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2011-UP-065 - MPI SC v. Levy Center

THIS OPINION HAS NO PRECEDENTIAL VALUE.  IT SHOULD NOT BE CITED OR RELIED ON AS PRECEDENT IN ANY PROCEEDING EXCEPT AS PROVIDED BY RULE 268(d)(2), SCACR.

THE STATE OF SOUTH CAROLINA
In The Court of Appeals

MPI South Carolina - 1, LLC, Appellant,

v.

Levy Center, LLC, Boyd Capital, LLC,  The Savannah Bank, and The McNair Law Firm, P.A., Respondents.


Appeal From Jasper County
Marvin H. Dukes, III, Master-In-Equity


Unpublished Opinion No.  2011-UP-065 
Submitted December 1, 2010 – Filed February 16, 2011


AFFIRMED


Steven L. Smith, of Charleston, for Appellant.

Jeffrey S. Tibbals, of Charleston, and William B. Harvey, III, of Beaufort, for Respondents.

PER CURIAM:  MPI South Carolina-1, LLC (MPI) appeals from an order granting Levy Center, LLC, and Boyd Capital, LLC's (collectively, Respondents) motion for summary judgment, arguing the master-in-equity erred in (1) ruling that unforeseen changes in zoning regulations did not make performance of the contracts impossible; (2) concluding the change in property regulations did not excuse its obligations of performance under the doctrine of frustration of purpose; and (3) granting summary judgment because genuine issues of material fact exist concerning the degree of Respondents' involvement with the planned development.  We affirm.[1]

FACTS

MPI is a South Carolina land development firm that contracted with Levy Center to purchase a piece of land (Levy Tract).[2]  Levy Center (Levy) owned the property, but Boyd Capital (Boyd) had a purchase contract, which it assigned to MPI on March 17, 2006.[3]  Boyd completed some preliminary development work on the Levy Tract before it assigned its contract with Levy to MPI, including due diligence and design of the development.  While MPI was continuing the due diligence and design work, Jasper County enacted a temporary building moratorium on "all land development as well as on commercial construction that was greater than 10,000 [square feet] or produced heavy amounts of traffic."  Jasper County intended for the moratorium to last from July 2006 to November 13, 2007; however, on November 13, 2007, the County amended the zoning in the area where the Levy Tract was located.  The new zoning requirements mandated a certain lot size that, according to MPI, had the practical effect of making its intended development impossible.

MPI filed a declaratory judgment action on May 11, 2007, seeking rescission of the contract and a full refund of the payments it made into escrow because the contract had failed its essential purpose and was impossible to perform.[4]  In their Answers, Levy and Boyd alleged MPI was in breach of the contract for failing to make payments on the property before the closing date in November 2006.  Boyd also alleged the assignment agreement provided all amounts paid by MPI to Boyd for the assignment were non-refundable regardless of whether MPI closed on the property.  Levy and Boyd both filed motions for summary judgment, which the master granted on February 19, 2009, after a hearing on the matter.  This appeal followed.   

STANDARD OF REVIEW

When reviewing the grant of a summary judgment motion, the appellate court applies the same standard that governs the trial court under Rule 56(c), SCRCP, which provides summary judgment is proper when there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law.  Fleming v. Rose, 350 S.C. 488, 493, 567 S.E.2d 857, 860 (2002).  On appeal from an order granting summary judgment, the appellate court reviews all ambiguities, conclusions, and inferences arising in and from the evidence in a light most favorable to the non-moving party below.  Willis v. Wu, 362 S.C. 146, 151, 607 S.E.2d 63, 65 (2004). 

LAW/ANALYSIS

I.  Impossibility of Performance

MPI argues the master erred in ruling that unforeseen changes in zoning regulations did not make performance of the contracts impossible.  MPI also argues the master erred in granting summary judgment because there was substantial evidence that the parties were working together toward the same goal, and it was immaterial that the parties did not include the purpose in the contract.  We disagree.

MPI admits the documents did not contain an express provision that specifically stated the purpose of the contract was to develop the Levy Tract in a specific manner; however, it asserts the doctrine of impossibility of performance does not rest exclusively on the language of the contract.  MPI maintains the doctrine has been "extended to include situations in which performance as anticipated is not merely physically impossible, but so impracticable as to significantly alter the understanding of the parties as to the nature of the underlying contract."  It further states the occurrence must be unexpected, but it does not have to be unforeseeable.  MPI claims the "imposition of a building moratorium, and the significant changes in zoning, were unforeseeable events, the non-occurrence of which were implicit conditions of the contract."

In Hawkins v. Greenwood Development Corp., 328 S.C. 585, 593, 493 S.E.2d 875, 879 (Ct. App. 1997), this court held a party to a contract must perform its obligations under the contract unless its performance is rendered impossible by an act of God, the law, or by a third party, and impossibility must be real and not a mere inconvenience.  "A party to a contract cannot be excused from performance on the theory of impossibility of performance unless it is made to appear that the thing to be done cannot by any means be accomplished, for if it is only improbable or out of the power of the obligor, it is not deemed in law impossible."  Id. (quoting 17A Am. Jur. 2d Contracts § 673, at 681 (1991)). 

