Scratch Golf v. DUNES WEST

• Decision Date: 11 October 2004
• Docket Number: No. 25878.,25878.
• Citation: 361 S.C. 117,603 S.E.2d 905
• Parties: SCRATCH GOLF COMPANY, Respondent, v. DUNES WEST RESIDENTIAL GOLF PROPERTIES, INC.; Dunes West Property Owners Association, Inc.; Allan Feker, a/k/a Ali Daghighfekr; Melinda McDonald; Julian Michael Murrin; Larry Schultz; Wilbur "Bill" Upson; Kathy Merritt; William "Bill" Fellers; Charles V. Cuddeback; and John Does and Jane Does, as past and current directors and officers of Dunes West Property Owners Association, Inc., Defendants, of whom Dunes West Residential Golf Properties, Inc., and Allan Feker, a/k/a Ali Daghighfekr, are Appellants.
• Court: South Carolina Supreme Court

361 S.C. 117

603 S.E.2d 905

SCRATCH GOLF COMPANY, Respondent, v. DUNES WEST RESIDENTIAL GOLF PROPERTIES, INC.; Dunes West Property Owners Association, Inc.; Allan Feker, a/k/a Ali Daghighfekr; Melinda McDonald; Julian Michael Murrin; Larry Schultz; Wilbur "Bill" Upson; Kathy Merritt; William "Bill" Fellers; Charles V. Cuddeback; and John Does and Jane Does, as past and current directors and officers of Dunes West Property Owners Association, Inc., Defendants, of whom Dunes West Residential Golf Properties, Inc., and Allan Feker, a/k/a Ali Daghighfekr, are Appellants.

No. 25878.

Supreme Court of South Carolina.

Heard May 25, 2004.

Decided October 11, 2004.

John A. Massalon, of Wills and Massalon, of Charleston, for Appellants.

H. Brewton Hagood and Richard S. Rosen, both of Rosen, Rosen, and Hagood, of Charleston, for Respondent. Chief Justice TOAL:

Dunes West Residential Golf Properties (Developer) asserts that the Master-in-Equity erred in granting a preliminary injunction in favor of Scratch Golf Company (Scratch Golf). The action arose after the Dunes West Golf Course was damaged by the alleged saltwater infiltration of various irrigation ponds that were supposed to be maintained by the Developer. The Master granted a preliminary injunction in favor of Scratch Golf, ordering the Developer to place $4.5 million into an escrow account to provide a fund for the damages arising out of Scratch Golf's pending civil action for breach of contract and negligence against the Developer. We find that the Master erred in granting the preliminary injunction because Scratch Golf did not present sufficient evidence to establish that injunctive relief was appropriate.

FACTUAL/PROCEDURAL BACKGROUND

The Dunes West subdivision in Mount Pleasant, South Carolina, began as a joint venture between Wild Dunes Associates and Georgia-Pacific Investment Corporation (Joint Venture). In 1991, Scratch Golf purchased Dunes West Golf Club and now owns and operates the golf course and its facilities. In 1998, Allan Feker (Feker) purchased all of the undeveloped property in the community from the Joint Venture and immediately assigned his rights to a shell corporation, Dunes West Residential Golf Properties (Developer). The Developer assumed all of the Joint Venture's rights and obligations, including its obligation under section 7.2(w) of the Sale and Purchase Agreement with Scratch Golf to maintain the water quality of the subdivision's lagoon system.

Various freshwater lagoons surround the Dunes West Golf Course and provide a source of water that Scratch Golf uses to irrigate the golf course. The lagoons collect rainwater, and if the water level rises too high, the excess water will flow into adjacent saltwater creeks through an outflow pipe. The pipe system is only supposed to allow the fresh water to flow out, but in some lagoons — most notably the lagoon located next to the 17th hole — the saltwater flows in through the pipes and infiltrates the freshwater lagoons.¹ Because the saltwater contamination of the lagoons has allegedly damaged the golf course, Scratch Golf filed a cause of action for breach of contract and negligence against the Developer and the Dunes West Property Owners Association.

Meanwhile, based on its concern that it would be unable to collect on a judgment entered against the Developer, Scratch Golf argued before the Master that he should grant a preliminary injunction in order to capture some of the Developer's assets before the undeveloped Dunes West property was sold to John Weiland Homes. Scratch Golf asserted that the total damages caused by the saltwater contamination were $6 million, which represents the cost of rebuilding much of the golf course. The Developer, however, asserted that the damages amount to $600,000.²

The Master granted Scratch Golf's motion for a preliminary injunction and set an escrow amount at $4.5 million. In addition, pursuant to Rule 65, SCRCP, the Master held that Scratch Golf would purchase a $1 million bond as security in the event the Developer was wrongfully enjoined. The Developer has appealed the Master's ruling, and pursuant to Rule 204(b), SCACR, this Court certified the case from the court of appeals.

The Developer raises the following issues on appeal:

I. Did the Master have the authority to issue the preliminary injunction?

II. Did the Master err in finding that Scratch Golf presented sufficient evidence to justify an injunction?

III. Did the Master err in setting the amount of Scratch Golf's bond at $1 million?

STANDARD OF REVIEW

Upon review of an action in equity, this Court may make factual findings based on its own view of the preponderance of the evidence. Townes Associates, Ltd. v. City of Greenville, 266 S.C. 81, 86, 221 S.E.2d 773, 775 (1976).

LAW/ANALYSIS

I. Authority to Issue an Injunction

The Developer asserts that the Master did not have the authority to issue the preliminary injunction that poured $4.5 million of the Developer's assets into an escrow account. We disagree.

The Developer relies on a United States Supreme Court decision, Grupo Mexicano de Desarrollo, S.A. v. Alliance Bond Fund, Inc., 527 U.S. 308, 119 S.Ct. 1961, 144 L.Ed.2d 319 (1999), which held that a U.S. District Court was not authorized to issue a preliminary injunction — absent a prior attachment of a money judgment — because the remedy was historically unavailable in a federal court of equity. This decision limiting a federal court's equitable powers is not dispositive of whether a state court judge may restrain a defendant's assets prior to the attachment of a...