Nichols Holding, LLC and J. Wade Nichols, Respondents-Appellants,
Divine Capital Group, LLC, John S. Divine, IV, Nathan Anderson, and Divine Dining Group, Inc., Appellants-Respondents
December 29, 2015.
From Horry County Steven H. John, Circuit Court Judge.
Appellate Case No. 2014-000662.
Ruth Brittain, Leah Montgomery Cromer, and J. Jackson Thomas,
of Thomas & Brittain, P.A., of Myrtle Beach, for
Connell Jr., of Kelaher, Connell & Connor, P.C., of Surfside
Beach, for Respondents-Appellants.
J. SHORT and MCDONALD, JJ., concur.
this breach of contract action, Appellants-Respondents,
Divine Capital Group, LLC, John S. Divine, IV, Nathan
Anderson, and Divine Dining Group, Inc. (collectively,
Divine), and Respondents-Appellants, Nichols Holding, LLC and
J. Wade Nichols (collectively, Nichols), seek review of the
circuit court's order. Divine appeals that part of the
order requiring Divine to pay impact fees to Georgetown
County Water and Sewer District (the District) on behalf of
Nichols. Nichols challenges that part of the order requiring
Nichols to pay Divine's outstanding trade
March 2011, Nichols filed this breach of contract action
against Divine to recover capital contributions made to
Divine for the purpose of opening certain restaurants at The
Market Commons in Myrtle Beach. Nichols also sought an
accounting and the appointment of a receiver to run all of
Divine's restaurant businesses. At the time, two related
actions involving the parties were pending in circuit
court. On May 25, 2012, the circuit court
ordered the establishment of a receivership over Divine's
restaurant businesses and appointed Arlene Jaskot, CPA, as
Meanwhile, the District sent yearly notices to Divine
concerning the District's imposition of a " Demand
Charge," in addition to regular water and sewer charges,
on the accounts of two restaurants located on Parsonage Creek
in Murrells Inlet, i.e., Bovine's Wood Fired Specialties
(Bovine's) and Divine Fish House (collectively, the
Restaurants). At least one of these notices was signed by the
District's " Finance/Administration Director,"
John F. Buck. The notices stated, in pertinent part:
In order to more equitably distribute costs associated with
providing water and sewer service to commercial customers,
the District put in place a " Demand Charge[." ]
The " Demand Charge" is applicable only to those
commercial customers [who] consistently exceed the
water and sewer capacity assigned to them. The capacity
assigned is determined by the number of water and/or sewer
impact fees previously paid for at a specific
service location. Impact fees are determined by the
expected water and/or sewer demand required to
service a particular commercial activity. The impact fees
paid by our customers are used exclusively to pay for the
expansion of the plant facilities, storage, and system
improvements required [for] serving all users of the water
and sewer system during peak demand periods. . . .
. . . . The " Demand Charge" is intended to (a)
encourage water/sewer conservation, (b) provide capital funds
necessary to expand facility capacity associated with excess
demand, and (c) ensure fair and equitable rates and charges
to all District customers. . . .
. . . .
You have the option of purchasing the additional
capacity by paying the associated impact fees
and eliminating or reducing the monthly Demand Charge(s). . .
Payment of the Demand Charges shall not be considered as a
credit toward the purchase of additional impact fees. A user
demand analysis shall be performed each year providing the
customer the opportunity to reduce consumption
and/or to lower or eliminate the Demand Charge for the
The District encourages you to review your usage records and
consider any justification or methods to reduce the usage
to the assigned capacities. . . .
(emphases added). Divine did not opt to pay impact fees to
purchase additional water and sewer capacity; instead, Divine
paid the monthly demand charges.
