Sapphire Development, LLC v. Span USA Inc.

UNPUBLISHED

UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT

No. 03-2258

SAPPHIRE DEVELOPMENT, LLC,

Plaintiff - Appellant,

versus

SPAN USA INCORPORATED; RIPLEY LIGHT MARINA
INCORPORATED; FRED COLLINS,

Defendants - Appellees.

No. 04-1092

SAPPHIRE DEVELOPMENT, LLC,

Plaintiff - Appellee,

versus

SPAN USA INCORPORATED; RIPLEY LIGHT MARINA;
FRED COLLINS,

Defendants - Appellants.

Appeals from the United States District Court for the District of
South Carolina, at Charleston. David C. Norton, District Judge.
(CA-00-3756-2-18)

Submitted: December 23, 2004 Decided: February 1, 2005
Before NIEMEYER and GREGORY, Circuit Judges, and HAMILTON, Senior
Circuit Judge.

Affirmed by unpublished per curiam opinion.

Clayton B. McCullough, PRATT-THOMAS, EPTING & WALKER, P.A.,
Charleston, South Carolina, for Appellant/Cross-appellee. Desa
Ballard, LAW OFFICES OF DESA BALLARD, West Columbia, South
Carolina, for Appellees/Cross-appellants.

Unpublished opinions are not binding precedent in this circuit.
See Local Rule 36(c).

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PER CURIAM:

Sapphire Development, LLC (“Sapphire”) appeals the

district court’s judgment in a civil case filed by Sapphire

relative to a contract dispute with Span USA, Inc., Ripley Light

Marina, Inc., and Fred Collins (collectively “Collins”), in which

the district court granted partial summary judgment in favor of

Collins (Appeal No. 03-2258). Collins appeals the district court’s

judgment and order dismissing its counterclaims against Sapphire

pursuant to the South Carolina Frivolous Civil Proceedings

Sanctions Act, for abuse of process, and for slander of title

(Appeal No. 04-1092). For the reasons set forth below, we affirm

the district court’s orders in both appeals.

Sapphire entered into a contract with Collins to

purchase, for the sum of ten million dollars, certain real property

in Charleston County known as Ripley Light Marina for commercial

development. The terms of the contract required Collins, at its

“sole cost and expense,” to deliver a copy of “all Phase I or II

Environmental Studies in Seller’s possession, if any” to Sapphire.

Collins retained an environmental engineer with Albrecht

Engineering (“Albrecht”) to conduct an environmental assessment, to

include the analysis of dioxins and furans, which are hazardous

substances of significant concern to environmental regulators,

which substances had been a problem in the area in the past.

Sapphire had been advised by the Corps of Engineers that the

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underlying Quality Control/Quality Assurance (“QC/QA”) data that

was part of Albrecht’s Phase I environmental study was required to

obtain the necessary state and federal permits to dredge the marina

basin in preparation for the development of the property as

condominiums. Sapphire requested the test results both orally and

in writing. Albrecht conducted the Phase I analysis, but because

Collins did not pay Albrecht for its reports, Albrecht refused to

turn over the underlying QC/QA data until it was paid for its work.

Albrecht was unable to release the test results to, or accept

payment offered by, Sapphire for its work without running afoul of

its professional responsibilities. Collins delivered to Sapphire

all reports in its possession.

While the contract provided for an October 31, 2000

closing date, Sapphire did not close by October 31, 2000, taking

the position that the QC/QA documentation was material to its

ability to close on the property, because issuance of the

appropriate dredging permits were dependent on the QC/QA data

results. Sapphire therefore took the position that as a result of

Collins’ failure to turn over the environmental data, Sapphire

could not close on the subject property. Collins took the position

that it did not “possess” the data at issue, therefore, pursuant to

the Agreement, the failure to turn the data over did not excuse

Sapphire from timely closing on the Ripley Light Marina project.

