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2005-UP-047 - Ahlfeldt v. Brown

THIS OPINION HAS NO PRECEDENTIAL VALUE.  IT SHOULD NOT BE CITED OR RELIED ON AS
PRECEDENT IN ANY PROCEEDING EXCEPT AS PROVIDED BY RULE 239(d)(2), SCACR.

THE STATE OF SOUTH CAROLINA
In The Court of Appeals

Harry J. Ahlfeldt and Carol A. Ahlfeldt, Plaintiffs,

v.

Franklin Dean Brown and Catherine Brown, Defendants,

and

Franklin Dean Brown, Third Party Plaintiff, Appellant,

v.

Sea Mark Tower Property Owners Association, Inc., Third Party Defendant, Respondent.


Appeal From Horry County
 John  L.  Breeden, Circuit Court Judge


Unpublished Opinion No.  2005-UP-047
Submitted December 1, 2004 – Filed January 19, 2005


AFFIRMED


John P. Bacot, Jr., of Surfside Beach, for Appellant.

Michael James Barnett, of Myrtle Beach, for Respondent.

PER CURIAM:  Franklin Dean Brown appeals from the trial court’s order granting summary judgment in favor of Sea Mark Tower Property Owners Association on Brown’s third-party claim for indemnification of legal expenses.  We affirm.1 

Factual/Procedural Background

Brown and his wife Catherine sold Unit 201 in Sea Mark Towers to Harry and Carol Ahlfeldt on December 1, 1999.  The Association thereafter imposed substantial assessments on all of the units for repairs to the common areas.  The Ahlfeldts sued the Browns for fraud, negligent misrepresentation, and other causes of action alleging the Browns failed to disclose the severe structural defects in the building and the need for the assessments.  The Ahlfeldts claimed that as Brown had served on the Association’s Board of Directors from mid-1995 to November of 1997, he knew that the repairs were needed and huge assessments would become necessary. 

Brown brought this third party claim against the Association seeking indemnification from the Association for all expenses and liabilities imposed upon him as a result of the Ahlfeldts’ action, including attorney’s fees, expenses and any judgment rendered against him.  The Association denied Brown’s claim for indemnification and brought a motion for summary judgment.  The trial court granted the motion.  This appeal followed. 

Standard of Review

Summary judgment is appropriate when there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law.  Osborne v. Adams, 346 S.C. 4, 7, 550 S.E.2d 319, 321 (2001).  The evidence and all reasonable inferences therefrom must be viewed in the light most favorable to the non-moving party.  Id.  “It is well established that summary judgment should be granted ‘. . . in cases in which plain, palpable and indisputable facts exist on which reasonable minds cannot differ.’”  Anders v. S.C. Farm Bureau Mut. Ins. Co., 307 S.C. 371, 373, 415 S.E.2d 406, 407 (Ct. App. 1992) (quoting Main v. Corley, 281 S.C. 525, 526, 316 S.E.2d 406, 407 (1984)); see Bloom v. Ravoira, 339 S.C. 417, 425, 529 S.E.2d 710, 714 (2000) (stating where a verdict is not reasonably possible under the facts presented, summary judgment is proper).

Discussion

Brown argues the trial court erred in granting summary judgment to the Association.  We disagree. 

Brown claims he is entitled to indemnification under the terms of the Association’s Articles of Incorporation.  The pertinent section provides:

Every Director and every officer of the Corporation shall be indemnified by the Corporation against all expenses and liabilities, including counsel fees, reasonably incurred by or imposed upon him in connection with any proceeding to which he may be a party, or in which he may become involved, by reason of his being or having been a Director or Officer of the Corporation, whether or not he is a Director or Officer at the time such expenses are incurred, except in such cases wherein the Director or Officer is adjudged guilty of willful misfeasance or malfeasance in the performance of his duties; provided, that in the event of any claim for reimbursement of indemnification, the indemnification herein shall only apply if the Board of Directors approves such settlement and reimbursement as being in the best interest of the Corporation. 

The trial court held Brown was not entitled to indemnification under this provision because Brown was a party to this action “‘by reason of’ his allegedly having personally defrauded or otherwise breached some duty he may have owed individually to the [Alfeldts] as a seller of his own condominium” and not “‘by reason of’ his having been a director of the Association two years prior to the sale of his unit.”  The court explained, “In short, the reason Mr. Brown is being sued is that he allegedly failed to fulfill his personal, legal obligation as a seller to disclose any knowledge of latent defects to the buyers, regardless of how or when he may have obtained such knowledge; the reason he is being sued is not because he once served as an Association director.”

As an alternative reason for granting the Association summary judgment, the trial court held Brown was not entitled to indemnification because there was no evidence that the Association’s Board had approved any settlement or reimbursement for Brown, or that it wrongfully refused to do so.  The court found that it would not be in the Association’s best interest for the Board to indemnify any director in this type of action.  The court elucidated:

Absent some special circumstances not present in this case, to allow any condominium homeowners association to indemnify a director for personal liability he incurs as a result of his alleged fraud or other failure to fulfill his personal duties as a seller of his own condominium unit would be improper, could result in claims by members of such association for breach of fiduciary duty against the directors voting to approve such indemnification, and if allowed to stand, could encourage directors to sell their own condominium units upon first learning as directors of construction defects, without disclosing the same to buyers, in anticipation that they would be indemnified by the association (at the expense of all the homeowners) for liability to the buyers resulting from such fraudulent activities. 

In his brief, Brown focuses his argument on the trial court’s first holding that Brown is not entitled to indemnification because he is not a party to the action “by reason of” his having been a director.  He largely ignores the court’s alternate holding that he is not entitled to indemnification because the Board had not approved any request for indemnification and such indemnification was not in the best interest of the corporation.  Brown merely recognizes that the court noted this provision in the Articles of Incorporation and states, “Brown has made a claim unto the corporation by way of his third-party claim, but no evidence has been submitted that such a claim has been acted upon by the Board.” 

Brown offers no argument as to how he is entitled to indemnification absent the Board’s approval.  He also does not challenge the trial court’s ruling that allowing such indemnification would not be in the Association’s best interest.  An appellant has the burden of convincing this court that the trial judge committed error in his findings.  In re Thames, 344 S.C. 564, 571, 544 S.E.2d 854, 857 (Ct.App.2001).  As Brown failed to meet this burden, we affirm the trial court’s grant of summary judgment in favor of the Association. 

AFFIRMED.  

HUFF, KITTREDGE, and BEATTY, JJ., concur.


1 We decide this case without oral argument pursuant to Rule 215, SCACR.