spring of 2013, Nichols and Divine settled their litigation
by executing (1) a Consent Order allowing for the entry of
judgment in favor of Nichols against Divine in the amount of
$8,642,370.70; (2) a " Settlement Agreement and Release
in Full," in which Divine agreed to sell certain real
estate and intellectual property to Nichols in exchange for
Nichols' (a) assumption of certain debts of Divine, (b)
execution of a satisfaction of judgment, and (c) request of
the circuit court to terminate the receivership; and (3) an
" Agreement of Purchase and Sale," covering
Nichols' purchase of the real estate and intellectual
property, which included Nichols' optional assumption of
certain operating agreements for the Restaurants, and a
marina adjacent to Divine Fish House. Specifically, the
Agreement of Purchase and Sale required Nichols to pay
Divine's " trade debt" that remained
outstanding as of the date of the closing of the sale, which
occurred on May 2-3, 2013. " Trade Debt" is defined
in the Agreement of Purchase and Sale as follows:
[A]ll amounts outstanding for and from the operation of the
Restaurants and Bars [that] are normal operating expenses of
the Restaurants and Bars, and [that] are reasonably
consistent with past operating expenses of the Restaurants
and Bars. The Trade Debt includes the fee for administrative
services provided to the Restaurants and Bars by Divine
Dining Group, Inc. (" DDG" ); provided, however,
that the administrative services fees of DDG shall not exceed
DDG's actual cost and shall not exceed normal rates for
fees of this kind in
the greater Myrtle Beach, South Carolina market area. The
Trade Debt shall not include, but specifically excludes,
intercompany debt owed to Divine or companies owned by Divine
other than the fees due to DDG for its administrative
services for the Restaurants and Bars.
closing of the sale occurred on May 2-3, 2013. At this time,
Divine presented Nichols with documentation of the
outstanding trade debt. Also, at this time, the
Restaurants' water and sewer accounts with the District
did not show any past due charges; rather, the District had
just issued a bill on May 2, 2013, the first day of the
closing, and those charges were not due for payment until May
the closing, Nichols' new restaurant manager, Ernest
Edwards, attempted to change the name on the Restaurants'
water and sewer accounts from " John S. Divine" to
" the Nichols Holdings companies" but was informed
that to change the ownership of the accounts, Nichols would
have to pay impact fees in the approximate amount of $53,000.
The District's Engineering Director, Tommie Kennedy, then
sent a letter, dated June 17, 2013, to Nichol's counsel,
explaining the District's policy for changes in ownership
of water and sewer accounts as well as the history of the
Restaurants' accounts. Kennedy stated, in pertinent part:
Before the request to transfer[, Divine] had received yearly
notices that the account had gone over its allocated capacity
of water and sewer. In the notice[, Divine had] the
option of buying additional capacity or incurring a
penalty. Every year that the usage was over its
allowed capacity[, Divine] elected to pay the
penalty in lieu of purchasing additional capacity.
According to District policy, change in ownership triggers a
review of the account and requires that all additional
capacity needed for the commercial business be purchased as
if it were a new business opening up for the first time.
During this review[,] staff used historical data from the
account to calculate the capacity required for the business.
. . .
learning of the impact fees required to change ownership of
the accounts, Nichols refused to pay Divine's outstanding
trade debt. Hence, on June 5, 2013, Divine filed a motion to
enforce the Settlement Agreement and the Agreement of
Purchase and Sale (collectively, the Agreements), seeking an
order compelling Nichols to pay the " trade creditor
debt owed at the time of the closing" of the sale and to
execute documents necessary to cancel Nichols' judgment
against Divine. Several weeks later, Divine offered to allow
Nichols to keep the Restaurants' water and sewer accounts
in Divine's name so that Nichols would not be required to
pay the impact fees.
then contacted Kennedy to inquire about the impact fees
quoted to Edwards. Kennedy responded in a letter dated August
15, 2013, explaining the policy of reviewing accounts upon a
change in ownership. In this letter, Kennedy also stated,
" Any commercial account holder exceeding their
purchased capacity should receive a letter every year
notifying them of the overage. In the notice[,] the owner
[sic] has the option of buying additional capacity
or incurring a penalty." (emphases added). On
September 12, 2013, Divine sent a letter to Kennedy, seeking
information concerning the Restaurants' accounts and
clarification of Kennedy's previous characterization of
the demand charge as a " penalty."
response, Kennedy characterized the purchase of additional
capacity as an option and admitted (1) there was nothing in
the District's Rates and Charges Resolution
characterizing a demand charge as a penalty, (2) the District
had no records of ever placing a " lien" or making
an " assessment" on the Restaurants or the
underlying property, and (3) prior to May 2013, when Nichols
purchased the Restaurants from Divine, the District had no
records showing that the District's engineering
department had reviewed the Restaurants' accounts and
required Divine to pay additional impact fees. Kennedy also
stated, " If the referenced account is not transferred
and no other changes are made[,] such as remodeling or
building a new building[,] then the account can continue to
be billed as it is today with a
demand charge instead of paying the impact ...