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 Based on this dispute, Sapphire filed the Complaint on

November 29, 2000, against Collins seeking declaratory relief and

specific performance, including an order requiring Collins to turn

over the analytical data. Sapphire also filed a lis pendens on the

property. Collins counterclaimed for abuse of process and slander

of title, and sought sanctions pursuant to the South Carolina

Frivolous Civil Proceedings Sanctions Act, S.C. Code Ann. §§ 15-36-

10 to -50 (Supp. 2003).

Collins subsequently moved for partial summary judgment

and the matter was heard on August 8, 2001.1 On September 20,

2001, the district court granted Collins’ motion for partial

summary judgment, ordered that Collins retain the $100,000 in

earnest money, plus interest, as liquidated damages, and ordered

Sapphire to remove the lis pendens filed against the property.

Collins subsequently tried its counterclaims before the

district court. Sapphire moved for judgment to be entered on all

three counterclaims. The court granted Sapphire’s motion as to

Collins’ slander of title claim following the presentation of

Collins’ evidence. At the conclusion of the two-day bench trial,

the district judge entered judgment in favor of Sapphire on both

Collins’ statutory claim and its claim for abuse of process.

1
Several days following the hearing on the motion for summary
judgment Collins ultimately filed, Collins paid Albrecht’s bill,
received delivery of the QC/QA data, and in turn delivered it to
Sapphire. Sapphire then asked for a reasonable amount of time to
close, which request was refused by Collins.

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 1. Appeal No. 03-2258.

In Appeal No. 03-2258, Sapphire challenges the district

court’s adverse grant of partial summary judgment. The prayer for

relief reflects that the basis for Sapphire’s suit was to obtain an

order requiring Collins to turn over the environmental data it

allegedly was withholding and to obtain an extension of the time

for closing until Sapphire received the requested data from Collins

and until the regulators had sufficient time to act on the permit

applications, so Sapphire could seek specific performance of the

contract.

In granting summary judgment in favor of Collins on

Sapphire’s cause of action for specific performance, the district

court concluded that Sapphire had breached the contract by not

closing the transaction on the date set forth in the contract, or

on a reasonable date thereafter. The district court’s analysis

focused on whether Collins had “possession” of the environmental

studies that had been prepared, but for which it had not paid, such

that it had violated the contract by not providing to Sapphire

“[e]nvironmental [s]tudies in [its] possession, if any.” The

district court rejected Sapphire’s contention that the Albrecht

engineer was Collins’ agent, concluding that, absent the payment by

Collins to Albrecht, Collins could not take possession of the

documents or exert any dominance over them and thus did not have

constructive possession of the documents.

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 Summary judgment is appropriate when there is no genuine

issue of material fact that could lead a trier of fact to find for

the non-moving party, based upon review of all pleadings,

depositions, affidavits, and other documents submitted by the

parties. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48

(1986); Miller v. Leathers, 913 F.2d 1085, 1087 (4th Cir. 1990) (en

banc). "In determining whether to grant summary judgment, all

justifiable inferences must be drawn in favor of the non-movant."

Miltier v. Beorn, 896 F.2d 848, 852 (4th Cir. 1990) (citing

Anderson, 477 U.S. at 255). The non-movant is entitled "to have

the credibility of his evidence as forecast assumed, his version of

all that is in dispute accepted, [and] all internal conflicts [ ]

resolved favorably to him." Charbonnages de France v. Smith, 597

F.2d 406, 414 (4th Cir. 1979) (quoting Fed. R. Civ. P. 56(c)); see

also Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S.

574, 587-88 (1986). We review de novo a district court's grant of

summary judgment. Shaw v. Stroud, 13 F.3d 791, 798 (4th Cir.

1994).

