IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF SOUTH CAROLINA

BEAUFORT DIVISION Robert C. Brandriff; Kristen E. Brandriff; Richard K. Davenport individually (“Plaintiffs”) individually and derivatively on behalf of the Dataw Island Owners’ Association, Inc. (“DIOA”); and Robert C. Brandriff; Kristen E. Brandriff; and Richard K. Davenport individually and as representatives of a class;

Plaintiffs, vs. Dataw Island Owners’ Association, Inc., nominal Defendant; Dataw Island Club, Inc.; Bruce “Skip” Adams; George Beck; Victor Brinkman; Colin Collins; Earl Dietz; Merwin “Mer” Grayson; Dan Hopkins; Herb Jarvis; John Mahoney; Colin McArthur; Peter Payne; John Payne; Bob Sanderson; Lee Scher; Deirdre Smith; Bob Spengler; Phil Sutphin; Ray Hoge; Pam Weigand; Jim Smithson; Peter Post; Roger Rittinger; Gabriel Nagy; Bob Albon; Larry Bernard; Harriette Buchanan; Gary Davis; Keith Dixon; Dan Frakes; Jack Hamilton; Jerry Hubbard; Gwen Jordan; Larry Lance; Terry Lurtz; Jim Marks; Jim McCornock; Bob Pogachnick; Bob Tisch; Richard Warden; Tom Fischer; Rick Manzari; Susan Beekman; Timothy McGrath; Joe Foutch; Thomas White; Herman Schmit; D. Pierre Cameron, Jr.; and William Bush;

Defendants.

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Civil Action No. 9:07-3361-CWH DATAW ISLAND OWNERS ASSOCIATION DEFENDANTS’ MEMORANDUM IN REPLY AND OPPOSITION TO PLAINTIFF’S MOTION FOR PARTIAL SUMMARY JUDGMENT

TO: ROBERT H. BRUNSON ATTORNEY FOR PLAINTIFFS

COMES NOW, the Dataw Island Owners’ Association, Inc. and all past and present

board members listed above of Dataw Island Owners’ Association (“Defendants”), by and

through the undersigned counsel, and submits its Reply Memorandum in Response and

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Opposition to Plaintiffs’ Motion for Partial Summary Judgment. For the reasons set forth below,

the Defendants respectfully submit that the Plaintiffs’ Motion should be denied.

PROCEDURAL BACKGROUND

Plaintiffs filed a complaint on October 10, 2007, six years and eight months after the

Amendment at issue was passed, naming 51 Defendants that included Dataw Island Owners’

Association, Inc. (DIOA), Dataw Island Club, Inc. (DIC), and every Board member for those two

organizations from 2000 through 2007. The Plaintiffs filed an Amended Complaint on

November 20, 2007 and a Second Amended Complaint on April 28, 2008. Plaintiffs filed a

Motion for Partial Summary Judgment and a Memorandum in Support on March 13, 2009. The

Defendants submit this Memorandum in Reply and Opposition to the Plaintiff’s Motion for

Partial Summary Judgment.

FACTUAL BACKGROUND

Dataw Island is an 870-acre secluded and gated community outside of the town of

Beaufort. Within the private gates of the 886-acre Dataw Island, there are over fifteen hundred

dwelling units intertwined with approximately 400 acres of luxury amenities that the community

offers, which include two first-class golf courses situated alongside and in between over half of

the community’s residences, a state-of-the-art clubhouse including a formal dining room, eight

high-quality tennis courts, an outdoor pool, two regulation croquet lawns, lagoons, and more.

(See Exhibit A, Plat of Community) The community has been marketed to and attracts residents

who are interested in living in an amenity-based community; residents who enjoy having an

active and social life enjoy the Dataw Island lifestyle. Besides the use of the sports amenities,

the Clubhouse and other amenity facilities serve as a gathering place for the residents of the

community. The amenities are also used for hosting regularly-held social events for Dataw

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Island residents. There are 696 residential properties adjacent to and along the golf courses; even

residents who are not members of the DIC bought and appreciate their houses with views of the

pristine golf courses.1 Additionally, the presence of the golf courses within the community plays

a large role in the Dataw Island lifestyle. Over 92% of the property owners on Dataw Island

have a membership with the DIC. Non-golf members are also entitled to use the golf course

paths as bike or walking paths, as well as other golf course features, such as the ponds for fishing

and wildlife-watching. (See Exhibit B, Affidavit of Lori S. Murdaugh)

