mistake. The court determined the mortgage was ambiguous, thus precluding summary judgment, and found it unnecessary to analyze the reformation argument. The supreme court case Sims v. Tyler clarified that subsequent conduct can serve as evidence in reformation disputes. In Sims, the court reversed a trial decision that reformed a deed based on alleged mutual mistakes, emphasizing that clear evidence of intent existed. As the Penza court declined to address the reformation argument, the master improperly applied summary judgment principles. The master also failed to consider KICA’s subsequent actions in the reformation assessment. For a deed to be reformed, clear and convincing evidence of mutual mistake—where both parties intended a specific outcome but failed due to drafting errors—is required. In appeals from equity actions, appellate courts can review facts in light of evidence preponderance but must respect trial findings and witness credibility. The appellant must demonstrate to the appellate court that an error was made in the trial judge's findings.
KRA contends that the intended starting point for the ten-mile beachfront parcel is the eastern boundary of Tract 13, contrary to KICA’s claim that it begins at the eastern boundary of the Employee Tract. During the trial, KRA presented testimonies from several KICA board members, including Leonard Long, who stated that the beachfront strip would terminate at Tract 13 and acknowledged that the property descriptions in the deed were inaccurate. Long noted the absence of a plat for the island at that time and indicated that surveying the beachfront would have been impractical before its conveyance to KICA. He also recounted instances of previous erroneous conveyances, which were later corrected with quit claim deeds, supporting KRA's argument that these deeds established a precedent for rectifying such errors.
Patrick McKinney, another KRA partner and KICA board member, corroborated Long's assertion regarding the starting point of the beachfront strip. He indicated that neither KRA nor KICA intended to convey the additional 4.62 acres to KICA, although he could not recall specific discussions or official actions by the KICA board regarding the Agreement for Conveyance. Townsend Clarkson, KRA's CFO and KICA's president, also confirmed that KICA intended for the beachfront property to start at Tract 13 and stated that KRA had been paying property taxes on the disputed 4.62 acres. Clarkson referenced a conversation with KICA's 2012 chairman, who recognized the property transfer as a mistake, and KRA presented a memorandum suggesting the KICA board's acknowledgment of this error. Clarkson admitted he could not recall if there was a formal board vote regarding the Agreement for Conveyance. Additionally, KRA provided maps indicating KICA's control over common areas that exclude the additional 4.62 acres.
KRA used Exhibit 16.2 from the Development Agreement to assert its intention to convey only a ten-mile stretch of beachfront property starting at Tract 13. The map in question is ambiguous regarding its starting point but distinctly shows that the additional 4.62-acre lot, which is physically separate from the beachfront property, is not shaded similarly, indicating it is not included in the conveyance. KRA's own maps suggest the 4.62 acres are developable property owned by KRA, zoned R-3 commercial, while the beachfront property is designated as a park. KICA’s published maps do not classify the 4.62 acres as common area owned by the association, although the timing of these maps' creation is unspecified. KRA contends these representations indicate KICA never intended to acquire the additional property and has not acted as if it owns it since 1995. Testimony from Clarkson, a former KICA board member, supports this claim, stating KICA did nothing regarding the 4.62 acres during his tenure from 1995 to 2001. KRA's long-range planning employee, Mark Pemar, corroborated Clarkson's observations.
In contrast, KICA argues that KRA did not provide sufficient evidence to demonstrate that the deed contradicts prior agreements. KICA claims that the 'Agreement for Conveyance' mandated KRA to convey a deed identical to the Beachfront Deed and that testimony from KRA representatives is not valid due to potential conflicts of interest under the South Carolina Nonprofit Corporation Act. This Act requires a majority of disinterested directors to approve conflict of interest transactions, which KICA claims did not occur. KICA presented testimonies from two members who actively use the 4.62 acres, with one acknowledging a 99-year lease allowing access regardless of ownership. Both testified to their enjoyment of the property and its natural state, but KICA maintains that without a formal vote from disinterested members, there is no evidence of intent regarding ownership of the additional property.
KICA contends that a memo from the 2012 board chair indicates an understanding that KRA did not intend to convey 4.62 acres to KICA. KICA highlights that the "Talking Points" document does not imply the 2011 board concluded that the 1995 board had no intention of transferring the acreage. Instead, the memo asserts that KICA's board, having reviewed relevant documents, believes the original parties to the Development Agreement (KRA and the Town of Kiawah Island) did not intend for the property to be transferred to KICA, which KICA does not wish to benefit from. KICA argues that any intentions of KRA and the Town regarding the 1994 Development Agreement cannot be inferred for KICA, as it was not a party to that agreement, and there is no evidence that KICA representatives were aware of it.