Sapphire asserts that the “clear and unambiguous terms of

the Agreement [between the parties] state that Collins is to

deliver and make available to Sapphire the Phase I environmental

study at Collins’ sole cost and expense” and that Collins refused

to pay for the study “in direct violation of the Agreement.” While

it admits that it is undisputed that Collins did not actually

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possess the data because it refused to pay Albrecht’s bill,

Sapphire asserts that Collins had constructive possession of the

pertinent data,2 and that its refusal to pay the bill and turn over

the data precluded the district court’s grant of partial summary

judgment.

As noted by the district court, the threshold question in

this case is whether Collins had “possession” of the data. We find

there are two ways to look at this issue, and under either

construction, the district court correctly held against Sapphire.

First, under the clear, unambiguous language of the contract,

Collins did not have actual possession of the data such that it was

required to turn it over to Sapphire. Second, to the extent that

Sapphire is contending that the contract is ambiguous such that the

term “possession” should include constructive as well as actual

possession of the data, i.e., to the extent that the contract is

subject to more than one reasonable interpretation, the contract

must be construed strictly against Sapphire, as it acknowledged

authorship of the pertinent paragraph of the contract. See, e.g.,

Myrtle Beach Lumber Co. v. Willoughby, 274 S.E.2d 423, 426 (S.C.

1981). Here, because Collins had not paid Albrecht, and as a

result, Albrecht refused to release the documents, Collins could

2
Under South Carolina law, a person has constructive
possession over an object if he or she has “dominion and control,
or the right to exercise dominion and control. . . .” State v.
Jennings, 515 S.E.2d 107, 109 (S.C. Ct. App. 1999).

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not take possession or control of the documents, nor did it have

any legal right to do so, without first paying the money it owed.

Once Collins paid the money owed to Albrecht, it then, and only

then, had constructive possession of the data until such time as it

actually possessed the data upon delivery. Stated differently,

constructive possession of the documents in this case attached only

when the bill was paid and continued until Collins had the data in

hand.

This analysis does not change upon consideration of

Sapphire’s assertion that the Albrecht engineer was an agent of

Collins, given that Sapphire presented no evidence tending to

establish that Collins appointed Albrecht as their representative

or that the engineer had any authority legally to bind Collins on

any issue with third parties. See, e.g., Peeples v. Orkin

Exterminating Co., 135 S.E.2d 845, 848 (S.C. 1964). Rather, the

engineer had a contractual arrangement with Collins, whereby the

engineer would perform necessary studies to prepare an

environmental report and Collins would pay for the report. The

authority of the engineer to act on Collins’ behalf was limited to

performing the service requested and Albrecht had no authority to

bind Collins with third parties. Because the existence of an

agency relationship between the Albrecht engineer and Collins was

not clearly established by the facts, Fraiser v. Palmetto Homes,

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Inc., 473 S.E.2d 865, 867 (S.C. Ct. App. 1996), we find the

district court properly rejected Sapphire’s claim as to agency.

Sapphire’s assertion of error in the district court’s

partial summary judgment ruling on this issue on the basis that

“Collins should not be allowed to circumvent his contractual

responsibilities to Sapphire simply by breaching his agreement with

Albrecht [i.e. refusing to pay for the studies undertaken at his

request]” is dependent upon parole evidence to support the

necessary argument that Collins was in fact contractually obligated

to request the studies and then turn over the results prior to

closing because nothing in the black-letter of the contract

obligates Collins to do anything other than to turn over studies

that actually were in its possession “if any.”3 Indeed, Sapphire’s

argument of this issue, based upon the premise that a contract must

be “interpreted in light of the situation of the parties, as well

as the purposes they had in view at the time the contract was made”

speaks directly to parole evidence. The district court, however,

properly held that under the parole evidence rule, extrinsic

evidence may not be used to vary the terms of the contract. (J.A.

226). Gilliland v. Elmwood Props., 391 S.E.2d 577, 581 (S.C.

1990). We find that the district court correctly rejected

Sapphire’s attempt to rely upon evidence of discussions and

3
In fact, as the district court noted, the explicit term in
the contract “if any” contemplates that Collins may not have any
environmental studies in its possession.

