Contract – Ambiguous Contract Term – Termination of Contract

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The phrase the parties used––”the Rent Payments due under this Agreement”––is ambiguous.

We affirmed the judgment that the Town breached the contract. We reversed the decision of the court of appeals, vacated the damages award, and remanded to the trial court.

To accommodate its growing population and teeming tourism, the Town of Mount Pleasant needed more public parking. Shem Creek Development Group (SCDG) approached the Town with an idea for a new parking garage. The Town and SCDG soon entered into a contract whereby SCDG would build, own, and operate the garage, and the Town would commit to leasing 132 parking spaces in the garage. The Town’s rent was $185,000 per year for the initial 15-year term but could be reduced based on a prorated formula keyed to the garage’s yearly net profit. The rent was to be paid annually, beginning on the “Rental Commencement Date,” defined as the date the certificate of occupancy was issued for the garage. After the contract became public, the Town Council began reeling from strident citizen opposition to the project. Town officials soon paralyzed the project with a remarkable campaign of regulatory nitpicking, including manipulating the zoning code to frustrate the project plans. Rather than watch the project die the death of a thousand cuts by what appeared to be the Town’s sabotage of itself and SCDG, SCDG terminated the contract, claiming the Town anticipatorily breached it. The garage had not yet been built. SCDG later sold most of its interest in the project to a third party, with whom it partnered to complete the garage. SCDG sued the Town for breach.

The trial court, after a bench trial, found the Town had breached the contract and awarded SCDG damages for the full 15 years of rent, reduced to present value, plus prejudgment interest. The total judgment in favor of SCDG was for $2,604,316, plus an award of $298,965.22 in attorneys’ fees. The court of appeals affirmed.

The Town did not dispute it breached the contract and conceded that SCDG was justified in terminating the contract. What the Town contested is what damages the contract allows SCDG to recover upon termination. The Town’s position centers on one core issue: whether section 6.01 of the contract, which sets forth the parties’ agreement as to what damages SCDG is entitled to in the event of termination, allows SCDG to recover future rent. Section 6.01 provides that SCDG’s “sole and exclusive remedy” for breach of contract “shall be the Rent Payments due under this Agreement.” The trial court, without ruling whether this language was ambiguous, ruled SCDG could recover for future rent. We had to decide, then, whether the phrase the parties used––”the Rent Payments due under this Agreement”––is ambiguous. Because the contract term is ambiguous, we remanded to the trial court for a new trial on damages to determine the parties’ intent.

Affirmed in part, reversed in part, vacated in part, and remanded with instructions.

Shem Creek Development Group LLC v. The Town of Mount Pleasant, South Carolina (Lawyers’ Weekly No. 013-007-25, 7 pp.) (Per Curiam) Appealed from Charleston County Circuit Court (Maite Murphy, J.) David Guy Pagliarini, of Pagliarini Law Firm, LLC, of Daniel Island, and Andrew F. Lindemann, of Lindemann Law Firm, P.A., of Columbia, both for Petitioner. E. Brandon Gaskins, of Moore & Van Allen, PLLC, of Charleston, for Respondent. South Carolina Supreme Court Unpublished