Contract – Conversion Rights – Parties’ Intent

Listen to this article

The determination of the parties’ intent at the time they executed the contract is a question of fact that should not have been decided on summary judgment.

We reversed the circuit court’s grant of summary judgment and remanded for trial.

RSV – Hardeeville, LLC appealed the circuit court’s order denying its motion for summary judgment, granting summary judgment in favor of SLF III – Hardeeville, LLC, and finding the assignments by which RSV obtained its development rights in the property prohibited the conversion of over 155 acres from residential to light industrial use. On appeal, RSV argued the court erred by ignoring language in the Reed-HTI Assignment showing that conversion rights were intended to be included; construing the Reed-HTI Assignment to prohibit conversion of property from residential to light industrial use without an explicit prohibition on doing so; concluding that the language in the Reed-HTI Assignment created a restrictive covenant; failing to strictly construe the Reed-HTI Assignment and resolve doubts and ambiguities therein in favor of RSV’s free use of the property; construing the Reed-HTI Assignment in a manner contrary to the public policy of the City of Hardeeville; holding RSV may only develop for light industrial use the 155 acres referenced in the SLF/Reed-HTI Assignment; granting declaratory relief without the City being a party; and failing to consider affidavits and exhibits.

RSV argued the plain language of the Reed-HTI Assignment shows the parties intended for conversion rights to be included. It pointed to Item 3(a), which states “all” of JPR [Land Co.]’s rights under the [Development Agreement] (DA) in the 2,262 residential units were assigned and transferred, and Item 10, which states “[a]ll other terms, conditions, rights and privileges contained in the [DA] not specifically referenced [in the assignment] shall remain in full force and effect.” It further notes the Reed-HTI Assignment included an express prohibition on the conversion of property from general commercial to residential use but is silent regarding conversions from residential to light industrial use. RSV asserted these provisions express an intent to assign conversion rights, or in the alternative, create an ambiguity that makes summary judgment improper. We agreed with RSV’s latter contention and found the Reed-HTI Assignment is ambiguous.

Item 1(a) of the Reed-HTI Assignment states that JPR transferred and assigned its “rights, privileges and obligations under the [DA] to . . . develop and use the balance of the Property only for (A) up to 2,261 Residential Dwelling Units . . . and Model Homes/Sales Center, (B) Community Recreation, (C) Institutional/Civic, (D) Maintenance Areas, (E) Open Space, (F) Roads, (G) Setback and Buffers, (H) Signage Control, (I) Silviculture, (J) Wetlands, (K) Utilities, and (L) Recreational Vehicle Parks, as all the foregoing use categories are currently defined in the PDD, and for no other use or purpose,” and that Reed/RSV “shall not be entitled to, any other development rights under the [DA] or the PDD, all of which are retained by Assignor to be assigned to [SLF].” Further, Item 1(b) states that Reed/RSV “covenants and agrees not to develop or use the Property (i) in a manner inconsistent with the foregoing development rights assigned by Assignor to Assignee pursuant to Paragraph 1(a) above, or (ii) for any use not specifically listed in Paragraph 1(a).” These provisions seem to demonstrate an intent to restrict the range of uses for the property, and the circuit court found the Reed-HTI Assignment to be unambiguous based largely on the force of these provisions. However, the circuit court’s order does not analyze, or even mention, other provisions in the Reed-HTI Assignment that seem to show an intent to convey all of JPR’s rights, which would include conversion rights. Rather, the order’s analysis focuses on two sentences from Item 1(a), without considering the broader context of the contract as a whole; this was error.

Other provisions further muddy the waters. For example, the Reed-HTI Assignment also contains an explicit restriction on conversion rights for the 75 acres designated for general commercial use but does not contain such a provision for the residential acreage. Additionally, it repeatedly refers to “Residential Dwelling Units (as such term is currently defined in the [DA] and the PDD).” However, the DA and PDD do not define “Residential Dwelling Units” or “residential acreage,” and it is unclear what implications those terms carry in the context of conversion rights or how they relate to each other, particularly since the DA and PDD specifically allow for the free conversion of residential acreage to light industrial use. Accordingly, the Reed-HTI Assignment is ambiguous because it is reasonably susceptible to more than one interpretation as to whether it conveyed all of JPR’s development rights, including conversion rights, or whether it restricted development of the residential acreage only to the uses and purposes set forth in Item 1(a).

Reversed and remanded.

SLF III – Hardeeville LLC v. RSV – Hardeeville LLC (Lawyers’ Weekly No. 012-044-25, 9 pp.) (Per Curiam) Appealed from Jasper County Circuit Court (Carmen T. Mullen, J.) Keating L. Simons, III, of Simons & Dean, of Charleston, for Appellant. J. David Black, of Maynard Nexsen, PC, of Columbia; Cheryl D. Shoun, of Maynard Nexsen, PC, of Charleston; and Scott Franklin Talley, of Talley Law Firm, P.A., of Spartanburg, all for Respondent. South Carolina Court of Appeals Unpublished