Supreme Court Seal
Supreme Court Seal
South Carolina
Judicial Department
2015-05-25-01
STATE OF SOUTH CAROLINA ) IN THE COURT OF COMMON PLEAS
  ) NINTH JUDICIAL CIRCUIT
COUNTY OF CHARLESTON )  
  )

Case No. 2011-CP-10-2220

J. HENRY FAIR, JR.; J. HOLCOMBE

)

 

ENTERPRISES, LP; and CHARLES LANE )  
and EDWIN COOPER, III, as Personal )  
Representatives of the Estate of JAMES H. HOLCOMBE, ) ORDER GRANTING PARTIAL
Plaintiffs, ) SUMMARY JUDGMENT ON
  ) EQUITABLE LIEN CLAIMS AND
vs. ) CANCELLING LIS PENDENS
  )

 

ASHLEY II OF CHARLESTON, LLC; )

 

MAGNOLIA/ARC L.P.; MAGNOLIA/ARC )

 

LENDER, LLC; ASHLEY RIVER )  

INVESTORS, LLC AND JOHN DOE,

)  
  )  
Defendants. )  

   

This matter came before the Court on Defendant Magnolia/ARC L.P. and Magnolia/ARC Lender, LLC’s (collectively, “Lender”) Motion for Partial Summary Judgment, and Motion to Cancel or Amend Lis Pendens (the “Motions”), both filed and served on November 19, 2014.  Defendant Ashley II of Charleston, LLC (“Ashley II”) joined in the Motions. Counsel for Plaintiffs J. Henry Fair, Jr., J. Holcombe Enterprises, LP, and Charles Lane and Edwin Cooper, III, as Personal Representatives of the Estate of James H. Holcombe (“Plaintiffs”), Capers G. Barr, III; counsel for Ashley II, Christy Ford Allen; and counsel for Lender, Paul A. Dominick and Jeffrey S. Tibbals; were present at the hearing, which was held on April 6, 2015, upon proper notice to all parties.  Having considered the pleadings, memoranda, and other matters of record, the Court finds there is no genuine issue of material fact as to Plaintiffs’ equitable lien claim, and Plaintiff is entitled to summary judgment as a matter of law.  Because Plaintiffs’ lis pendens is dependent upon the equitable lien claim, the lis pendens must also be cancelled. Therefore, this Court grants the Motions in their entirety, for the reasons set forth in more detail below.

FACTUAL BACKGROUND

The facts, viewed in the light most favorable to Plaintiffs as the non-moving parties, and as reflected in the Third Amended Complaint and documents of record with the Charleston County Register of Mesne Conveyance, are as follows.  On or about December 31, 2002, J. Holcombe Enterprises, LP and J. Henry Fair, Jr. (“Holcombe and Fair”), as sellers, and Ashley II, as buyer, entered into a contract for the sale and purchase of a 27.62 acre tract of land along the Ashley River for $2.7 million dollars (the “Contract”).  Third Amended Complaint at ¶15 and Exhibit “A” thereto.  At the time the parties entered into the Contract, each of them knew that the parcel had been contaminated through heavy industrial use spanning decades. Fair Depo. at pp. 41-42, 51; Hagood Depo. at pp. 247-249.  The property (the “CNC Site”) had served as the site of a phosphate fertilizer manufacturing facility from approximately 1906 to 1972, most recently operated by Columbia Nitrogen Corp.  Third Amended Complaint at ¶15.

The Fourth Amendment to the Contract, dated November 24, 2003, contains an environmental clean-up cost indemnity (the “Indemnity”) granted to Holcombe and Fair by Ashley II.  This Indemnity was prepared by Ben A. Hagood, who represented both Holcombe and Fair, and Ashley II, in negotiating the terms of the Indemnity over the course of several months until the parties reached final agreement. Hagood Depo. at 38-40.  The Indemnity contains a number of terms, provisions, and limitations, some of which are highlighted in the Third Amended Complaint at paragraph 17.  The Fourth Amendment contains no provision that reflects any intent of the parties to provide any security for Ashley II’s performance of its obligations pursuant to the Indemnity.  Nor did Holcombe and Fair and Ashley II enter into any mortgage or any other written or recorded agreement by which Ashley II’s obligations pursuant to the Indemnity would be secured by any real property owned by Ashley II.  Fair Depo. at p. 71.  The parties closed on the sale of the CNC Site on the same date, November 24, 2003.