In the Master’s Orders, issued on June 4, 2014, the master determined that the Agreement for Conveyance was the sole document related to the 4.62 acres signed by KICA, with identical descriptions in both the Agreement and the quit claim deed. The master examined evidence and testimony from KRA regarding the developability of the 4.62 acres, noting KRA's intent to only convey non-developable property. The master found that any evidence of KRA’s intent was relevant only if the deed and Agreement were deemed ambiguous, but ruled that they were unambiguous, leading to the failure of KRA’s claims. The master clarified that the Agreement for Conveyance was the only written agreement between KRA and KICA, confirming the identical property descriptions eliminated any drafting mistake. The master concluded KRA intended to convey the 4.62 acres, which was non-developable, aligning with the purpose of the 1994 Development Agreement to provide KICA with common area.
The master also stated that KICA's status as a third-party beneficiary did not clarify KICA’s intent. The master noted a lack of legal authority to consider the intent of non-parties in determining mutual mistake for reformation, thus denying KRA's request to reform the deed. Following KRA's motion to alter or amend the final judgment, the master reaffirmed on May 4, 2015, that his previous findings regarding the developability of the 4.62 acres did not affect the conclusion that KRA failed to meet its burden for reformation, and the 1994 agreement was irrelevant to KICA’s intent. Any references to the Development Agreement did not support KICA’s intent but rather illustrated KRA’s intent.
The master determined that the potentially gratuitous nature of the property transfer did not affect the reformation claim analysis. The master emphasized that the clear language of the Agreement for Conveyance and the deed argued against reforming the deed. It was noted for the first time in the order denying KRA’s motion that KRA directors, also KICA board members, were involved in a 'conflict of interest transaction' under the South Carolina Non-Profit Corporation Act. This Act allows transactions with interested directors only if approved by a majority of disinterested directors, which the master found was not demonstrated by any KICA board meetings regarding the property transfer.
The master concluded that there was insufficient evidence of a mutual mistake, reaffirming the refusal to reform the deed. Additionally, KPOG and ICCHA were found not to have asserted separate claims from their KICA membership, leading to their dismissal from the case. KRA's evidence of a mutual mistake regarding the intended property transfer did not meet the high burden required for deed reformation. The only agreement indicated that KRA would convey a ten-mile strip of property, which KICA accepted. While evidence suggested KICA acted inconsistently with property ownership, there was no proof that KICA intended to receive anything beyond what KRA conveyed.
The case largely stemmed from KRA’s failure to conduct a proper property survey. Regarding KPOG and ICCHA's appeal, the master explained that intervention is permitted when a party has a significant interest in the action's outcome, which must not be adequately represented by current parties. The trial court has discretion in granting or denying intervention requests under the relevant rules.
The court will uphold a lower court's decision on appeal unless a manifest abuse of discretion resulting in a legal error is identified. Such an error must significantly undermine the lower court's discretion to the extent that it deprives a party of their legal rights. Intervention rules are to be interpreted liberally to promote judicial economy by clarifying the rights of all affected parties, but a party must demonstrate standing under Rule 24, SCRCP. Standing requires a personal stake in the lawsuit and designation as a 'real party in interest,' which implies a substantial interest rather than a nominal one. An issue cannot be raised for the first time on appeal; it must have been previously addressed by the master. KPOG and ICCHA's appeal is not preserved for review, as they did not raise their issue with the master before appealing.
Initially, KPOG and ICCHA sought to intervene in the case concerning a 4.62-acre property, citing distinct interests due to their proximity. The master allowed their intervention, finding their interests inadequately protected by KICA. However, after KRA's motion to alter the order, the master later ruled that KPOG and ICCHA lacked standing, stating they did not present claims separate from KICA membership. KPOG and ICCHA appealed without seeking reconsideration, arguing the master misapplied legal standards regarding standing and intervention. This argument was not previously addressed to the master, leading the court to decline to consider it. Consequently, the trial court's decision is affirmed, with the judges concurring. KICA contends the master correctly declined to reform the deed as it was unambiguous.
