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Unpublished Opinion No.  2005-UP-047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.