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writings outside the four corners of the contract between the

parties that would change the actual obligations of the parties

under the terms of the written contract. Moreover, Sapphire’s

attempts to argue in the alternative that parole evidence is

unnecessary because the contract itself states that Collins is to

deliver the studies at issue at its “sole cost and expense” fail

because the contract does not obligate Collins to deliver these

particular studies because it did not have the studies until after

the summary judgment hearing.

Moreover, if, as Sapphire asserts throughout its brief,

the specific environmental studies performed by Albrecht were so

material to the deal, Sapphire should have included provisions in

the written contract that obligated Collins: (1) to have the

environmental studies conducted; (2) to pay for them; and (3) to

turn over the results to Sapphire prior to closing. However, the

contract did not include such terms and the district court

correctly refused to allow Sapphire to vary the terms of the actual

contract, as written and agreed to by the parties, in order to

provide to Sapphire greater benefit. We affirm the district

court’s refusal to rewrite the terms of this contract for

Sapphire’s benefit.

Given the propriety of the district court’s determination

that Collins fulfilled its obligations under the contract because

its did not possess the Phase I environmental studies at issue and

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therefore had no obligation to turn over those documents,

Sapphire’s refusal to close on the designated day, or on a

reasonable day thereafter, was a material breach of the contract.

Hence, we affirm as proper the district court’s grant of partial

summary judgment to Collins, along with its orders that Collins

retain the $100,000 in earnest money and Sapphire remove the lis

pendens from the subject property.

2. Appeal No. 04-1092.

The first issue raised in Appeal No. 04-1092 is Collins’

challenge to the district court’s adverse determination relative to

its counterclaim seeking statutory damages under the South Carolina

Frivolous Civil Proceedings Sanctions Act, S.C. Code Ann. §§ 15-36-

10 to -50 (Supp. 2003).4 The basis for this claim is Sapphire’s

4
To prevail on this cause of action, Collins was required to
prove that:

(1) [T]he other party has procured, initiated,
continued, or defended the civil proceedings
against him;
(2) the proceedings were terminated in his favor;
(3) the primary purpose for which the proceedings were
procured, initiated, continued, or defended was not that
of securing the proper discovery, joinder of parties, or
adjudication of the civil proceedings;
(4) the aggrieved person has incurred attorney’s fees and
court costs; and
(5) the amount of the fees and costs set forth in item (4).

S.C. Code Ann. § 15-36-40.

In addition, pursuant to S.C. Code § 15-36-20,

Any person who takes part in the procurement, initiation,
continuation, or defense of civil proceedings must be

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alleged bad faith in filing the lawsuit in district court. Collins

asserts that the lawsuit was filed under pretexual grounds.

Specifically, it claims Sapphire filed the suit to force Collins to

pay the bill and obtain the environmental data Sapphire needed to

finance its purchase of the property.

Stuart Longman, a member of Sapphire, testified at trial

that Sapphire needed the QC/QA data to obtain the necessary

dredging permits and to obtain financing. Jack Walker, formerly

employed by the U.S. Army Corps of Engineers, testified that the

Corps required the QC/QA data before it would issue a dredging

permit. David Swanson, an experienced real estate attorney,

testified that the QC/QA data generally is required by lending

institutions before issuing a loan on this type of project.

Longman testified that he sought the advice of Marvin Infinger and

David Swanson, both attorneys with the law firm of Haynsworth,

Sinkler and Boyd, P.A., before proceeding with the lawsuit. Both

considered to have acted to secure a proper purpose as
stated in item (1) of Section 15-36-10 if he reasonably
believes in the existence of the facts upon which his
claim is based and

(1) reasonably believes that under those facts his claim
may be valid under the existing or developing law; or
(2) relies upon the advice of counsel, sought in good
faith and given after full disclosure of all facts within
his knowledge and information which may be relevant to
the cause of action; . . .

S.C. Code § 15-36-20 (emphasis added).

