Middleton v. Eubank

• Decision Date: 19 April 2010
• Docket Number: No. 4675.,4675.
• Citation: 694 S.E.2d 31,388 S.C. 8
• Court: South Carolina Court of Appeals
• Parties: Ernest F. MIDDLETON, III, and Marjorie Ann Middleton as Co-Trustees Under the Last Will and Testament of Ernest F. Middleton, Jr., Appellants,v.Manly EUBANK, 1625 Partnership, A South Carolina General Partnership, and Palmetto Ford, Inc., Respondents.

388 S.C. 8

694 S.E.2d 31

Ernest F. MIDDLETON, III, and Marjorie Ann Middleton as Co-Trustees Under the Last Will and Testament of Ernest F. Middleton, Jr., Appellants,v.Manly EUBANK, 1625 Partnership, A South Carolina General Partnership, and Palmetto Ford, Inc., Respondents.

No. 4675.

Court of Appeals of South Carolina.

Heard Dec. 10, 2009.

Decided April 19, 2010.

Rehearing Denied June 24, 2010.

Thomas H. Hesse and Daniel S. McQueeney, Jr., both of Charleston, for Appellants.

J. Rutledge Young, Jr., Stephen L. Brown, Russell G. Hines, and Stephen A. Spitz, all of Charleston, for Respondents.

SHORT, J.

In this dispute involving the interpretation of a real property lease, Ernest Middleton, III, and Marjorie Middleton (collectively, Appellants), as co-trustees of the will of Ernest Middleton, Jr., appeal from the Master-in-Equity's order finding in favor of Manly Eubank, 1625 Partnership, and Palmetto Ford, Inc. (collectively, Respondents), the lessees of the property owned by Ernest Middleton, Jr. We affirm.

FACTS

On July 28, 1983, Ernest Middleton, Jr. (Lessor) signed a lease with Eubank, individually and as President of Palmetto Ford, Inc., and Hugh Cannon (Lessees), whereby Middleton leased real property in Charleston, South Carolina to Palmetto Ford to relocate its dealership on the land.¹ The leased property was composed of two tracts: a 3.476-acre tract on Highway 17, and a 4.79-acre tract.² The two parcels were separated by a third tract that was owned by a third party. At that time, Ford required its dealerships to be built on at least seven acres of property. Therefore, the parties agreed the lease would be contingent upon the acquisition of an easement to the third-party tract of land that would provide access between the two parcels of land, allowing the two parcels to function as one and meet Ford's acreage requirement. Almost one year later, Lessor and 1625 Partnership were granted two easements for $25,000 in consideration paid by 1625 Partnership and $200 per month to use a portion of the property owned by the third party to provide “vehicular and pedestrian access to and from both parcels” of the leased land. The first easement connected the two separated parcels and the other provided access from the property onto Highway 17. The lease described the property as being composed of two tracts, but referred to them collectively as the “Property.” The lease did not mention the easements. The lease further stated the Respondents would be making improvements to the property:

Leesee [sic] will have improvements constructed and added to the Property, at a cost of approximately $1.1 million, including buildings, paved areas for display and parking of vehicles, driveways, lighting, signs, landscaping, and the equipment and fixtures (such as heating and air conditioning) which are customarily deemed to become a part of the real property to which they are affixed (but excluding equipment which is solely for automotive uses) (hereinafter, all such included improvements shall be collectively referred to as the “Improvements”).

The lease provided the initial term of the lease would be for thirty years, with the possibility of two ten-year renewals, and the annual rent would be an amount equal to nine percent of the valuation of the property, to be paid in monthly installments. The lease listed the then-current value of the parcels separately and together. The property was to be revalued three years from the first day of the lease term, and every three years thereafter, and the rent for the following three years was to be based on the valuation set at that time. Section four of the lease, titled “Valuation,” stated, “The property shall be revalued by a MAI appraisal based on raw, unencumbered land with no Improvements, for the highest and best use thereof at such time, without regard to any improvements thereon or to the use then being made of the property by lessee.” ³ Further, the lease provided the “Valuation [of the property] shall not be decreased during the first Fifteen (15) years of the Property Lease term, and that the Valuation for this same Fifteen (15) years shall not be increased more than Six percent (6%) per year.”

Several different appraisers appraised the land from 1984 to 2005. The initial appraisal was done on January 13, 1984. Fred Attaway, Jr., MAI, valued the property, after the completion of the proposed improvements, at $1.83 million for the fee simple estate and at $1.3 million for the leasehold estate. ⁴ On January 24, 1994, Attaway re-appraised the raw land at $1.23 million and the leased estate at $1.5 million. In this appraisal, Attaway mentions the property is divided into two parcels that can function fully; however, he states the division has a negative effect on the value because the property is separated by an access easement. On August 11, 1999, Attaway appraised the property at $2.1 million for the fee simple estate, considering the tracts as one parcel because they function as one. Appellants did not increase the rent after the 1999 appraisal because the parties disagreed about the amount of the appraisal. As a result, the parties reached a temporary agreement that the valuation for the following three years would be $1.7 million.

In 2002, Christopher Donato, MAI, appraised the property for Appellants. On November 13, 2002, Donato appraised the land “as is” at $2,897,000. He appraised the property as one parcel connected by the easements because the “two easements facilitate access to both tracts and have the affect of linking the two tracts such that they can be used in concert.” One month later, Donato re-appraised the land at $2,845,000. In this appraisal, at the request of Respondents, he appraised the property as separate tracts independent of each other without the access easements. On October 21, 2005, Donato appraised the land “as is” at $6.34 million.

Michael Robinson, MAI, appraised the property for Respondents. On March 3, 2003, Robinson appraised the 3.476-acre tract, as if vacant, at $1,911,800 and the 5.577-acre tract, as if vacant, at $655,300. He appraised the property as two separate and distinct tracts. Hugh Cannon, the attorney who drafted the lease, contacted Robinson in January or February 2003 and suggested the easements should not be considered in the appraisal. On November 15, 2005, Robinson appraised both tracts, as if vacant, at $3,504,400.

On March 2, 2006, Appellants filed a complaint in Charleston County Court of Common Pleas against Respondents, seeking a judicial declaration as to the rights and obligations of the parties under the Lease. The complaint alleged that based on the clear language of the valuation clause, the parties intended that the appraisal would be based upon the most valuable and profitable use of the property, which includes the easements and appraising both parcels together as a unit. However, Respondents asserted the parcels must be appraised as separate, unrelated, and unconnected parcels. Appellants also claimed Respondents refused to agree on a methodology for appraising the value of the property. In their amended answer, Respondents alleged:

[T]he “Property,” as defined in the Lease and as it actually existed at the time the Lease was entered, was two separate and distinct tracts of land, not connected by easements, and thus the “Property” that is to be revalued pursuant to [the valuation clause] should continue to consist of two separate tracts of vacant land, as they existed on July 28, 1983, unconnected by any easements and should therefore continue to be appraised as raw, unencumbered land with no Improvements as set forth in the Lease.

On July 30, 2007, the parties consented to refer the declaratory judgment action to the Master-in-Equity for Charleston County. A non-jury trial was held on December 5 and 6, 2007. At the close of the presentation of their case, Appellants moved for a directed verdict on the question of whether an easement is an improvement under the law and the lease.⁵ At the conclusion of the trial, the master ruled for Respondents from the bench, and on December 18, 2007, he issued his order. The master found that (1) the lease was unambiguous; (2) the plain language of the lease negated consideration of...