Floyd v. City of Spartanburg South Carolina

• Decision Date: 16 March 2022
• Docket Number: Civil Action 7:20-cv-1305-TMC
• Parties: John F. Floyd and Gordon Farms Inc., Plaintiffs, v. City of Spartanburg South Carolina, Defendant. City of Spartanburg South Carolina Counter Claimant, v. John F. Floyd and Gordon Farms Inc., Counter Defendants.
• Court: U.S. District Court — District of South Carolina

John F. Floyd and Gordon Farms Inc., Plaintiffs,
v.
City of Spartanburg South Carolina, Defendant.

City of Spartanburg South Carolina Counter Claimant,
v.
John F. Floyd and Gordon Farms Inc., Counter Defendants.

Civil Action No. 7:20-cv-1305-TMC

United States District Court, D. South Carolina, Spartanburg Division

March 16, 2022

ORDER

Timothy M. Cain United States District Judge.

Plaintiffs John F. Floyd (“Floyd”) and Gordon Farms Inc. (“Gordon Farms”) (collectively, “Plaintiffs”) brought this action against Defendant City of Spartanburg, South Carolina (the “City”) asserting two claims for breach of contract, as well as breach of the implied covenant of good faith and fair dealing, breach of contract accompanied by a fraudulent act, unjust enrichment, and promissory estoppel. (ECF No. 1). The City filed its answer on June 5, 2020, stating two counterclaims against Plaintiffs for unjust enrichment and breach of contract. (ECF No. 6).

On May 14, 2021, the parties filed cross motions for summary judgment. (ECF Nos. 36; 37). The parties filed their respective responses and replies to the motions for summary judgment. (ECF Nos. 41; 42; 45; 47). On September 30, 2021, the undersigned judge issued a text order referring the parties' motions for summary judgment to United States Magistrate Judge Jacquelyn D. Austin for a Report and Recommendation (“Report”). Now before the court is Judge Austin's

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Report, recommending that the court grant in part and deny in part both motions for summary judgment. (ECF No. 59). Plaintiffs and the City both filed objections to the Report (ECF Nos. 65; 66), and this matter is now ripe for review. After carefully reviewing the record and the submissions of the parties, the court concludes a hearing is unnecessary to decide this matter. For the reasons set forth below, the court adopts the Report, as modified, and grants in part and denies in part both motions for summary judgment.

BACKGROUND & PROCEDURAL HISTORY

Upon review of the parties' briefing, the record, and the magistrate judge's Report, the court adopts the procedural history, factual background, and evidence as thoroughly set forth in the Report and to which none of the parties object. See (ECF No. 59 at 2-9). Briefly, this case arises out of two distinct contracts.^[1] The first is an Intergovernmental Agreement entered between the City and Spartanburg County on December 14, 1998, “for the development of an incentive program to stimulate commercial redevelopment of vacant, physically declining, or underperforming commercial properties within the City of Spartanburg.” (ECF Nos. 1 at 2-3; 1-1; 36 at 3). The Intergovernmental Agreement provided for the creation of a multi-county industrial/business park (“MCIP” or the “Program”) such that property owners could apply to the City to have their properties included in the MCIP. (ECF Nos. 1 at 3; 36 at 3-4). The Intergovernmental Agreement further incentivized participation in the Program by offering annual fee-in-lieu-of-ad-valorem tax rebates. (ECF Nos. 1 at 3; 1-1 at ¶¶ 4(D), 5(G), (H); 36 at 4). Specifically, property owners participating in the Program would receive an annual fee rebate from the City equal to thirty percent (30%) of the incremental annual property taxes resulting from the redevelopment of the property for fifteen (15) years or until the payments reached twenty percent

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(20%) of the redevelopment basis (the “Cap”), whichever came sooner. (ECF Nos. 1 at 3; 1-1 at ¶¶ 4(D), 5(G), (H); 36 at 4).

At the time the City and Spartanburg County executed the Intergovernmental Agreement, Floyd and Gordon Farms^[2] owned the Hillcrest Shopping Center (“Hillcrest”) and sought to have the property included in the MCIP. (ECF No. 36-1). On August 9, 1999, the City approved Hillcrest for inclusion in the Program, (ECF No. 1-2), and on June 19, 2000, the County followed suit and passed a resolution adding Hillcrest to the list of properties included in the MCIP, (ECF No. 1-3). (ECF Nos. 1 at 5; 36 at 6). Based on the redevelopment and renovation costs Floyd submitted, the City determined the redevelopment basis for the project to be $15, 230, 507.00. (ECF Nos. 1 at 5; 1-4; 36 at 6; 42-2 at 5). Thus, pursuant to the Intergovernmental Agreement, Floyd^[3]was entitled to receive annual rebate payments from tax years 2000 through 2014 or until the rebates equaled the Cap amount of $3, 046, 101.00. (ECF Nos. 1 at 5; 1-4; 36 at 6; 42-2 at 5). Accordingly, Floyd received the first annual fee rebate on March 16, 2001, for tax year 2000 in the amount of $72, 945.00. (ECF Nos. 1 at 6; 1-8; 36 at 6).