In the instant case, Plaintiffs claimed the right to an equitable lien over all real property owned by Ashley II as security for payment of Plaintiffs’ share of environmental liability resulting from the Indemnity.  See Third Amended Complaint at ¶¶ 58-68.  Along with the original Complaint, Plaintiffs filed a lis pendens (the “Lis Pendens”) blanketing all of the real property owned by Ashley II, no matter whether Ashley II had acquired the property before or after the execution of the Fourth Amendment.  In a related claim, Plaintiffs assert that their alleged equitable lien takes priority over Lender’s recorded mortgage lien, and seek a declaratory judgment to that effect.  See Third Amended Complaint at ¶¶ 69-79.

Lender acquired the indebtedness of Ashley II to Bank of America, N.A. on or around April 2, 2013, including the assumption of all of mortgagee’s rights pursuant to that certain Mortgage, Assignment, Security Agreement and Fixture Filing dated July 28, 2004, made by Ashley II in favor of Assignor, recorded in Book P503, Page 753, Charleston County RMC Office, as amended.  Lender’s holdings are more specifically described in that certain Affidavit of Richard Lee dated April 5, 2013 and filed in this case on April 10, 2013. 

PROCEDURAL HISTORY

Plaintiffs filed their original Complaint and Lis Pendens on March 25, 2011, naming only Ashley II as a defendant.  On May 23, 2011, Ashley II filed a motion to dismiss the complaint under SCRCP Rule 12(b)(6).  After a hearing, Ashley II’s motion was denied by form order filed November 2, 2011.  Subsequently, the case was stayed by a Consent Order filed March 15, 2012, to allow for resolution of a federal district court case to determine allocations of responsibility for environmental cleanup at the CNC Site.  The Consent Order stated that the stay “serves as an efficient way to delay this court from having to address difficult issues of state and federal jurisdiction and comity concerns, and the outcome of the Federal Case may render all or portion of this action unnecessary in the future.”

On April 10, 2013, just over a week after it acquired the Bank of America mortgage, Lender filed a motion to lift the stay and a motion to intervene, seeking to protect its first priority lien and collateral.  A Consent Order allowing Lender’s intervention as a party defendant was filed on June 17, 2013.  By and through another consent order filed on September 18, 2013, this case was referred to the Business Court Pilot Program of the South Carolina Circuit Courts.

On October 18, 2013, Lender filed a partial motion for summary judgment and a motion to cancel or amend the Lis Pendens, both of which Ashley II joined.  A hearing on these motions was held on November 25, 2013, and then continued over to and completed on February 21, 2014.  The Court denied Defendants’ motions at that time, in order to allow the parties to conduct discovery on various issues and arguments advanced by Plaintiffs at the hearing.  This Court invited Defendants to renew their motions once discovery was completed, and Defendants did so on November 19, 2014.  At the hearing, counsel for Plaintiffs conceded that discovery on the equitable lien claim is complete.  By the time of the hearing on April 6, 2015, the Lis Pendens had remained as an encumbrance on title for more than four years.  

CONCLUSIONS OF LAW

I.  Standard of Review

Rule 56(c) of the South Carolina Rules of Civil Procedure requires that summary judgment be granted if “there is no genuine issue of material fact and… the moving party is entitled to judgment as a matter of law.” S.C.R.C.P. 56(c).  “The purpose of summary judgment is to expedite the disposition of cases not requiring the services of a fact finder.”  McKnight v. South Carolina Dept. of Corrections, 385 S.C. 380, 385, 684 S.E.2d 566, 568 (S.C.App. 2009) (citing George v. Fabri, 345 S.C. 440, 452, 548 S.E.2d 868, 874 (2001)). A “mere scintilla of evidence” is required to defeat a motion for summary judgment when the burden of proof is by a preponderance of the evidence. Hancock v. Mid-South Mgmt. Co., 381 S.C. 326, 330, 673 S.E.2d 801, 803 (2009). 