In February 2001, Amendment Number Three to the Amended and Restated Declaration

of Covenants, Conditions and Restrictions for Dataw Island was enacted with the requisite three-

fourths membership vote in support. This amendment to the covenants made membership in the

DIC mandatory for all purchasers of property after May 31, 2001. Pursuant to Amendment

Number Three, property owners who owned at Dataw prior to May 31, 2001 had the option to

remain a non-member and were not required to pay the fees to join the DIC. Amendment

Number Three states,

“Every Person who becomes an Owner of a Lot or Dwelling after May 31, 2001 shall thereupon be required to be and shall automatically become at least a Social Member of the Dataw Island Club, Inc. (“Club”) for so long as such Person continues to be an Owner of such Lot or Dwelling, with all the rights, privileges and obligations of Social Membership as from time to time set forth in the By-Laws of the Club. The applicable Social Membership Initiation Fee shall be payable by such Owner at the closing of the conveyance to the Owner of the Lot or Dwelling, and such payment shall be a condition precedent to delivery of a deed or other form of conveyance…. The provisions of this Section 4.02 shall run with the title of and be appurtenant to all Lots and Dwellings transferred or otherwise conveyed after May 31, 2001, and shall be binding upon and inure to the benefit of all Owners of such Lots and Dwellings and their respective heirs, executors, legal representatives, successors and assigns. Each Owner, by acceptance of a deed or other conveyance of a Lot or Dwelling after May 31, 2001, consents and ageees to the obligation of automatically being at least a Social Member of the Club.”

1 This leaves approximately 382 residential properties that are not directly adjacent to the golf courses.

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(See Exhibit B, Amendment Number Three, DIOA_9477-8)

STANDARD OF REVIEW

“Summary judgment should be granted when the record demonstrates that the

requirements of Rule 56(c) have been met.” Wright v. Ozmint, ---F.Supp.2d---, 2008 WL

4542915 (D.S.C. 2008) (citing Celotex Corp. v. Catrett, 477 U.S. 317, 106 S.Ct. 2548 (1986)).

Summary judgment is appropriate when the pleadings and the evidence demonstrate that "there

is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter

of law." Fed.R.Civ.P. 56(c). The party seeking summary judgment bears the initial responsibility

of demonstrating the absence of a genuine dispute of material fact. See Celotex Corp., 477 U.S.

at 323. The moving party may successfully support its motion by identifying those portions of

"the pleadings, the discovery and disclosure materials on file, and any affidavits" that it believes

demonstrate the absence of a genuine issue of material fact. Fed.R.Civ.P. 56(c); see Celotex,

477 U.S. at 323.

In determining whether there exists a genuine issue of material fact sufficient to preclude

summary judgment, the court must regard the non-movant's statements as true and accept all

evidence and make all inferences in the non-movant's favor. See Anderson v. Liberty Lobby,

Inc., 477 U.S. 242, 255, 106 S.Ct. 2505 (1986). “The judge is not to weigh the evidence but

rather must determine if there is a genuine issue for trial. All evidence should be viewed in the

light most favorable to the nonmoving party.” Primus v. Padula, 555 F.Supp. 2d 596, 605

(D.S.C. 2008). “It is well established that summary judgment should be granted only when it is

clear that there is no dispute concerning either the facts of the controversy or the inferences to be

drawn from those facts.” Yarborough v. Montgomery, 554 F.Supp. 2d 611, 613 (D.S.C. 2008).

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ANALYSIS

I. The Association had authority to amend the Declaration.

Section 13.02 of the Amended and Restated Declaration of Covenants, Conditions, and

Restrictions for Dataw Island (the “Declaration”) sets forth the authority of the Association to

amend the Declaration. This provision allows for amendments to be proposed and adopted when

approved by three-fourths of the total votes cast at the meeting of the Association. The language

simply allows that “[a]mendments to this Declaration…shall be proposed and adopted in the

following manner:” and proceeds to describe a detailed procedure, including means of proper

notice, votes required, required approval of the developer and so forth for adopting amendments.