The second agreement at issue in this case allegedly came about after Plaintiffs began exploring the option of selling Hillcrest to Excel Realty Partners LP (“Excel”) in late-2004 and early-2005. (ECF Nos. 1 at 8; 36 at 9). Although Floyd originally hoped to sell the property for thirty-six million dollars ($36, 000, 000.00), he never had the property appraised, nor did he seek any third-party input in arriving at that number. (ECF Nos. 36 at 9; 36-13 at 11-24). Instead, Excel made an initial offer of thirty-two million ($32, 000, 000.00). (ECF Nos. 36 at 9; 36-6).

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Additionally, in connection with the potential sale, Floyd met with representatives of the City who informed Floyd a change in ownership of the property may require the new owner to bring a section of Hillcrest comprising 120, 000 square feet of retail space into compliance with applicable building codes before the space could be leased. (ECF Nos. 1 at 8-9; 36 at 9; 36-15 at 3-8). Plaintiffs allege that, upon learning of the necessary renovations, Floyd and the City agreed to have

Gordon Farms sell Hillcrest to Excel at a “reduced price” to allow Excel to perform the necessary redevelopment work, in exchange for the City's “agree[ment] to extend the fee rebate period for the entire Shopping Center[, ]” (the “Extension Agreement”). (ECF No. 1 at 9). Specifically, Plaintiffs allege that the City orally agreed to the following:

[W]hile the existing MCIP designation for the entire Shopping Center would continue, the 15-year annual fee rebate period for the entire Shopping Center would start over following completion of the redevelopment work to account for the significantly reduced sales price of the Shopping Center necessary to provide for the required redevelopment Additionally, the fee rebate payments would transfer from Mr. Floyd to Gordon Farms, the entity that would sell the Shopping Center at a reduced price in return for the extension of the annual fee rebate period. . . . Pursuant to the agreement, the annual fee rebate period would begin to run for a 15-year period beginning with the tax year following the completion of the renovations to the Shopping Center.

Id. at 9, 10.

The City, on the other hand, denies making any such agreement with Plaintiffs and asserts that, “[u]ltimately, there were numerous significant deductions to the original purchase offer, including deductions for the costs Excel would incur in improving [Hillcrest], which Excel knew would require substantial repairs and redevelopment to attract tenants and, as a consequence of those activities, bringing it up to code.” (ECF No. 36 at 9-10); see also (ECF No. 36-7). Regardless, Gordon Farms sold Hillcrest to Excel on February 16, 2005, for $31, 309, 522.00, but retained the right to receive any future fee rebate payments. (ECF Nos. 1 at 10-11; 36 at 10; 36-

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7). Additionally, on December 21, 2005, the City send a letter confirming that the remaining fee rebate payments on Hillcrest would be made to Gordon Farms. (ECF No. 1-10).

Excel completed the redevelopment work on Hillcrest in 2007. (ECF No. 1 at 11). Accordingly, Plaintiffs allege that, under the Extension Agreement, “a new 15-year fee rebate period for the entire Shopping Center commenced in tax year 2007, to run through tax year 2021.” (ECF No. 1 at 11). The annual fee rebate period for Hillcrest under the original MCIP designation should have ended in tax year 2014, with the last payment being made in 2015. (ECF No. 26 at 10). Nevertheless, Gordon Farms continued to receive annual fee rebate payments from the City through tax year 2016, receiving the final payment on April 7, 2017. (ECF Nos. 1 at 15; 1-11). Plaintiffs assert that the payments for tax years 2015 and 2016 were part of the extended fee rebate period from 2007 through 2021 pursuant to the Extension Agreement. The City, however, asserts that those payments were made in error and sent multiple letters to Plaintiffs in November and December 2017 stating the specific amount of the overpayment and requesting that Plaintiffs return the funds. (ECF Nos. 1 at 15-16; 1-13; 1-14; 1-15; 36 at 11). The City asserts that “[i]t was only after receiving the overpayment letters that Floyd, for the first time, claimed that the City had agreed to a new 15-year fee rebate period for the entirety of Hillcrest[.]” (ECF No. 36 at 12).

Consequently, Plaintiffs initiated this action on April 6, 2020, asserting claims against the City for breach of the Intergovernmental Agreement, breach of the Extension Agreement, breach of the implied covenant of good faith and fair dealing, breach of...