Queen's Grant v. Greenwood Development

Decision Date10 April 2006
Docket NumberNo. 4101.,4101.
Citation628 S.E.2d 902
CourtSouth Carolina Court of Appeals
PartiesQUEEN'S GRANT II HORIZONTAL PROPERTY REGIME, Appellant-Respondent, v. GREENWOOD DEVELOPMENT CORPORATION, d/b/a Palmetto Dunes Resort, Inc., Respondent-Appellant.

Edward E. Bullard, of Hilton Head Island, for Appellant-Respondent.

Joseph R. Barker, of Hilton Head Island, for Respondent-Appellant.

KITTREDGE, J.:

We are presented with cross-appeals involving the Queen's Grant II Horizontal Property Regime on Hilton Head Island in Beaufort County, South Carolina. Queen's Grant II is part of a series of horizontal property regimes in a resort known as Palmetto Dunes. Queen's Grant II appeals from an order dismissing two of its three causes of action. On appeal, Queen's Grant II limits its challenge to the dismissal of its claim for prospective declaratory relief regarding the efficacy of an amendment to restrictive covenants concerning assessments for maintenance in Palmetto Dunes. Greenwood Development Corporation, the owner of Palmetto Dunes, appeals: (1) from the denial of its motion for summary judgment as to Queen's Grant II's claim for breach of contract for failure to repair a road within the Queen's Grant II regime; and (2) from the denial of its motion for attorney fees and costs. We affirm in result in part and reverse in part with respect to the dismissal of Queen's Grant II's declaratory judgment claim. We affirm the denial of Greenwood Development's motion for attorney fees and costs. We elect not to entertain, and thus dismiss, Greenwood Development's interlocutory appeal from the denial of its summary judgment motion, and we remand.1

Although this case involves many issues, primarily related to restrictive covenants and tangentially to horizontal property law, the essence of our holding is that a developer may reserve to himself, in his sole discretion, the right to amend restrictive covenants running with the land or impose new restrictive covenants running with the land, provided five conditions are met: (1) the right to amend the covenants or impose new covenants must be unambiguously set forth in the original declaration of covenants; (2) the developer, at the time of the amended or new covenants, must possess a sufficient property interest in the development; (3) the developer must strictly comply with the amendment procedure as set forth in the declaration of covenants; (4) the developer must provide notice of amended or new covenants in strict accordance with the declaration of covenants and as otherwise may be provided by law; and (5) the amended or new covenants must not be unreasonable, indefinite, or contravene public policy.

FACTS / PROCEDURAL HISTORY
I.

Palmetto Dunes is a real estate resort development that includes multiple horizontal property regimes located on Hilton Head Island in Beaufort County, South Carolina. The development consists of various single and multi-family residences, commercial establishments, and resort facilities. The initial developer of Palmetto Dunes was Palmetto Dunes Resort, Inc. (Palmetto Dunes Resort), a subsidiary of Phipps Land Company, Inc.

Between 1968 and 1972, Palmetto Dunes Resort filed and recorded various covenants relating to contemplated single-family and multi-family developments throughout Palmetto Dunes. The Declaration of Covenants,2 recorded in 1972, sets forth various rights, conditions, and restrictions concerning "all multi-family dwelling areas within Palmetto Dunes," including "lands conveyed in the future in Palmetto Dunes." The Queen's Grant II Horizontal Property Regime became subject to the Declaration of Covenants when it was created in 1974. The 1972 Covenants imposed restrictions throughout Palmetto Dunes, including, for example, covenants respecting ocean front property, lagoons, ponds, lakes, and golf courses.

Under the 1972 Covenants, Palmetto Dunes Resort agreed to maintain "community areas" in the resort, but only to the extent "such maintenance and services can be provided with the proceeds." Such services were to be funded by assessing all multi-family unit owners in the resort. Paragraph 22 of the 1972 Covenants provided:

In order to provide a permanent fund to maintain, landscape and repair private streets (except those located within a privately owned lot), walkways and like community areas, maintain the beachfront, lagoons and other bodies of water in a clean and orderly condition, provide for pest control when needed and in general provide those services important to the development and preservation of an attractive community appearance, and further, to maintain the privacy, security and general safety of the residential communities in Palmetto Dunes, each owner of a multi-family dwelling unit shall pay annually to [Palmetto Dunes Resort] the sum of Sixty ($60.00) Dollars per residential unit, said sum to be placed in an account and to be used exclusively for the purposes hereinabove noted. From and after January 1, 1974, this annual payment may be increased each year by the percentage of increase in the consumer price index for the previous year, or at the option of [Palmetto Dunes Resort] may be increased each year up to five (5) percent of the maximum authorized payment for the previous year.

