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Ralph v. McLaughlin

Court of Appeals of South Carolina

August 21, 2019

Richard Ralph and Eugenia Ralph, Appellants,
v.
Paul Dennis McLaughlin and Susan Rode McLaughlin, Respondents. Appellate Case No. 2017-000866

          Heard May 15, 2019

          Appeal From Charleston County Roger M. Young, Sr., Circuit Court Judge.

          G. Dana Sinkler, of Gibbs & Holmes, of Wadmalaw Island, and Ainsley Fisher Tillman, of Ford Wallace Thomson LLC, of Charleston, both for Appellants.

          George Hamlin O'Kelley, III, of Buist Byars & Taylor, LLC, of Mt. Pleasant, for Respondents.

          GEATHERS, J.

         This case involves a property dispute on Seabrook Island between neighbors Richard and Eugenia Ralph ("the Ralphs"), and Paul and Susan McLaughlin ("the McLaughlins"). The dispute in question concerns the destruction of a drainage easement by the McLaughlins that, the Ralphs allege, exacerbated drainage issues on the Ralphs' property. At trial, the jury found for the Ralphs on their cause of action for trespass and awarded them $1, 000 in nominal damages. On appeal, the Ralphs argue the circuit court erred in 1) failing to apply the rulings and factual determinations from a previous grant of summary judgment to a third-party defendant as the law of the case; 2) entering a directed verdict for the McLaughlins on the issue of punitive damages; 3) failing to find the McLaughlins trespassed as a matter of law; and 4) failing to grant the Ralphs a new trial absolute, a new trial nisi additur, or a new trial on damages. We reverse and remand the case for a new trial on compensatory damages and punitive damages.

         FACTS

         In 1984, E.M. Seabrook, Jr. prepared and recorded a plat depicting blocks 32 and 33 of Seabrook Island ("the Seabrook plat"). In 1987, he similarly prepared and recorded a second plat depicting blocks 32 and 33. To alleviate drainage issues concerning several lots on block 32, Seabrook established a twenty-foot-wide drainage easement and a corresponding no-build area across the back of lots 21 through 28, which are reflected in the plats. The plats also reflect a twenty-foot-wide drainage easement running between the property lines of lots 21 and 22, extending ten feet into each lot. The drainage easements contained a pipe that began at the front corner of lot 22, ran down the property line, turned ninety degrees, and extended across lots 22 through 28 before emptying into a water hazard on the neighboring golf course.[1]

         In 1997, the Ralphs purchased lot 23 and recorded their deed, which granted them the property "with, all and singular, the Rights, Members, Hereditaments and Appurtenances to the said Premises belonging, or in anywise incident or appertaining." The deed also indicated the property was subject to "the Covenants, Conditions, Restrictions, Limitations, Affirmative Obligations and Easements of Record . . . ." Similarly, in 1998 or 1999, Carroll and Lorraine Gantz ("the Gantzes") purchased lot 22 and recorded their deed. The Gantzes' deed indicated lot 22 was subject to "a twenty[-]foot (20') easement for drainage and a ten[-]foot (10') easement for drainage as shown on the [Seabrook plat]," as well as "the area designated as 'No Build Area' shown on the [Seabrook plat]."

         In 2002, the Gantzes, predecessors in title to the McLaughlins, approached the Seabrook Island Property Owners Association ("SIPOA") about eliminating the twenty-foot drainage easement and no-build area on the back of lot 22. Thereafter, SIPOA unanimously voted to give the easement back to the owners of lot 22. On September 11, 2002, a new plat prepared by Forsberg Engineering ("the Forsberg plat") entitled "Plat Showing Abandonment of an Existing 20' Drainage Easement Lot 22, Block 32," was recorded. The Forsberg plat also indicated the current no-build area was to be abandoned.

         In October 2002, the Gantzes conveyed lot 22 to the McLaughlins, and the deed was recorded. The legal description of the property indicated that it remained subject to the ten-foot drainage easement depicted in the Forsberg plat and "all Restrictions, Covenants, Easements, Rights-of-Way, Matters and Conditions of record affecting said property . . . ." Mr. McLaughlin indicated he never discussed the twenty-foot easement with the Gantzes or SIPOA prior to closing, but he maintained that the real estate agent asserted the easement had been abandoned.[2]Mr. McLaughlin also testified his closing attorney brought the twenty-foot easement to his attention before indicating that it had been abandoned, telling him "everything was appropriate and in order."

         In 2006, the McLaughlins approached SIPOA's Architectural Review Board about building a house on their property. According to the plans, part of the house was to be sited over the twenty-foot easement and no-build area. At an August 15, 2006 SIPOA meeting, the preliminary plans were unanimously approved subject to several stipulations.[3] Thereafter, the McLaughlins received a letter from the administrator of the Architectural Review Board, dated August 18, 2006, stating:

The Architectural Review Board has approved the Preliminary Plans submitted for Block 32 Lot 22, Seabrook Island, SC. Please address the following comments of the ARB and re-submit plans for Conditional Review.
1. Owner is to assume all responsibility for the underground drainage line at the 20' drainage easement/driveway.[4]
2. Owner is to assume all responsibility for the abandoned drainage easement that may contain a pipe.
3. Property lines must be located prior to any grading because of the Right-Of-Way for the SIPOA 20' drainage easement.