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Infinger and Swanson testified that they advised Longman to proceed

with the lawsuit and that the lawsuit was well founded in the law.

The district court found this testimony credible,

concluded that Collins failed to prove that the “primary purpose of

the lawsuit was not the adjudication of a valid legal proceeding,”

and further held that Sapphire reasonably relied upon the advice of

counsel prior to filing the lawsuit. We find that the district

court’s decision to reject Collins’ statutory claim was proper.

First, we will not review a district court’s credibility

findings. See, e.g., Murdaugh Volkswagen, Inc. v. First Nat'l Bank

of S.C., 801 F.2d 719, 725 (4th Cir. 1986). Second, Collins put

forth no evidence to dispute that Sapphire reasonably believed that

his claim was valid or that Sapphire’s reliance upon the advice of

counsel was not sought in good faith and after full disclosure of

all facts and information relevant to the cause of action sued

upon.5 We find that the district court’s decision regarding

5
Collins contends that the advice of counsel was not rendered
upon a full factual disclosure by Sapphire. (Appellees/Cross-
Appellants’ Brief, at 21). In particular, Collins relies on
Infinger’s testimony that, at the time the lawsuit was filed, he
did not know that: (1) Sapphire did not have the funds to purchase
Collins’ property (J.A. 304-05); (2) Sapphire was pre-selling the
units on Collins’ property and that the contract documents allowed
the purchase money to be used to purchase the subject property
(J.A. 309); (3) the $100,000 earnest money check had bounced (J.A.
307); and (4) the earnest money had not been placed in an interest-
bearing account as required by the Contract (J.A. 307-08). (Id.).
However, there is no evidence on this record that the advice of
counsel would have been any different had Sapphire informed counsel
of the additional facts Collins set forth in its brief.

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Collins’ right to recover under the Frivolous Civil Proceedings Act

was not clearly erroneous, Anderson v. City of Bessemer City, 470

U.S. 564, 574 (1985), and therefore affirm that decision.

The next issue raised in Appeal No. 04-1092 is Collins’

challenge to the district court’s adverse determination relative to

its abuse of process counterclaim. Collins asserts that the

district court applied the wrong standard in its determination that

it “was not persuaded that the sole purpose of the underlying

litigation was [Sapphire’s] simple desire to postpone the closing

date on the subject property.” Citing Huggins v. Winn-Dixie

Greenville, Inc., 153 S.E.2d 693, 694 (S.C. 1967), Collins contends

that the correct standard requires only an “ulterior purpose.” It

asserts that Sapphire filed the lawsuit against it with the

ulterior purpose of delaying the closing date on the property so it

could gain time to pre-sell units and accumulate enough money to

close on the contract with Collins, close on a related tract of

property, and obtain government approvals.

To establish a viable cause of action for abuse of

process, Collins must prove: (1) an ulterior purpose; and (2) a

willful act in the use of process not proper in the regular conduct

of the proceeding. Huggins, 153 S.E.2d at 694. As the district

court noted in its opinion, an allegation of an ulterior purpose or

bad motive, without evidence that willful acts were taken through

which the process was misapplied or abused, is insufficient. Food

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Lion, Inc. v. United Food & Commercial Workers Intern. Union, 567

S.E.2d 251, 255 (S.C. Ct. App. 2002). The willful act element

requires: “(1) a ‘willful’ or overt act; (2) ‘in the use of the

process’; (3) that is improper because it is either (a)

unauthorized or (b) aimed at an illegitimate collateral objective.”

Food Lion, 567 S.E.2d at 254 (citations omitted).

