Docket: Appellate Case No. 2016-001300; Opinion No. 27837
Court: Supreme Court of South Carolina; August 29, 2018; South Carolina; State Supreme Court
Georgetown County's petition for a writ of certiorari was granted to review the court of appeals' decision in Repko v. County of Georgetown. The County contended that the appellate court made several errors, including misinterpreting the County Development Regulations as establishing a private duty of care to David Repko, incorrectly asserting that the South Carolina Tort Claims Act (TCA) preempted certain regulatory language, improperly applying the 'special duty' test, and distinguishing a precedent case. Most critically, the County argued that it is entitled to sovereign immunity under the TCA, a point on which the appellate court's reversal was deemed erroneous. The Supreme Court agreed, reinstating the trial court’s directed verdict in favor of the County and vacating the appellate opinion.
The context involves the development of Harmony Township by Harmony Holdings, LLC, which required adherence to local regulations for infrastructure completion before selling residential lots. The County's regulations allowed developers to post financial guarantees in lieu of completing required improvements, with discretion on acceptance. In 2006, the County accepted a Letter of Credit (LOC) from the Developer to cover infrastructure costs for Harmony Phase 2-D-1. The LOC was set at 125% of the projected costs, and the County had established policies for overseeing infrastructure completion and LOC management, allowing withdrawal from the LOC if the Developer failed to fulfill its obligations.
By April 2007, the County had approved multiple reductions to the Developer's Letter of Credit (LOC), which ultimately totaled $156,704.03, while the cost of completing the remaining infrastructure exceeded one million dollars. The Developer informed the County in August 2007 that it could not finance any further infrastructure work, and shortly thereafter, declared bankruptcy. A new developer attempted to take over the project and requested the release of LOC funds to finish the infrastructure but was deemed untrustworthy by the County, leading to the new developer withdrawing from the project. Consequently, lot owners in Harmony Phase 2-D-1 were left unable to build due to incomplete infrastructure.
Respondent David Repko, an owner of two lots, sued the County for alleged negligent failure to enforce its regulations regarding the LOC. The County asserted it owed no private duty of care to Repko and claimed immunity under specific subsections of the Tort Claims Act (TCA), particularly subsections 15-78-60(4) and (12). Additionally, the County argued Repko's claims were barred by a two-year statute of limitations. The trial court ruled in favor of the County, determining that the Regulations did not create a private duty of care and that the County was immune from liability under the cited TCA subsections. However, the court found the County was not entitled to immunity under subsection (12).
The court of appeals reversed the trial court's directed verdict, remanding for a new trial, specifically challenging the ruling related to subsection 15-78-60(4). The appellate court emphasized that it would only reverse a directed verdict if there was no evidence supporting it or if it was based on a legal error. In reviewing directed verdict motions, courts must consider evidence in the light most favorable to the nonmoving party and assess whether a legal duty exists in negligence cases. If no duty is found, the defendant is entitled to a directed verdict.
A dispute exists regarding whether the Regulations imposed a private duty of care from the County to Repko. However, the resolution of this issue is unnecessary because the County is immune from liability under subsection 15-78-60(4) of the TCA, even if such a duty existed. Repko claims that the County was grossly negligent in reducing the Developer's Letter of Credit (LOC) from $1,301,705.63 to $156,704.03 without ensuring it still covered 125% of remaining infrastructure costs. Central to Repko's argument is the assertion that the County failed to adhere to its own rules regarding the LOC. The County contends that it is immune from liability under the TCA, which was enacted following the abolition of sovereign immunity in McCall v. Batson. The TCA allows political subdivisions like the County to be liable for torts similarly to private individuals, but includes limitations and exemptions. Notably, subsection 15-78-60(4) states that a governmental entity is not liable for losses resulting from the adoption or enforcement of laws, including regulations. The County also cited subsection 15-78-60(12), which provides immunity related to licensing functions, unless exercised in a grossly negligent manner. After Repko's case concluded, the County sought a directed verdict, focusing on subsections (4) and (12). Repko argued that subsection (12) was inapplicable since the County's actions did not pertain to a licensing function, a position the trial court supported, ultimately granting a directed verdict based on subsections (4, 5, and 13) but not (12).
Repko sought reconsideration of a prior ruling, arguing that the gross negligence standard in subsection (12) should apply to immunity provisions in subsections (4), (5), and (13) based on the County's claim of immunity. This argument was raised for the first time during the reconsideration motion. The trial court denied the motion without further discussion. Established precedent dictates that new issues cannot be introduced in a motion for reconsideration. The appellate court erroneously addressed this unraised issue, stating that subsection (12) grants immunity for losses from permit renewals, despite Repko not arguing that his loss was tied to the County's licensing functions. Consequently, the appellate court's ruling, which suggested a jury could find subsection (12) applicable, was deemed erroneous. An appellate court cannot reverse a lower court's decision based on arguments not presented at the trial level. Therefore, the appellate court's finding that a jury issue existed regarding the applicability of subsection (12) was reversed. Additionally, the court did not consider whether the gross negligence standard in subsection (12) should be applied to subsection (4) as Repko had not provided other theories of liability beyond the County's alleged gross negligence in enforcing its regulations.