Although the moving party bears the initial burden of demonstrating the absence of a genuine issue of material fact, “this initial responsibility may be discharged by ‘showing’—that is, pointing out to the trial court—that there is an absence of evidence to support the nonmoving party’s case.”  Baughman v. Am. Tel. & Tel. Co., 306 S.C. 101, 115, 410 S.E.2d 537, 545 (1991). 
It is not necessary for the moving party to support its motion with affidavits or other similar materials negating the opponent's claim.  Lord v. D & J Enterprises, Inc., 407 S.C. 544, 553, 757 S.E.2d 695, 699 (S.C. 2014).  “Once the moving party carries its initial burden, the opposing party must do more than rest upon the mere allegations or denials of his pleadings, but must, by affidavit or otherwise, set forth specific facts to show that there is a genuine issue for trial.” Id. (citing Rule 56(e), SCRCP).  Under South Carolina law, where “plain, palpable and indisputable facts exist on which reasonable minds cannot differ,” summary judgment in favor of the moving party is proper.  CoastalStates Bank v. Hanover Homes of South Carolina, LLC, 408 S.C. 510, 516, 759 S.E.2d 152, 156 (S.C.App. 2014) (citing Pee Dee Stores, Inc. v. Doyle, 381 S.C. 234, 240, 672 S.E.2d 799, 802 (Ct.App.2009)).

II.  Lender Is Entitled to Summary Judgment on Plaintiffs’ Equitable Lien Claim

The elements of an equitable lien are well established under South Carolina law.  “For an equitable lien to arise, there must be a debt, specific property to which the debt attaches, and an expressed or implied intent that the property serve as security for payment of the debt.” Chase Home Finance, LLC v. Risher, 405 S.C. 202, 209, 746 S.E.2d 471, 475 (S.C. App. 2013) (quoting Regions Bank v. Wingard Props., Inc., 394 S.C. 241, 250, 715 S.E.2d 348, 353 (Ct.App.2011) (quoting First Fed. Sav. & Loan Ass'n of S.C. v. Finn, 300 S.C. 228, 231, 387 S.E.2d 253, 254 (1989)). Furthermore, “equity is generally only available when a party is without an adequate remedy at law.” Id. (citing Nutt Corp. v. Howell Rd., LLC, 396 S.C. 323, 328, 721 S.E.2d 447, 449 (Ct.App.2011).

In Risher, the South Carolina Court of Appeals upheld the trial court’s denial of a claimed equitable lien, specifically endorsing the standard set forth by the lower court as follows:  “[i]n order for an equitable lien to arise as to specific property, there must be a debt, a duty or obligation owing from one person to another, a res to which the obligation attaches, which can be described with reasonable certainty, and an intent, expressed or implied, that the property is to serve as security for the payment or obligation.”  Id. (citing First Federal Savings and Loan Ass'n of Charleston v. Bailey, 316 S.C. 350, 356, 450 S.E.2d 77, 80–81 (Ct.App.1994), and Carolina Attractions, Inc. v. Courtney, 287 S.C. 140, 145, 337 S.E.2d 244, 247 (Ct.App.1985).  Importantly, the Risher court proclaimed that “[i]f a party seeking an equitable lien cannot satisfy any one of these requirements, this remedy is not available.”  Id. (emphasis added).  This Court finds that Plaintiffs have remained unable to demonstrate the existence of facts to support the required element of intent.

A. The Contract Is a Fully Integrated Agreement and Does Not Reflect Any Intent by the Parties to Create a Security Interest.

The Fourth Amendment makes clear that all provisions of the Contract not thereby amended remain in full force and effect.  See Fourth Amendment at p. 1 (“All of the terms of the Contract, not specifically amended herein shall remain unchanged.”).  One key provision of the Contract, reaffirmed by the Fourth Amendment, is Section 6.01.  Section 6.01 states as follows:

The parties further covenant and agree, that this written instrument expresses the entire agreement between the said parties, and there is no other agreement oral or otherwise varying or modifying the terms of this agreement.  This agreement may be modified only by an instrument in writing signed by both Purchaser and Seller.  This agreement is and shall be binding on both parties, their successors, heirs, executors, administrators and assigns.  Section headings are for convenience only and do not constitute substantive part of this agreement.  No representation, promise or inducement not included in this agreement shall be binding upon any party hereto.  This agreement shall be governed by, interpreted and enforced in accord with the laws of the State of South Carolina.

