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Kiawah Resort Associates, L.P. v. Kiawah Island Community Association, Inc.

Court of Appeals of South Carolina

September 27, 2017

Kiawah Resort Associates, L.P., a Delaware Limited Partnership, and Kiawah Development Partners II, Inc., Appellants/Respondents,
v.
Kiawah Island Community Association, Inc., a South Carolina Not-for-Profit Corporation, Respondent, and Kiawah Property Owners Group, Inc. and Inlet Cove Club Homeowners Association, Inc., Respondents/Appellants. Appellate Case No. 2015-001146

          Heard March 8, 2017

         Appeal From Charleston County Mikell R. Scarborough, Master-in-Equity

          Ellis R. Lesemann and Michelle A. Matthews, both of Lesemann & Associates, of Charleston, for Appellants/Respondents.

          Allison Carter Jett, of Weissman, P.C., of Atlanta, GA, for Respondent.

          Amy E. Armstrong and Jessie A. White, both of the South Carolina Environmental Law Project, of Pawleys Island, for Respondents/Appellants.

          OPINION

          LOCKEMY, C.J.:

         In these cross-appeals Kiawah Resort Associates, L.P. (KRA) and Kiawah Development Partners II LLC (KDP II) (collectively Appellants) appeal from the Master-in-Equity's order declining to reform a deed given to Kiawah Island Community Association (KICA). Appellants assert the master erred by refusing to consider KICA's subsequent conduct as evidence of mutual mistake and finding there was no evidence KICA did not intend to accept 4.62 acres of oceanfront property as common area. Kiawah Property Owners Group, Inc. (KPOG) and Inlet Cove Club Homeowners Association (ICCHA) assert the master properly declined to reform the deed, but appeal the master's order finding KPOG and ICCHA did not have standing to participate in the action between Appellants and KICA. We affirm.

         FACTS

         KRA is the developer of a substantial area on Kiawah Island. On September 26, 1994, KRA entered into a Development Agreement with the Town of Kiawah Island. As part of that agreement, KRA agreed to convey certain property to KICA as common property. Those lands included "a strip of scenic dunes and high land owned primarily by the Property Owner . . . which extends along the Kiawah Island beachfront for approximately 10 miles as generally depicted on Exhibit 16.2." KRA agreed to convey by quit claim deed that property to KICA on or before January 1, 1996. KRA also agreed to convey property known as "Captain Sam's Spit" to KICA by January 1, 2008, "provided, however, that [KRA] may convey the eastern half of the spit to Charleston County Park & Recreation Commission prior to January 1, 2008."

         On that same day, KRA entered into an Agreement for Conveyance with KICA. The stated purpose of the agreement was "to evidence its agreement to the conveyance of such properties in accordance with the terms and provisions of the Development Agreement." In consideration of the sum of $5.00, KRA agreed to convey, and KICA agreed to accept several tracts of land. Specifically, parcel 8, entitled "Approximately 10 Miles of Beachfront Property pursuant to Paragraph 16(b) of the Development Agreement" included a full legal description with specific metes and bounds. On December 29, 1995, KRA issued KICA a quit claim deed using the same legal description found in the Agreement for Conveyance.

         Subsequently, KRA determined the property it conveyed in the 1995 deed included a 4.62-acre tract not contemplated in the Development Agreement. On March 1, 2013, KRA filed its complaint requesting the court reform the deed based on a mutual mistake and issue a declaratory judgment that the inclusion of this additional tract was "unintentional, in error, and a mistake, and contrary to the intent of the parties to the two Development Agreements of which KICA was a named third party beneficiary." After a trial, the master found KRA failed to present clear and convincing evidence of a mutual mistake and denied KRA's requests for a declaratory judgment and reformation of the deed. This appeal followed.

         KRA's APPEAL

         KRA asserts the master erred by denying its request for reformation of the 1995 deed based upon the intent expressed in the 1994 Development Agreement and KICA's subsequent conduct. KRA alleges all of the evidence presented during trial evidences a mutual mistake by KICA and KRA in deeding an additional 4.62 acre tract to KICA.

         a) Consideration of Subsequent Conduct

         KRA presented evidence of subsequent conduct by KICA that could support their claim for reformation. In its final order the master gave little weight to that evidence and stated, "given the lack of any evidence of KICA Board's discussion of the Beachfront Strip prior to the execution of the Beachfront Deed, that the best evidence of KICA's intent during the relevant period of 1994 and 1995 is its President's execution of the Agreement for [C]onveyance" (emphasis added). KRA alleges the master improperly relied upon this court's decision in Penza v. Pendleton Station, LLC for the proposition that a court cannot look to parole evidence if a deed is unambiguous on its face. 404 S.C. 198, 743 S.E.2d 850 (Ct. App. 2013).

         To the extent the master found Penza to preclude its consideration of parole evidence if it found the deed was unambiguous, the master erred. The plaintiff in Penza appealed the master's order finding a mortgage was intended to cover two tracts rather than one. Id. at 201, 743 S.E.2d at 851. Penza asserted the master erred in granting summary judgment because there was an issue of fact as to whether the mortgage was intended to encumber both tracts; alternatively Penza argued the master's order reformed the deed without a showing of mutual mistake. Id. This court found the mortgage to be ambiguous, and that a genuine issue of material fact precluded summary judgment. Id. at 205, 743 S.E.2d at 853. This court then found an analysis of Penza's reformation argument was unnecessary. Id. at 205, 743 S.E.2d at 853-54.

         Furthermore, our supreme court's decision in Sims v. Tyler indicates subsequent conduct is proper evidence in a reformation dispute. 276 S.C. 640, 281 S.E.2d 229 (1981). The Sims purchased two lots in a subdivision in 1969 from James Perry. Id. at 641, 281 S.E.2d at 229. Perry executed a deed in favor of the Sims and they recorded it. Id. The Sims built a house on one lot and built a doghouse and garden on the other. Id. at 641, 281 S.E.2d at 230. Several years later, Perry purportedly sold one of the lots to the Tylers. Id. at 642, 281 S.E.2d at 230. The Tylers asked the Sims to remove the doghouse so they could build a fence. Id. The Sims complied, then brought suit for trespass. Id. The trial court found the Sims' deed should be reformed and the Tylers should have possession of the lot, based on a mutual mistake between the Sims and Perry. Id. The Sims court reversed, finding "There is no evidence to support respondents' contention that the Sims did not intend to purchase this lot. The purchase price, the payment of taxes since its purchase, the construction of the doghouse and the planting of the garden are clear and convincing evidence the Sims intended to purchase" both lots. Id.

         Because the Penza court specifically declined to address the reformation argument before it, the master erred in applying the summary judgment analysis in this case.[1]Additionally, applying Sims, we believe the master erred to the extent it failed to consider KICA's subsequent acts in determining whether to reform the deed. Therefore, we will consider those facts in the reformation analysis.

         b) Reformation of Deed

         "Before equity will reform an instrument, it must be shown by clear and convincing evidence not simply that there was a mistake on the part of one of the parties, but that there was a mutual mistake." Timms v. Timms, 290 S.C. 133, 137, 348 S.E.2d 386, 389 (Ct. App. 1986). "A mutual mistake is one whereby both parties intended a certain ...


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