Queen's Grant II (Queen's Grant) is one of the multi-family horizontal property regimes within Palmetto Dunes. Queen's Grant consists of 81 condominium units and comprises just a small part of Palmetto Dunes. Queen's Grant was created in 1974 when Palmetto Dunes Resort recorded a master deed (Master Deed) subjecting the property to the South Carolina Horizontal Property Act, S.C.Code Ann. §§ 27-31-10 to 300 (1991 & Supp.2005).3 The Master Deed provides for the administration of the Queen's Grant regime in accordance with its bylaws.

The Master Deed references the 1972 Covenants and provides that "nothing contained [in the Master Deed] shall limit the rights of Palmetto Dunes Resort, Inc., its successors or assigns, as set forth in the aforesaid Declaration." The Declaration of Covenants reserved to Palmetto Dunes Resort, or its successors, the right to modify or impose additional covenants at any time in its sole discretion. The Declaration of Covenants further provided that any modifications to prior covenants would apply only to units sold after the amended covenants were recorded. Additionally, the Declaration of Covenants reserved to Palmetto Dunes Resort a thirty-day right of repurchase ("at the same price at which the highest bona-fide offer has been made for the property") in the event any unit owner should decide to sell.

Queen's Grant, as a multi-family dwelling area within Palmetto Dunes, was subject to the assessments under the 1972 Covenants to fund Palmetto Dunes Resort's maintenance obligations throughout the resort. Additionally, the Master Deed creating Queen's Grant and the regime's bylaws assign to Queen's Grant the responsibility for the maintenance of the property within its regime.4 The bylaws created the "Council of Co-Owners," consisting of the unit owners within the Queen's Grant regime. The Council, in turn, is governed by a "Board of Administration."5 This Board, on behalf of the regime, has many duties, including the "[c]ollection of assessments from the co-owners ... [and the] [c]are, upkeep and surveillance of the [Queen's Grant] Property and the Common Elements." The bylaws further authorize the imposition of "periodic assessments" on "[a]ll co-owners" to meet all regime "common expenses." Queen's Grant thus is obligated to perform within its regime "[a]ll maintenance, repair and replacement to the common elements as defined in the Master Deed." The Master Deed defines the "common elements" broadly to include virtually every aspect of regime maintenance, including "the land on which the Apartments are constructed, . . . [p]arking facilities located on the Property,... [and][a]ll roads, walkways [and] paths."

Palmetto Dunes Resort conveyed the last of the units in Queen's Grant in 1977. In 1979, Palmetto Dunes Resort (through its parent company, Phipps Land Development) was sold to Greenwood Development, an unaffiliated company. As successor in interest, Greenwood Development continued under the name "Palmetto Dunes Resort" and acquired all rights of its predecessor, including those under the 1972 Covenants.

Greenwood Development determined the assessments under the 1972 Covenants were insufficient to fund its maintenance duties throughout the resort. Greenwood Development, in the exercise of its right to amend the covenants, consequently recorded amended covenants in 1981 — the 1981 Covenants6 — applicable to all multi-family dwelling areas in Palmetto Dunes.7 Tracking language from the 1972 Covenants, Greenwood Development made the 1981 Covenants applicable "to lands conveyed in the future in Palmetto Dunes by deeds or other instruments hereafter made which make reference to this Declaration of Covenants." The 1981 Covenants are substantially similar to the 1972 Covenants, but the 1981 Covenants increase the annual maintenance assessment. Article IV of the 1981 Covenants provides, in relevant part:

In order to provide a permanent fund to maintain, landscape and repair private streets (except those located within a privately owned lot), walkways and like community areas, maintain the beachfront, lagoons and other bodies of water in a clean and orderly condition, repair damage caused by beach erosion, provide for pest control when needed and in general provide those services important to the development and preservation of an attractive community appearance, and further, to maintain the privacy, security and general safety of the residential communities in Palmetto Dunes Resort, each owner of a multi-family dwelling unit shall pay annually to Greenwood the sum of Two Hundred ($200.00)...

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