Section 6.01 includes a merger and integration clause confirming that the intent of the parties on matters relating to the Contract, including the Indemnity, is fully encapsulated in the Contract itself.  The parol evidence rule prohibits the consideration of statements of the parties’ intent outside of the Contract.

The parol evidence rule prevents the introduction of extrinsic evidence of agreements or understandings contemporaneous with or prior to execution of a written instrument when the extrinsic evidence is to be used to contradict, vary, or explain the written instrument.  The parol evidence rule is particularly applicable where the written instrument contains a merger or integration clause.

A merger clause expresses the intention of the parties to treat the writing as a complete integration of their agreement.

The terms of a completely integrated agreement cannot be varied or contradicted by parol evidence of prior or contemporaneous agreements not included in the writing. Furthermore, when the writing on its face appears to express the whole agreement, parol evidence cannot be admitted to add another term to the agreement, even when the writing is silent as to the particular term sought to be established.

Davis v. KB Home of South Carolina, Inc., 394 S.C. 116, 127-28, 713 S.E.2d 799, 805 (S.C.App.2011) (emphasis added) (citing U.S. Leasing Corp. v. Janicare, Inc., 294 S.C. 312, 318, 364 S.E.2d 202, 205 (Ct.App.1988); Wilson v. Landstrom, 281 S.C. 260, 266, 315 S.E.2d 130, 134 (Ct.App.1984); and Blackwell v. Faucett, 117 S.C. 60, 65, 108 S.E. 295, 296 (1921)).

In this case, the recognized exceptions to the parol evidence rule are inapplicable.  Plaintiffs allege neither ambiguity in the terms of the Contract nor fraud in the inducement.  In fact, quite the opposite – Plaintiffs embrace the Contract as a “valid, binding, and enforceable Contract,… neither procured nor infected by fraud, accident or mistake.”  Third Amended Complaint at ¶¶81-82.   In reviewing the Contract, I find that it is unambiguous. The construction of a clear and unambiguous contract is a question of law for the court. Robarge v. City of Greenville, 675 S.E.2d 788 (S.C. Ct. App. 2009).

The testimony of Mr. Hagood, who drafted the Fourth Amendment and represented both Holcombe and Fair and Ashley II regarding the terms of the Indemnity, buttresses this conclusion.  Mr. Hagood testified that an agreement to provide security for the performance of indemnity obligations would have been a material term of such an agreement.  Hagood Depo. at 81-82.  Mr. Hagood also testified that:

  • The documents that Hagood drafted, including the Fourth Amendment, represented his best effort to memorialize the intentions and agreements of the parties with respect to the terms of the environmental indemnity.  Hagood Depo. at 79-80.
  • He did not intentionally omit or remove any terms from the Fourth Amendment that had been agreed to by the parties.  Hagood Depo. at 80.
  • He does not believe that he failed to include any material terms in the Fourth Amendment.  Hagood Depo. at 80.
  • He believes that the Fourth Amendment (together with the full Contract) contains a complete and integrated agreement between Holcombe and Fair and Ashley II.  Hagood Depo. at 80.

Because the Contract sets forth fully, completely and unambiguously all of the terms comprising the Indemnity, a conclusion reinforced not only by the merger and integration clause, but also by the testimony of the drafter of the Fourth Amendment, this Court may not consider evidence of intent outside the four corners of the Contract.  Materials used to support or refute a motion for summary judgment must be those which would be admissible in evidence. See Baughman v. American Tel. & Tel. Co., 306 S.C. 101, 410 S.E.2d 537 (1991); Moon v. Jordan, 301 S.C. 161, 390 S.E.2d 488 (Ct.App.1990); Moss v. Porter Bros., Inc., 292 S.C. 444, 357 S.E.2d 25 (Ct.App.1987); see also Hansen v. DHL Labs., Inc., 316 S.C. 505, 510, 450 S.E.2d 624, 627 (Ct.App.1994), aff'd, 319 S.C. 79, 459 S.E.2d 850 (1995) (“A genuine issue of fact … can be created only by evidence which would be admissible at trial.”)  The lack of admissible evidence to support an essential element of an equitable lien mandates summary judgment.