The district court considered the issue raised by Collins

and, based upon the evidence before it, determined that Collins

failed to prove that Sapphire filed the suit for any purpose other

then to obtain the environmental data it reasonably believed was

needed to secure financing and be secure in the business venture.6

The district court based its decision on the testimony of Attorney

Swanson and Longman, who testified that the environmental condition

of the property was an essential consideration as to whether the

development would be feasible and that the QC/QA data was necessary

for financing of the project, as well as the fact that Longman

sought the advice of Sapphire’s attorney, who advised him that he

had a legitimate legal controversy and that he should file a

complaint based on the dispute with Collins over production of the

environmental data. The pertinent issue here is the purpose behind

the lawsuit, not the result. As the district court noted, although

6
The court took note of the fact that while an individual in
the Corps verbally assured Sapphire that the data would not be
necessary in this particular instance, Sapphire had nothing in
writing from the government waiving the requirement to produce
QC/QA data in the permit application process. (J.A. 346 n.1).

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the lawsuit resulted in some collateral advantage to Sapphire with

regard to the closing date, the evidence nonetheless supports the

conclusion that the suit was initiated for a legitimate purpose.

We find that Collins’ assertion that the district court

applied an incorrect legal standard in considering its claim is

without merit. The district court set forth the proper legal

standard, and determined that no “willful acts” were taken by

Sapphire “through which the legal process was misapplied or

abused.” Given the evidence presented at trial, we find that the

district court did not clearly err in determining that Sapphire did

not use the lawsuit to obtain a collateral advantage in purchasing

the subject property, but rather to obtain information it

reasonably believed to be necessary. Anderson, 470 U.S. at 574.

Hence, we uphold the district court’s decision denying Collins’

abuse of process claim.

The final issue raised in Appeal No. 04-1092 is Collins’

challenge to the district court’s adverse determination relative to

its slander of title counterclaim. We review de novo the district

court’s grant of a directed verdict on the issue of slander of

title. Gairola v. Virginia Dep’t of Gen. Servs., 753 F.2d 1281,

1285 (4th Cir. 1985). To maintain an action for slander of title,

Collins must establish:

‘(1) the publication of (2) a false statement
(3) derogatory to [Collins’] title (4) with
malice (5) causing special damages (6) as a

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 result of diminished value of the property in
the eyes of third parties.’

Huff v. Jennings, 459 S.E.2d 886, 889 (S.C. Ct. App. 1995) (citing

TXO Prod. Corp. v. Alliance Resources Corp., 419 S.E.2d 870 (W. Va.

1992)). Collins challenges the district court’s dismissal of its

slander of title claim, asserting that the lis pendens filed by

Sapphire on the subject property, and Sapphire’s marketing and pre-

selling of units to be built on the property at issue, which

property it did not own, were done with reckless disregard for

Collins’ rights and that these actions resulted in the diminished

value of the property in the eyes of third parties.

First, the law in South Carolina is clear that the filing

of a lis pendens cannot form the basis of an action for slander of

title. Pond Place Partners, Inc. v. Poole, 567 S.E.2d 881, 892

(S.C. Ct. App. 2002). Second, we find that the district court’s

entry of judgment against Collins on its slander of title

allegations based upon Sapphire’s other actions as described above

was proper because Collins failed to produce evidence at trial that

the value of the property at issue was in any way diminished.

While Collins contends that none of the collateral inquiries since

the filing of the lawsuit and the pre-sale by Sapphire of

condominium units resulted in a sale of the subject property, this

evidence does not establish diminution of the value of the

property. Moreover, to the extent Collins is relying on the fact

of protracted litigation to support its claim, the fact that the

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litigation at issue was prolonged based upon Collins’ pursuit of

counterclaims against Sapphire flies in the face of any assertion

that it was solely the actions of Sapphire that resulted in

Collins’ inability to sell the subject property, rather than its

own actions.

Accordingly, we affirm the district court’s grant of

partial summary judgment against Sapphire in Appeal No. 03-2258,

and further affirm the district court’s rejection of Collins’

counterclaims in Appeal No. 04-1092. We dispense with oral

argument because the facts and legal contentions are adequately

presented in the materials before the court and argument would not

aid the decisional process.

AFFIRMED

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