Also, in Coker International, Inc. v. Burlington Industries, Inc., 747 F. Supp. 1168, 1170 (D.S.C. 1990), aff'd, 935 F.2d 267 (4th Cir. 1991), the district court held that "[s]ubjective impossibility of performing does not relieve a party from the contract unless the contract so states."  Further, in Opera Co. of Boston v. Wolf Trap Foundation for Performing Arts, 817 F.2d 1094, 1102 (4th Cir. 1987), the court held a party seeking to rely on the defense of impossibility of performance must establish "(1) the unexpected occurrence of an intervening act, (2) such occurrence was of such a character that its non-occurrence was a basic assumption of the agreement of the parties, and (3) that occurrence made performance impracticable."

Pursuant to its assignment from Boyd, MPI's duties were to pay the earnest money and purchase price, accept the contract of sale, and accept title to the property at closing.  Therefore, MPI cannot argue any action taken by Jasper County affected MPI's ability to perform its duties or its ability to close on the property.  In addition, the temporary building moratorium did not create an impossibility of performance of the contract because MPI continued to go forward with the contract even after learning of the moratorium, and neither Boyd nor MPI submitted any development plans to Jasper County for consideration or approval.  Further, the assignment required that Boyd convey to MPI all its rights, title, and interest in and to the contract of sale, not the property, in exchange for payments made by MPI.  Boyd fulfilled its obligations pursuant to the agreement, and MPI admitted that Boyd did not breach any term of its agreement with MPI.  Tom Small, vice president of MPI, also admitted MPI did not provide any written notice of termination of the contract for any justifiable reason within the contract.

Small acknowledged during his deposition that the contract did not contain any language or any other evidence that Levy intended for a particular use or density for the property, and the contract did not condition performance under the contract upon successful development, zoning, or county approval.  Moreover, prior to and in conjunction with Boyd's assignment of the contract to MPI, Boyd and Levy amended the contract twice, and MPI and Levy amended the contract once more after the assignment.  These amendments to the contract did not contain any contingencies or conditions that would excuse MPI's performance under the contract in the event the County altered the zoning of the property in any manner.

MPI had not completed a conceptual plan of development for the property at the time Jasper County issued its moratorium ordinance.  Prior to assigning the contract to MPI, Boyd performed due diligence and created a conceptual master plan, which it provided to MPI; however, there was no evidence that MPI intended to adopt Boyd's master plan because MPI separately initiated its own development plans, hired its own land planner and market analysis firm, and was preparing a new land plat.  In fact, James Wolfe, principal member of Boyd, testified Small wanted to increase the density by decreasing the size of the lots from Boyd's conceptual plan.

Additionally, MPI admits that after the County lifted the moratorium, it could have completed the purchase of the property and developed it for less of a profit.  MPI also did not submit even a conceptual plan for review to Jasper County; therefore, MPI does not know with certainty that the County would have denied its development plans.  Further, had MPI submitted even an incomplete conceptual master plan prior to the cut-off date, it could have avoided the imposition of the building moratorium.[5]  Tedd Moyd, who served as Jasper County's Planning and Zoning Coordinator at the time the County enacted the ordinance, testified the ordinance exempted parties from the moratorium if they filed application for conceptual approval before July 13, 2006, even if the application was incomplete.

Therefore, we find the master properly granted Respondents' motions for summary judgment because, viewed in the light most favorable to MPI, the evidence showed the zoning changes did not make performance of the contract impossible, and the contract did not condition performance under the contract upon successful development, zoning, or county approval.  In addition, the evidence did not show the parties intended that a particular use or density for the property was a fundamental premise of the contract.      

II.  Doctrine of Frustration of Purpose

MPI argues the master erred in concluding the change in property regulations did not excuse its obligations of performance under the doctrine of frustration of purpose.  We disagree.

Specifically, MPI asserts the master erred in relying on Felt v. McCarthy, 922 P.2d 90 (Wash. 1996), because the Felt court did not rely on the foreseeability of the zoning changes, but on the purchaser's own acts.  MPI contends the parties conditioned the purchase agreement in this case entirely and exclusively on the shared intent that the property was to be developed as a planned unit development and that development was rendered impossible through the actions of the governmental agency.

In Felt, the defendants claimed frustration of purpose excused them from making further payments on their note because newly-enacted wetlands regulations prevented them from developing the land as a business park.  Id. at 91.  The defendants owned some land and sought to purchase an additional nine acres.  Id.  They requested to have 123 acres, including the nine they wanted to purchase, rezoned as a business park, but the county denied their request because they did not own all the property they wanted rezoned.  Id.  Even though they were unable to get the property rezoned, the defendants purchased the nine acres, and the sales contract did not place any conditions on the sale.  Id.  About a month later, the Army Corp of Engineers released a manual delineating protected wetlands, and the county ultimately adopted regulations that rendered the land useful only as a single home site or as open space.  Id. at 91-92.  The defendants defaulted on their note, and as an affirmative defense, they argued the court should excuse all unpaid portions of the note due to frustration of purpose.  Id. at 92.  The court held the frustration of purpose doctrine was unavailable because for the doctrine to apply, the purpose that was frustrated must have been a principal purpose of that party in making the contract, the frustration must be substantial, and the non-occurrence of the frustrating event must have been a basic assumption on which the parties made the contract.  Id. at 93.  The court stated that had the defendants wanted to condition the real estate deal upon the successful development of a business park, they clearly had the power to include that condition in the contract; however, they failed to assign any risk of the business park failure to the seller.  Id.  Therefore, the court found it should not correct the defendants' mistake by using the frustration doctrine to read such conditions implicitly into the sales contract.  Id.