B. Even Absent Application of the Parol Evidence Rule, No Extrinsic Evidence Supports the Required Element of Intent.

The patent inadmissibility of any evidence of the parties’ intent outside of the fully integrated Contract is enough to require summary judgment in favor of Lender on the equitable lien claim. However, even if Plaintiffs could use parol evidence to alter the terms of the highly negotiated Fourth Amendment between sophisticated parties, Plaintiffs have come forward with no evidence of any intent that any property of Ashley II would be used as security for Ashley II’s Indemnity obligations.  Mr. Hagood testified that Ashley II never instructed him to prepare a security agreement relating to Ashley II’s obligations pursuant to the Fourth Amendment, and that Ashley II never informed him that it intended to create a security interest in favor of Holcombe and Fair upon real property owned by Ashley II.  Hagood Depo at 83.  Mr. Hagood is not aware of any document that purports to grant a security interest in favor of Holcombe & Fair in real property owned by Ashley II.  Hagood Depo at 83.  Mr. Hagood further testified that he did not have any recollection as to any conversations with Holcombe and Fair regarding security or lack of security for the Indemnity obligations in the Contract.  Hagood Depo. at 109.  Mr. Hagood could not recall “either lien or security interest being used in discussions with either party.”  Hagood Depo. at 273.   In addition, Mr. Hagood produced hundreds of pages of documents relating to his dual representation of Holcombe and Fair and Ashley II in crafting the Indemnity, and Plaintiffs could not produce a single page that records any intent that Ashley II’s real property—including the CNC Site—would serve as collateral.

Prior to discovery, Plaintiffs opposed summary judgment through the affidavit testimony of Mr. Fair that “[t]he Parties intended that Ashley II’s environmental covenants, to indemnify and to perform remediation, were secured by its other lands that would be benefitted as a result.”  At his deposition, Mr. Fair acknowledged that his affidavit was prepared by his lawyer, Fair Depo. at 65, and admitted that the basis for his belief was that he was told Ashley II “had deep pockets and that we didn't have to worry because they had the assets to back up their contract.”  Fair Depo. at 70.  He assumed the assets included real property, but does not recall any specific discussions regarding Ashley II’s real property.  Id.  Mr. Fair did not remember discussing, with either Ashley II or Hagood, any lien or security from Ashley II to stand behind its Indemnity obligations.  Fair Depo. at 71. 

During the prior hearings on the equitable lien, Plaintiffs’ counsel emphasized that a document entitled Ashley Accumulation Investment Memorandum dated May 1, 2003 (the “Investment Memo”) served as evidence of an intent of the parties that Ashley II’s real property would serve as security for its obligations to Plaintiffs.  However, Mr. Fair testified that he did not know the significance of the Investment Memo.  Fair Depo. at 75.  Furthermore, the Affidavit of Craig Briner, an Ashley II representative, dated November 18, 2014, states that Ashley II never intended the Investment Memo to serve as any indication of any intent by Ashley II (there being none) to place a lien on property owned by Ashley II.  Briner Aff. at ¶5.  Moreover, there is no evidence that the Investment memo was relied upon, reviewed or even known to Plaintiff at the time of the Contract.  Thus, the Investment Memo cannot be inferred as evidence of even an implied intent to create a security interest.

Contrary to Plaintiffs’ allegations of inequity, the documents and testimony reflect that, at the time, Holcombe and Fair received substantial monetary consideration and the bargained benefits of the Contract.  They sold the CNC Site to Ashley II at a profit of $2.4 million dollars.  Fair Depo. at 40.  According to Mr. Hagood, Holcombe and Fair also improved their liability position by selling the CNC Site, although he advised Holcombe and Fair that there was still the potential for liability.  Hagood Depo. at 111.  Mr. Hagood also testified that it was Ashley II’s standard practice, and in keeping with its underwriting practices, to obtain pollution legal liability insurance coverage for the sites that it was purchasing in the Neck area of Charleston.  Hagood Depo. at 41, 77.  Mr. Hagood further testified that the parties understood and agreed that there would be no broad indemnity under subsection E of the Fourth Amendment unless Ashley II procured insurance policies for pollution legal liability.  Hagood Depo. at 77.  Thus, Holcombe and Fair took a calculated risk, because it was possible, and came to pass, that Ashley II could not obtain such insurance. The Court finds no evidence on which it could intervene, in equity, to create a lien on all of Ashley II’s property holdings, and finds no supporting evidence for this term as part of any agreement between the parties, within or outside of the Contract.