The County asserts immunity from liability under subsection (4) for failing to comply with or enforce Regulations, which does not include a gross negligence standard. Repko argues that case law necessitates incorporating the gross negligence standard from subsection (12) into subsection (4) due to the County's initial claim of immunity under subsection (12). However, it is clarified that the gross negligence standard can only be applied to other immunity provisions if the standard is relevant to the case at hand. Previous rulings, including Steinke and Chakrabarti, established that when a gross negligence standard is applicable to one exception, it should be read into other exceptions lacking that standard, but only when the gross negligence standard's relevant exception is applicable. In Plyler v. Burns, the court upheld the trial court's dismissal of claims against a probate court, ruling that subsections without a gross negligence standard could not be influenced by those that did not apply to the case. Repko's reference to Jones v. Lott is countered as the sheriff did not invoke the gross negligence provision, and the court affirmed the decision without extending the gross negligence standard to other subsections. The overarching principle affirmed is that the government should assert all applicable exceptions for immunity, and the gross negligence standard should be uniformly applied only when relevant.
Repko argues that the case Proctor v. Department of Health, Environmental Control supports his position that the gross negligence standard from subsection 15-78-60(12) should apply to other subsections since the County invoked subsection (12). In Proctor, the Department of Health and Environmental Control (DHEC) fined Proctor for regulatory violations and removed him from an approved rebate list. Proctor sued DHEC under subsection (12), claiming gross negligence. DHEC did not dispute the applicability of subsection (12) but contended its actions did not constitute gross negligence, leading to a trial court's denial of a directed verdict. The court charged the jury to apply the gross negligence standard to all relevant subsections, which the court of appeals affirmed.
However, the court distinguishes Proctor from Repko’s case, stating that subsection (12) does not apply here, and no other immunity provision with a gross negligence standard is relevant. It cites Plyler and Steinke, establishing that for the gross negligence standard to apply across different immunity provisions, the initial provision must be applicable to the case. The court disavows any contrary implications from Jones.
The trial court agreed with Repko that subsection (12) was not applicable and ruled accordingly. Repko's argument that the gross negligence standard from subsection (12) should apply to subsection (4) simply because the County initially pled subsection (12) fails legally. Subsection (4) independently provides immunity to the County, leading the court to uphold the trial court’s directed verdict in favor of the County under subsection (4). Consequently, the court reverses the court of appeals' decision and reinstates the directed verdict, vacating the court of appeals’ opinion, with concurrence from Chief Justice Beatty, Justice Kittredge, and Acting Justice Cooper.
Justice Hearn concurs with the majority opinion but emphasizes the necessity of first determining whether the County owed a private duty to Repko. He references the case Arthurs ex rel. Estate of Munn v. Aiken County, establishing that finding a duty is essential before addressing potential immunities under the South Carolina Tort Claims Act (TCA). Hearn agrees with the trial court's conclusion that the County did not owe such a duty, advocating for a reversal of the court of appeals on this basis.
The County's regulations regarding infrastructure completion in residential developments include a specific provision (Section 3.1) stating that accepting a financial guarantee does not create obligations to other agencies, utilities, or property owners. Hearn notes the compatibility of the public duty rule and the TCA. Under this rule, public officials generally cannot be held liable in private actions unless a statute explicitly creates a duty to a specific class of persons.
To determine legislative intent regarding such duties, the "special duty test" from Jensen v. Anderson County Department of Social Services is applicable. However, Hearn contends that when the language of a statute or ordinance clearly indicates no intent to impose a private duty, applying the special duty test is unnecessary. The County's ordinance prohibits lot sales until required infrastructure is complete, although it allows developers to sell lots with a financial guarantee, explicitly stating this does not create an obligation to property owners. This language reflects the County's intent not to establish a duty to property owners, minimizing the relevance of the special duty test in this case.
Section 3.1 is viewed as a disclaimer that is preempted by the South Carolina Tort Claims Act (TCA), according to the court of appeals in Repko v. Cty. of Georgetown. However, the determination of whether an ordinance establishes a duty of care is a fundamental aspect of a negligence claim, not an immunities analysis. The TCA does not create causes of action or impose duties of care, thus it does not conflict with the ordinance in question. The TCA merely removes the common law bar of sovereign immunity under certain conditions.
The analysis is further guided by the case Brady Development Co. Inc. v. Town of Hilton Head Island, where a developer's failure to pay a construction fee led to a denial of approval for infrastructure systems necessary for water and sewer service. The developer’s house, built on a lot purchased from a bankrupt entity, became uninhabitable due to the lack of these services and eventually burned down. Brady sued the Town, claiming negligent administration of the development ordinance. A directed verdict motion by the Town was denied, and the jury initially ruled in favor of Brady.
However, the appellate court reversed this decision, stating that the Town did not owe a duty to Brady since the ordinance's main purpose was to protect the public from overdevelopment, not to safeguard against specific harms. The court noted that imposing a private duty would effectively make the Town an insurer of all developments, which could hinder regulatory efforts. The decision emphasized that the ordinance did not explicitly create a private duty, despite its stated aim of promoting public health, safety, and welfare.
The Court determined that the ordinance did not establish a special duty, as the first element of the special duty test was not met. The ordinance clearly indicates the County's intent to avoid conferring a private duty, making the case stronger than in Brady. Acknowledging a duty would necessitate overruling Brady, and since the County did not owe a duty, the immunities issue under the Tort Claims Act need not be addressed.
The special duty test, as outlined in Jensen, includes six elements, which must be satisfied for a duty to exist. Specifically, the third element requires that the class of persons the statute intends to protect must be identifiable beforehand. The ordinance states that acceptance of a financial guarantee by the County does not create an obligation to property owners in the affected development, which undermines Repko's claim of being part of a protected class. Thus, Repko does not meet the criteria for protection under the ordinance, reinforcing the conclusion that no special duty exists.
