Stevens and Wilkinson of South Carolina, Inc., Gary Realty Company, Inc., Garfield Traub Development, LLC, and Turner Construction Company, Plaintiffs, of Whom Stevens & Wilkinson of South Carolina, Inc., Gary Realty Company, Inc., and Garfield Traub Development, LLC, are Respondents,
City of Columbia, Paul C. " Bo" Aughtry III, Windsor/Aughtry Co., Inc., Vista Hotel Partners, LLC, and Hilton Hotels Corporation, Defendants, of Whom the City of Columbia, is Petitioner Appellate Case No. 2012-208490.
Heard January 21, 2014
Appeal from Richland County. The Honorable George C. James, Jr., Circuit Court Judge.
Michael W. Tighe, D. Reece Williams, III, Richard C. Detwiler, and Kathleen M. McDaniel, all of Callison Tighe & Robinson, LLC, of Columbia, for Petitioner.
Richard A. Harpootlian and Graham L. Newman, both of Richard A. Harpootlian, PA, of Columbia; Kenneth M. Suggs and Francis M. Hinson, IV, both of Janet Jenner & Suggs, LLC, of Columbia, for Respondents.
JUSTICE HEARN. TOAL, C.J., BEATTY and KITTREDGE, JJ., concur. PLEICONES, J., dissenting in a separate opinion.
[409 S.C. 572] ON WRIT OF CERTIORARI TO THE COURT OF APPEALS
The respondents, two developers and an architectural firm, entered into a Memorandum of Understanding (MOU) with the City of Columbia as part of a larger project team to develop a publicly-funded hotel for the Columbia Metropolitan Convention Center. The City eventually abandoned its plan under the MOU, and the respondents brought suit on several causes of action including breach of contract and equitable [409 S.C. 573] relief. The City moved for summary judgment arguing the MOU was not a contract and therefore the contract claims failed. The circuit court agreed and, rejecting the equitable claims as well, granted summary judgment in favor of the City. The respondents appealed and the court of appeals affirmed in part and reversed in part. Stevens & Wilkinson of South Carolina, Inc. v. City of Columbia, 396 S.C. 338, 721 S.E.2d 455 (Ct. App. 2011). We reverse.
In January of 2001, the City, seeking a team to develop a publicly-funded, full-service hotel adjacent to the convention center, issued a request for qualifications. The City settled on a project team in December of 2002 that consisted of the architectural firm of Stevens & Wilkinson of South Carolina, Inc. (S& W); Turner Construction Company; Hilton Hotels Corporation; the underwriter Salomon Smith Barney, Inc.; and three developers--Edens & Avant Real Estate Services LLC; Garfield Traub Development, LLC; and Gary Realty Company Inc.
In April of 2003, the City and the project team members entered into the MOU. The MOU documented " the understandings reached with respect to the financing, development and operation of the Hotel." It contemplated multiple future agreements to fully define the duties of the parties--the Development Management Agreement, the Design/Build Agreement, the Qualified Management Agreement, and the HQ Hotel Room Block Commitment, a joint use agreement for parking, and a bond financing agreement. At the outset, the MOU provided:
This MOU reflects the intent to proceed in good faith to execute definitive written agreements with respect to the business terms and conditions herein contained. Notwithstanding anything herein to the contrary, if the City determines that is it not feasible to proceed with the Hotel project
it shall have no liability under this MOU.
Additionally, the MOU illustrated the roles of the signatories. The City was to acquire the land and prepare it for construction, establish a non-profit corporation to own the Hotel and issue bonds for financing, and " retain [Salomon] and legal [409 S.C. 574] counsel to structure and issue approximately $60 million in tax exempt hotel revenue bonds." Under the MOU, the " Developer" --Edens, Garfield, and Gary--" will coordinate design, development, construction and delivery of Hotel in accordance with the terms of the Development Management Agreement to be finalized between the City or [non-profit corporation]." S& W, the architect, " shall develop and implement a design review process."
The MOU also addressed payment of the project team, stating:
The Project Team will be responsible for the costs incurred prior to closing the financing. . . . If Hotel financing fails to close as a result of the City not meeting its obligations outlined in the Development Management Agreement, . . . the City will reimburse the Project Team for actual, documented costs incurred to that point up to an amount to be agreed upon.
Additionally, the MOU clarified any payment to S& W, Turner, or Salomon was contingent upon Salomon successfully closing the bond financing. The MOU also stated: " All studies, tests, plans and the like prepared or obtained by the Project Team will be assigned to and become property of the City."
The parties began negotiating the contracts required under the MOU during the course of the next year. S& W completed its initial design thereby allowing Turner to determine the guaranteed maximum price of the project as envisioned under the MOU, and that price was approved by the City in July 2003. S& W informed the City it would cease design work for the ninety days remaining until the bond financing closed unless the City agreed to compensate it for work performed in the interim. S& W submitted an estimate of $650,000 to continue working until the anticipated bond closing and $75,000 per week after that. On July 30, 2003, the city council voted to approve " $650,000 for interim architectural design."
Over the course of the negotiations, the bond issuance required to fund the project rose from the $60 million estimated in the MOU to $71 million by February 2004. Nevertheless, the non-profit organization accepted the financing plan [409 S.C. 575] for the $71 million and set the bond closing date as April 1, 2004. However, by mid-March the estimate had climbed to above $72 million. A little over a week after receiving this most recent financial report, the City issued a new request for proposals to develop a privately-funded hotel for the convention center. Ultimately Windsor/Aughtry Co., Inc. was chosen as the developer and it successfully constructed the Hilton.
S& W sued the City for breach of contract based on the MOU and the July 30 agreement, and on the equitable grounds of quantum meruit and estoppel. Gary and Garfield also sued the City for quantum meruit and breach of the duty of good faith, later adding a breach of contract claim. The City moved for summary judgment arguing the MOU was not a contract, it retained no benefit from the work of the project team, and the MOU contained no promise to pay S& W.
In a consolidated order, the circuit court granted summary judgment in favor of the City on all claims. Specifically, the court found the MOU was not a binding contract, and instead was a nonbinding agreement to agree in the future. It further held that the respondents failed to present any evidence they had ...