C. Intent to Create a Security Interest Can Be Implied Where, as Here, an Express Contract Memorializes the Intent of the Parties.

Plaintiffs claim that the parties’ intent to create a security interest was implied rather than express.  However, the merger and integration clause of the Contract, combined with the parol evidence rule, operate to eliminate the possibility of silent terms or hidden meanings.  “Parties are governed by their outward expressions and the court is not at liberty to consider their secret intentions.” Blakeley v. Rabon, 266 S.C. 68, 73, 221 S.E.2d 767, 769 (1976).

The notion of an “implied intent” to create an equitable lien appears to trace back to a discussion of the law of equitable liens in Carolina Attractions, Inc. v. Courtney, 287 S.C. 140, 337 S.E.2d 244 (S.C.App.1985), which cited to a Virginia Supreme Court case, Harnsberger v. Wright, 185 Va. 586, 39 S.E.2d 737, 738 (1946), for the proposition that equitable liens must rest on an expressed or implied contract, as moral obligations do not sustain equitable liens.  An ancient and stalwart tenet of the law holds that there can be no implied contract where an express contract exists between the same parties in reference to the same subject-matter.  See Suber v. Pullin, 1 S.C. 273, 1870 WL 3477 (S.C. 1870) (discussing the “plain and well recognized principle that, if there is an express promise still existing, the party is precluded from a remedy founded on an implied one.”).  Therefore, an implied intent theory is misplaced in this case, where an express contract contains the complete agreement between the parties.  “The judicial function of a court of law is to enforce contracts as made by the parties and not to re-write or distort, under the guise of judicial construction, the terms of an unambiguous contract.”   Dobyns v. South Carolina Dept. of Parks, Recreation and Tourism, 325 S.C. 97, 480 S.E.2d 81 (1997) (citing Patterson v. Aetna Life Ins. Co., 248 S.C. 374, 149 S.E.2d 915 (1966)).

D. An Equitable Lien Does Not Arise from Non-Performance of Contractual Duties.

Plaintiffs’ equitable lien claim, at its essence, seeks to remedy the alleged failure of Ashley II to perform its Indemnity obligations. “A mere breach of contract does not give rise to an equitable lien.” Carolina Attractions, Inc., v. Courtney, 287 S.C. 140, 145 337 S.E.2d 244, 247 (Ct. App. 1985) citing U.S. v. Adamant Co., 197 F.2d 1, 10 (9th Cir.) (“there must be something more than the mere fact that a contract has been breached before a lien is impressed upon a specific fund.”), cert. denied sub nomBullen v. Scoville, 344 U.S. 903, 73 S.Ct. 283, 97 L.Ed. 698 (1952); Hallmark Manufacturing, Inc. v. Lujack Construction Co., 372 So.2d 520, 521 (Fla. App.1979) (complaint alleging no more than breach of contract failed to state a claim for equitable lien); McKenna v. Turpin, 128 Ind. App. 636, 151 N.E.2d 303, 305 (1958) (where there has been nothing more than a breach of agreement to pay a commission to a broker, he is not entitled to equitable lien on property); Hipps v. McKenzie, 201 Tenn. 26, 296 S.W.2d 838, 839 (1956) (action for damages is remedy for breach of contract, not action for equitable lien on land); Keyworth v. Israelson, 240 Md. 289, 214 A.2d 168 (1965) (“A mere promise to pay a debt or obligation does not of itself, however, create a lien unless the intention to create it is apparent from the instrument and circumstances leading to it.”).

Plaintiffs have failed to provide evidence that the alleged equitable lien has arisen from anything beyond the mere failure of Ashley II to comply with its contractual obligations (a contention denied by Ashley II).  Therefore, the equitable lien claim cannot stand.

III. The Failure of the Equitable Lien Claim Mandates the Cancellation of the Lis Pendens

The Court grants the motion to cancel the Lis Pendens because, in the absence of the equitable lien claim, this is not “an action affecting the title to real property.”  S.C. Code Ann. § 15-11-10. The filing of a Notice of Pendency of Action, or lis pendens, is authorized by S.C. Code Ann. § 15-11-10 (Supp. 2004), which reads:

In an action affecting the title to real property the plaintiff (a) not more than twenty days before filing the complaint or at any time afterwards or (b) whenever a warrant of attachment under §§ 15-19-10 to 15-19-560 shall be issued or at any time afterwards or a defendant when he sets up an affirmative cause of action in his answer and demands substantive relief, at the time of filing his answer or at any time afterwards if such answer be intended to affect real estate, may file with the clerk of each county in which the property is situated a notice of the pendency of the action, containing the names of the parties, the object of the action and the description of the property in that county affected thereby. If the action be for the foreclosure of a mortgage such notice must be filed twenty days before judgment and must contain the date of the mortgage, the parties thereto and the time and place of recording such mortgage.