         In June 2007, the McLaughlins received a letter from SIPOA regarding a plan to address the drainage pipe and eliminate the twenty-foot easement. The Ralphs received the same letter. After receiving the letter, Mr. Ralph met with John Thompson, the executive director of SIPOA, to voice his objections regarding any plans to remove the drainage pipe.

         Over the course of the next year, the McLaughlins sought financing for their construction, closing on a loan in June 2008. At some point, the McLaughlins received a call from the chair of the SIPOA legal committee indicating there were some issues concerning the drainage pipe. On September 22, 2008, Thompson sent an email to the owners of lots 21 through 28 seeking to schedule a meeting concerning the easement. The email summarized the dispute surrounding the easement[5] and indicated the drainage pipe was still functioning. The email further indicated that several neighbors objected to the removal of the pipe due to concerns over adverse effects it would have on drainage and that SIPOA had hired an engineer, Robert George, to evaluate the consequences of removing the pipe.[6]

         The meeting between SIPOA, the McLaughlins, and the affected property owners was held on September 29, 2008. At the meeting, Mr. George presented his findings and advised against removing the drainage pipe on lot 22, indicating that doing so would increase the likelihood of flooding and exacerbate existing drainage problems. Another meeting was held to discuss the issue on October 1, 2008. Following the meetings, several emails were exchanged between the affected property owners and the McLaughlins. In these emails, the property owners continued to express their concerns about the adverse impact the removal of the pipe would have on their properties, and the McLaughlins adamantly denied the existence of an easement on their lot. After the McLaughlins and their neighbors failed to reach an agreement, SIPOA indicated it had exhausted its options. On October 22, 2008, SIPOA sent a letter to the affected property owners indicating that it had rescinded the May 2002 resolution abandoning the easement.

         On December 5, 2008, the McLaughlins emailed the neighboring property owners asserting that there was no easement on their property, they had been patient with SIPOA, and they would begin construction on their home. On December 9, 2008, the McLaughlins authorized their construction team to remove the drainage pipe. On the same day, SIPOA filed a lawsuit against the McLaughlins seeking a temporary restraining order to prevent the removal of the pipe.[7] However, SIPOA withdrew the lawsuit two days later on December 11, 2008.[8] Following the removal of the pipe, the McLaughlins built part of their home over the no-build area and the area formerly containing the pipe.

         On September 30, 2011, the Ralphs filed a complaint[9] against the McLaughlins seeking actual and punitive damages and alleging the McLaughlins caused flooding and poor drainage on the Ralphs' property by destroying the drainage easement. On December 6, 2011, the McLaughlins filed an answer and a third-party complaint against SIPOA alleging reliance on representations by SIPOA. On February 14, 2014, the Ralphs moved for partial summary judgment on their trespass claim. The McLaughlins filed a motion for summary judgment on February 19, 2014, and, a day later, SIPOA filed a motion for summary judgment. While these motions were pending, the Ralphs moved to strike the matter from the docket pursuant to Rule 40(j) of the South Carolina Rules of Civil Procedure (SCRCP), [10]and the parties entered into a consent order striking the case from the docket on June 24, 2014. The Ralphs moved to restore the case to the active docket on May 11, 2015, and the case was restored by consent order on June 23, 2015, pursuant to Rule 40(j), SCRCP.[11]

         After the case was restored, the parties refiled their motions for summary judgment. On May 11, 2016, the Honorable G. Thomas Cooper, Jr., [12] heard all three motions for summary judgment, denying both the Ralphs' motion and the McLaughlins' motion. However, Judge Cooper granted SIPOA's motion for summary judgment, finding there was no evidence to show SIPOA had made any promises to the McLaughlins and, as a matter of law, the McLaughlins could not have reasonably relied on SIPOA.

         At trial, the Ralphs presented Howard Yates as an expert in real property. Yates indicated that he examined the chains of title for the Ralphs and McLaughlins and opined that both properties became subject to the drainage easement after the properties were first purchased according to the Seabrook Island plat. Yates explained the lot owners each held a special property interest in the easement. Yates further testified SIPOA could not unilaterally abandon the easement, indicating abandonment would require the consent of everyone who held a special property interest. Additionally, while Yates conceded that lot 22 was subject to the Forsberg plat, he maintained that it was still subject to the earlier plats as well. Yates further testified that determining whether SIPOA had authority to abandon the easement would require an attorney to look at the deed and plats and that such a review would only take twenty to thirty minutes.