There is no limitation on types of amendments allowed to the Declaration. (See Exhibit C,

Section 13.02, DIOA_9404, DIOA_9463-4)

The right to amend covenants running with the land can be reserved by the developer or

successor to the developer provided that (1) the right to amend covenants is set forth in the

declaration, (2) the amendments are made by the developer or entity holding the developer’s

rights, who holds a sufficient property interest in the development, (3) the developer or its

successor complies with the amendment procedure as set forth in the declaration, (4) developer

or its successor provides notice of the amendments in accordance with the declaration or other

law, and (5) the amendment must not be unreasonable, indefinite, or contravene public policy.

Queens Grant v. Greenwood Development, 368 S.C. 342, 628 S.E.2d 902 (Ct. App. 2006).

In the instant case, the right to amend the Declaration is clearly stated without ambiguity

in Section 13.02 of the Declaration. The Plaintiffs contend that the right to amend the

Declaration does not include the right to create new restrictions on property; however, the term

“amendment” is not commonly construed using the narrow definition suggested by the Plaintiffs.

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“The language of a restrictive covenant is to be construed according to the plain and ordinary

meaning attributed to it at the time of execution.” Hardy v. Aiken, 369 S.C. 160, 166, 631 S.E.

2d 539, 542 (2006). An “amendment” in a legal context is defined as “[a] formal revision or

addition proposed or made to a statute, constitution, pleading, order, or other instrument; specif.,

a change made by addition, deletion, or correction; esp., an alteration in wording.” BLACK’S

LAW DICTIONARY, 8th ed. (2004) (emphasis added).

The Plaintiffs cite to Erkes v. Kasparek, 303 S.C. 70, 399 S.E.2d 6 (Ct.App. 1990), to

support their contention that the Defendants do not have the authority to amend the covenants as

they did in Amendment Number Three; however, the Plaintiffs’ reliance on Erkes is misplaced.

Neither the facts nor the holding in Erkes are similar to the present situation.

Unlike the amendment in Erkes, Amendment Number Three does not attempt to impose

new restrictions that eliminate rights that are specifically reserved to the developer in the

Declaration. In Erkes, the residents drafted amendments seeking to bind the developer, without

the developer’s consent. Id. at 72. Further, the amendments in Erkes affected the undeveloped,

un-subdivided land owned by the developer and imposed minimum lot size requirements on the

undeveloped land owned by the developer. In effect, the amendments eliminated the specific

reservations contained in the covenants permitting the developer to develop the remainder of the

project. The South Carolina Court of Appeals in Erkes held that because the amendment was

directly contrary to the reservation of rights by the developer as a part of the bargain made by the

residents at the time of purchase, the amendment could not be upheld. Id. Amendment Number

Three does not purport or attempt to limit the developer’s rights, and in fact, it was signed and

consented to by the developer. Amendment Number Three does not eliminate any rights that

were created in the Declaration.

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Furthermore, unlike the amendment provision in Erkes, the Declaration does not include

any limitation on the permissible types of amendments to the Declaration. The specific language

of the covenants in Erkes stated that “the conditions, restrictions and covenants herein contained

may be changed, or amended… (italics added)” Id. at 73. In contrast, the provision in the

Declaration in our present facts contains broader language, allowing “Amendments to this

Declaration” without limitation or restriction. The language of Section 13.02 of the Declaration

allows for any amendment to be proposed and adopted when approved by three-fourths of the

total votes cast at the meeting of the Association. This provision in the Declaration contains no

language limiting the scope of amendments or purporting to permit only changes to the existing

provisions contained in the Declaration, as was found in Erkes.

Finally, the holding in Erkes is limited to any amendments which impose restrictions on

undeveloped land held by the developer of the subdivision. The court in Erkes specifies that

additional restrictions cannot be placed on the undeveloped land of the developer without the

developer’s consent and focuses its ruling on restrictions as to the use of the property, rather than

a more general application. In extracting language from Erkes, Plaintiffs are citing to a body of

law that relates to restrictions on the use of the land contrary to the developer’s rights, such as

subdividing land or preventing development; this body of case law is not relevant to our present

facts and deals with dissimilar interpretations of covenants, easements, or other instruments that

affect property that are limited to circumstances where the property owners within a subdivision

use the restrictive covenants to frustrate the developer’s ability to continue its development

project. Windham v. Riddle, 672 S.E.2d 578 (2009) (“Where language in a plat reflecting an

easement is capable of more than one construction, that construction which least restricts the

property will be adopted.”); Hardy v. Aiken, 369 S.C. 160, 631 S.E.2d 539 (2006) (“[A]

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restriction on the use of property must be created in express terms or by plain and unmistakable

implication, and all such restrictions are to be strictly construed, with all doubts resolved in favor

of the free use of property.”)