S.C. Code Ann. § 15-11-10. 

In other words, a lis pendens can only be filed when the plaintiff is seeking to assert an ownership interest in the property.  Pond Place Partners, Inc. v. Poole, 567 S.E.2d 881, 889 (S.C. Ct. App. 2002).  Since the filing of a lis pendens is an extraordinary privilege granted by statute, strict compliance with the statutory provision is required.  Id.  Thus, the lis pendens will only stand if Plaintiffs have a legitimate claim to an ownership interest in the Property.  As stated by the South Carolina Supreme Court in the recent decision of Carolina Park Associates, LLC v. Marino, 400 S.C. 1, 9, 732 S.E.2d 876 (S.C. 2012), “if the court finds that the lis pendens does not ‘affect[ ] the title to real property’ as required under § 15–11–10, the lis pendens is not authorized by the statute and the statute does not limit the court's power to cancel it.”1

Plaintiffs have taken the position that they do not seek to assert an ownership interest in the Property but rather to insure that any judgment they might obtain can be satisfied.  Affidavit of Charles Lane dated March 26, 2015, at ¶2.  This is not the purpose of a lis pendens.  “The purpose of a notice of pendency of an action is to inform a purchaser or encumbrancer that a particular piece of real property is subject to litigation.”  Pond Place, 567 S.E.2d at 889.  “The lis pendens mechanism is not designed to aid either side in a dispute between private parties.”  Id. (quoting 51 Am.Jur.2d Lis Pendens § 2 (2000)).  A lis pendens is certainly not designed to act as a prejudgment attachment in a matter that relates to real estate but does not involve an actual claim to interest in real estate.  Id. at 890; 51 Am.Jur.2d Lis Pendens § 26 (“Notices of lis pendens, filed by parties who sought the imposition of a constructive trust on certain properties are improper where the parties sought the constructive trust only to satisfy the judgment they sought against the property owner, and they were interested in the property only as collateral.”).

For the reasons stated herein, Lender’s Motion for Summary Judgment and Motion to Cancel or Amend Lis Pendens are hereby GRANTED;

IT IS THEREFORE ORDERED, ADJUDGED AND DECREED THAT final judgment is granted in favor of Lender and Ashley II on Plaintiffs’ First and Second Causes of Action;

AND IT IS FURTHER ORDERED THAT the Lis Pendens filed in this case is cancelled and the Clerk of Court is hereby directed to mark the Lis Pendens as cancelled and dissolved ten (10) days from the date of entry of this order;

IT IS SO ORDERED.

May 25, 2015
Charleston, South Carolina
                                                                                   

THE HONORABLE ROGER M. YOUNG
COURT OF COMMON PLEAS

 

1 Plaintiffs have alleged claims for declaratory and injunctive relief pursuant to South Carolina’s Anti-Assignment statute (Seventh Cause of Action) and for fraudulent conveyance (Eighth Cause of Action); however, under the circumstances and facts alleged, the Court finds that these claims do not independently support a lis pendens.  First, these claims, as pled, do not affect title as required by the statute.  Second, these claims are dependent upon Plaintiffs establishing that Ashley II is indebted to Plaintiffs or defrauded Plaintiffs in some way.  Third, to the extent that these claims address the “Baker Hospital Property” as referenced in the Third Amended Complaint at ¶115, the issue is moot, because the Lis Pendens upon the Baker Hospital Property was released by that certain Consent Order of Dismissal with Prejudice filed on January 12, 2015. Finally, this case is distinguishable from Lebovitz v. Mudd, 293 S.C. 49, 358 S.E.2d 698 (S.C. 1987), because, in the instant case, there is no allegation that any property owned by Ashley II has been conveyed, other than the Baker Hospital Property, which has been released from the Lis Pendens, as discussed, supra.