         The Ralphs also presented Robert George as an expert in civil engineering, registered land surveying, and storm-water drainage. George testified that the Ralphs' yard is a trough and the original design for Seabrook Island was meant to alleviate this issue. George further explained this design was interrupted by the McLaughlins' removal of the pipe, leading to increased water flow into the Ralphs' yard, increased "ponding, "[13] and poor drainage. Additionally, Mrs. Ralph indicated the standing water in their yard could reach a depth of eight inches and could take several days to drain, whereas the water would typically dissipate within a day and a half before removal of the pipe.

         Concerning damages, the Ralphs estimated their house was worth $775, 000 without the backyard ponding issues. After removal of the pipe, both of the Ralphs testified that they believed the value of their property had dropped by at least $200, 000. The Ralphs also presented Nick Thompson as an expert in commercial and residential appraisal. Thompson indicated he had trouble appraising the Ralphs' property because he had not been able to find any sales with a similar problem. According to Thompson, the lack of comparable sales indicated that either the Ralphs' drainage problems were unique and a similar situation had never existed before or property owners with the same problems had not been able to find a buyer. Thompson then estimated the Ralphs' property had decreased in value by ten, fifty, or sixty percent. Thompson further indicated he believed the Ralphs' property to be worth approximately $567, 000 before the pipe was removed, opining that the Ralphs would be lucky to sell their property for half that price afterwards. Additionally, Mrs. Ralph testified that they had paid Mr. George $17, 000 in an attempt to alleviate the drainage problem, but no solution could be implemented.

         After the Ralphs rested their case, the McLaughlins moved for a directed verdict on several issues, including punitive damages. The Ralphs argued Mr. McLaughlin's testimony indicated that he acted with reckless disregard for the rights of his neighbors.[14] The circuit court indicated it did not think punitive damages were applicable because Mr. McLaughlin believed he had the right to remove the pipe. Ultimately, the circuit court found, "I don't think he was acting malevolently, certainly not to the level of clear and convincing, so I'll grant their motion for punitive damages."

         After this ruling, the Ralphs made two additional arguments in support of punitive damages. First, the Ralphs argued that, under South Carolina law, a purchaser is imputed with knowledge of all the other deeds in his chain of title and the act of digging up the pipe could be construed as willful because the McLaughlins are presumed to have known the easement ran across their property. The circuit court responded, "Well, I got to disagree with you on that. That's language in the deed. I doubt there's probably anybody in this room, including all the lawyers, who read the deed when they bought their piece of property. They had their lawyer read it, and it's there." Second, the Ralphs argued the conclusion in Judge Cooper's unappealed grant of summary judgment-that the McLaughlins could not rely on any representations by SIPOA-was the law of the case. As such, the Ralphs argued this conclusion should be binding, and they should be allowed to argue to the jury that the removal of the pipe was intentional and punitive damages applied. However, the circuit court ruled the grant of summary judgment to SIPOA was not binding on the jury. After dismissing these arguments, the circuit court reiterated that it was granting the directed verdict on punitive damages.

         The McLaughlins' case centered on the theory that they had justifiably relied on SIPOA and the purported abandonment of the easement in removing the pipe. The McLaughlins also testified they had observed significant amounts of standing water in the Ralphs' yard when visiting their property prior to construction. Additionally, Mr. McLaughlin explained that when determining where to site their house, SIPOA's Architectural Review Board required the McLaughlins to preserve a large oak tree in the middle of their property. As such, the McLaughlins had the option to site the house on the front or back side of the oak tree, and they ultimately decided to site the house on the back side.[15] Mr. McLaughlin further indicated he removed the pipe because he was frustrated; he had not asked any of his neighbors for permission to remove the pipe or begin construction; and following construction, he told SIPOA that it could take on the responsibility of providing a solution to the Ralphs' drainage problem.

         After the close of the McLaughlins' case, the Ralphs moved for a directed verdict on trespass, arguing SIPOA's purported abandonment of the drainage easement would not have affected the Ralphs' property rights. The circuit court denied the motion, finding the issues of trespass and abandonment were both for the jury. After closing arguments, the circuit court charged the jury on, among other things, the law of easements, trespass, abandonment, and nominal damages. After deliberating for about five hours, the jury indicated it was deadlocked, and the circuit court issued an Allen[16] charge. After resuming deliberations for a little over an hour, the jury returned the following verdict: "We, the jury, find for the plaintiff against the defendant in the amount of $1, 000 actual nominal[17] damages . . . ."

         On February 3, 2017, the Ralphs moved for, in the alternative, a new trial absolute, a new trial as to damages, or a new trial nisi additur pursuant to Rule 59, SCRCP. In denying the motions for a new trial absolute and a new trial nisi additur, the circuit court found it was the jury's intention to award nominal damages and that such an award was supported by the evidence at trial. Additionally, in denying the motion for a new trial as to damages, the circuit court cited the same rationale and indicated a new trial as to damages was not warranted because a directed verdict on the issue of trespass would not have been proper. This appeal followed.

         ISSUES ON APPEAL

         1. Did the circuit court err by failing to apply the rulings and factual determinations in the previous grant of summary judgment to SIPOA as the law of the case?

         2. Did the circuit court err by entering a directed verdict for the McLaughlins ...


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