The language that Plaintiffs cite from Erkes is taken out of its context and should not be

applied in the present case. Furthermore, it is worthwhile to note that the Erkes case has not

been cited by any court since this 1990 decision was handed down. For example, in Pond Place

Partners, Inc. v. Poole, the court cited to its affirmation of the trial court’s holding that an

amendment to the covenants imposing a minimum square footage requirement of heated space

was valid. 351 S.C. 1, 567 S.E.2d 881 (2002) (citing to unpublished opinion Poole, et al v. Pond

Place Partners, Inc., et al, Op. No. 1997-UP-129 (Ct.App. Feb. 12, 1997), cert. denied (Jan. 12,

1998)). (See Exhibit D) In that case, the majority of the owners passed an amendment creating a

new restriction that imposed minimum square footage requirements on the amount of heated

space. The amendment and the acts of the owners were upheld. The court made no reference to

Erkes.

In the Erkes case, the residents did not have a right to amend the covenants. In Erkes, the

court noted that “power over property, such as that claimed by the residents, can be conferred

only by an instrument executed with the same formalities as would be necessary for the

disposition of the property they purport to restrict.” 303 S.C. at 72 (citing Home Sales v. City of

N. Myrtle Beach, 299 S.C. 70, 77, 382 S.E.2d 463, 467 (Ct. App. 1989)). In contrast, in Queens

Grant, the covenants contained an amendment provision that was followed and the amendment

was upheld.

Further evidence of the broad right and authority to amend the Declaration is found in the

Declaration itself and the multiple amendments recorded since the original Declaration of

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Covenants, Conditions, Restrictions and Easements for Dataw Island was filed of record in 1984

(the “Original Declaration”)2. Prior to Amendment Number Three, at least fourteen other

amendments to both the Declaration have been adopted and approved, without dispute or

challenge. For example, the “Second Amendment to Declaration of Covenants, Conditions,

Restrictions and Easements for Dataw Island” added a new requirement in Section 10.28 to the

Original Declaration to require that all detached dwellings have a covered carport or garage.

(See Exhibit E, Second Amendment to the Original Declaration, DIOA_4687-4703)

Furthermore, the “Third Amendment to Declaration of Covenants, Conditions, Restrictions and

Easements for Dataw Island” added new restrictions to the Original Declaration to require

owners to maintain all landscaping to at least the standard originally approved by the

architectural review board and to prohibit the air drying of any clothing. (See Exhibit F, Third

Amendment to the Original Declaration, DIOA_4704-4711) In addition, the “Seventh

Amendment to the Declaration of Covenants, Conditions, Restrictions and Easements for Dataw

Island” added the concept of a “Nature Preserve,” established a specific Nature Preserve,

reserved the right to designate additional land as Nature Preserves, and imposed the obligation to

pay for maintaining viewing platforms in the Nature Preserves as an assessment. (See Exhibit G,

Seventh Amendment to the Original Declaration, DIOA_4724-4731) As evidenced by these

amendments, each of which added new restrictions, and the fact that owners have not challenged

such amendments, it is clear that the intent in the Declaration was to reserve a broad amendment

power, including the right to impose new restrictions on the property.

2 References to the term “Declaration” shall be deemed to mean both the Original Declaration and the Declaration, as the Declaration was an amendment and restatement of the Original Declaration. The term Original Declaration will be used where necessary to distinguish section references in the Original Declaration from those in the Declaration.