The Felt court further held a reduction in market value was insufficient in and of itself to support a finding of frustration.  Id. at 94 (citing Restatement (Second) of Contracts § 265 cmt. a (1979) ("It is not enough that the transaction has become less profitable for the affected party or even that he will sustain a loss.")).  Likewise, in Duke Power Co. v. South Carolina Public Service Commission, 284 S.C. 81, 89, 326 S.E.2d 395, 400 (1985), our supreme court held that "a party to a contract should not be given relief from the requirements of the contract simply because it proved to be less favorable than an alternative provision would have been." 

Similarly, in Coker International, the South Carolina District Court found the actions of the government of Peru may have frustrated Coker's intended resale of the equipment to a customer in Peru; however, that was not the purpose of its contract with Burlington, which was the conveyance of the looms from Burlington to Coker.  747 F.Supp. at 1171.  The court also noted the parties did not insert a condition into the agreement that would have conditioned Coker's obligation to pay on the successful resale of the equipment.  Id.

As stated in Felt and Coker International, MPI could have negotiated a provision in the contract to provide protection against an unfavorable zoning change.   Small admitted the contract did not contain any language or any other evidence that the contract conditioned performance under the contract upon successful development, zoning, or county approval.  Anthony Pasquinelli, one of the owners of MPI, testified that MPI knew zoning changes could occur and it could have protected itself by including the conditions in the contract, but did not do so.  Additionally, although Boyd and Levy amended the contract twice, and MPI and Levy amended the contract once more after the assignment, none of the amendments contained any contingency or condition that would excuse MPI's performance under the contract in the event of a zoning change.

Further, MPI's claim only raises a property valuation issue, and MPI admits it could have purchased the property and developed it for less of a profit.  Moreover, MPI never submitted even a conceptual plan for review to Jasper County; thus, MPI does not know with certainty that Jasper County would have denied their development plans.  If MPI had filed even an incomplete application for conceptual approval with the County prior to July 13, 2006, it could have avoided the imposition of the building moratorium.  Small testified that neither MPI nor Boyd formally submitted any development plans to Jasper County for approval.

Even if MPI could prove the change in property regulations excused its obligations of performance under the doctrine of frustration of purpose, the clear terms of the assignment state the payments made by MPI were non-refundable, regardless of whether MPI closed on the purchase of the property.  In his deposition, Small testified he knew the amounts paid under the contract were non-refundable, regardless of whether MPI purchased the property.  Therefore, the clear terms of the contract are evidence the parties did not share an intent that MPI's inability to develop the property in a specific manner would permit the return of the amounts paid by MPI.  Further, MPI cites Restatement (Second) of Contracts § 265 for authority regarding frustration of purpose; however, that section provides that when a purpose is frustrated by unanticipated events, only its remaining duties to render performance are discharged, not those duties already performed. 

In Coker International, the South Carolina District Court held that even if the frustration of purpose doctrine applied, it would only discharge Coker's remaining duties and would not affect the completed payment of the non-refundable down payment.  747 F.Supp. at 1171.  The court further noted the express contractual provision provided the down payment would be non-refundable, which negated Coker's argument that the successful resale of the equipment was an implicit condition of its obligation to make the payment.  Id.  Thus, even if MPI could demonstrate facts sufficient to meet the requirements of the doctrine of frustration of purpose, the doctrine would only excuse MPI of its remaining duties.  The master did not compel MPI to perform any of its remaining duties under the contract, and Boyd did not seek specific performance or attempt to make MPI close on the purchase of the property.

Therefore, we find the master properly granted Respondents' motions for summary judgment because, viewed in the light most favorable to MPI, the evidence showed MPI did not meet the requirements for the doctrine of frustration of purpose, and was not excused from its obligations of performance.

CONCLUSION

Accordingly, the master's order is

AFFIRMED.

FEW, C.J., SHORT and WILLIAMS, JJ., concur.


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

[2]  MPI is a subsidiary of a national corporation engaged in the business of building residential and mixed-use developments.

[3]  MPI initially named the Savannah Bank and the McNair Law Firm as defendants in the action, but the court dismissed both parties from the case when they deposited the funds held by them in escrow with the Jasper County Clerk of Court.

[4]  MPI filed the action in the court of common pleas, and by consent order, the parties referred the case to the master-in-equity.

[5]  Ordinance R06-27 exempted properties for which parties had submitted development plans for approval by July 13, 2006.  Jasper County, S.C., Ordinance R06-27 (September 18, 2006).