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Even if Erkes is applicable to the instant case, Amendment Number Three is simply a

modification of the terms of the Declaration and is not a new restriction. The Original

Declaration recorded in 1984 begins by stating “Whereas, ALCOA South Carolina, Inc., a

Delaware Corporation is the owner of certain real property located in Beaufort County, South

Carolina, known as Dataw Island and does desire to subject such property to the provisions of

this Declaration and to have constructed on the property a private residential community with

related recreational facilities… (italics added)” and goes further to broadly define “Recreational

Amenities” to include, without limitation, the “two (2) 18-hole golf courses, golf driving range,

putting green, tennis courts, swimming pool, golf and/or tennis pro shops, locker room facilities,

clubhouse, food and beverage facilities, golf course lagoons, trails, and garden plots, marina and

boat slips and docking facilities…” and granted easement rights to all owners for the access, use

and enjoyment of these Recreational Amenities. (See Exhibit H, “Whereas” Clause, Section

1.01 (ff) and Section 3.11 of the Original Declarations, DIOA_4628, DIOA_4632, DIOA_4643)

Furthermore, the Declarations defined “Recreational Charges” to include “all fees, rentals, food

and beverage costs, memberships and other charges which are charged by or to an Owner with

respect to his use or the use by his family, tenants, or guests of certain Recreational Amenities.”

(See Exhibit H, Section 1.01 (gg) of the Original Declarations, DIOA_4632-3) It is evident that

the Declarations contemplated that the development would include the golf courses, the

clubhouse, and other facilities as recreational amenities and that fees relating to such amenities

could be charged to all owners. (See Exhibit H, Section 2.01 of the Original Declaration,

DIOA_4633) In light of the foregoing provisions in the Original Declaration, Amendment

Number Three is merely a modification of the terms of the Original Declaration in that

Amendment Number Three authorizes all Owners acquiring property after May 31, 2001, to

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exercise rights or privileges to use the club facilities and obligates such Owners to maintain a

membership and pay fees to the Club. Therefore, Amendment Number Three is not a new

restriction.

The Supreme Court of South Carolina has consistently held that so long as the procedure

for the amendment process contractually agreed to in the underlying document is followed,

courts have upheld amendments to covenants. Queens Grant, 368 S.C. at 350. In Queens Grant,

the court of appeals upheld a developer’s right to amend restrictive covenants and did not dispute

the fact that a developer may impose new restrictive covenants running with the land so long as

the right to amend was originally reserved in the declaration and the developer follows all

required procedures for amendment, including proper notice. Id. The Declaration specifically

allows for amendments, the procedures of which are clearly set forth in Section 13.02 of the

Declaration. When any individual purchases a lot within the development, such individual is on

record notice that their rights are subject to the Declaration, including the possibility that

provisions in the Declaration may be amended by the procedures set forth in the Declaration.

There is no dispute that Amendment Number Three was proposed and adopted in accordance

with the procedures set forth in the Declaration.

Finally, the court should enforce Amendment Number Three because it does not violate

any public policy. In Sea Pines Plantation Company v. William M. Wells, III, the court stated

that “courts shall enforce such covenants unless they are indefinite or contravene public policy.”

294 S.C. 266, 270, 363 S.E.2d 891 (S.Ct. 1987) (citing to Vickery v. Powell, 267 S.C. 23, 225

S.E.2d 856 (1976); see also Alirezia Reyhani v. Stone Creek Cove Condominium II Horizontal

Property Regime, 329 S.C. 206, 494 S.E.2d 465 (1997). Plaintiffs do not assert that Amendment

Number Three violates any public policy.

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In fact, the power to amend a declaration furthers public policy by enabling common-

interest communities to adapt to changing circumstances and to permit communities to retain

their vitality over time. RESTATEMENT (THIRD) OF PROPERTY: SERVITUDES § 6.10.

cmt. a (2000). Because restrictive covenants potentially have perpetual duration, the need to

preserve flexibility is paramount. Enabling a community to adopt amendments is necessary for

the purpose of adapting to changed circumstances and retaining means for the associations to

support the common property or carry out its other functions. Id. at cmt. b. In furtherance of

such policy, amendments, for example, may impose restrictions to prevent nuisance-like uses of

individually owned lots or units. Id. at §6.10(1)(a)(iii). The power to amend is generally

perceived to be a primary benefit of owning property in a common-interest community. Id. at

cmt. d. While the will of the majority is intended to prevail and to permit changes as needed,

the protection for the minority lies in the procedure for adopting amendments which typically

require notice and a specified number to approve an amendment. Id. at cmt. e. The varying

approval requirements address the tension between the need for flexibility to sustain long-term

viability of the community and the need for safeguards to protect the reliance interests of those

who find themselves in the minority. Id. at cmt. a. As set forth in the preamble to the

Declaration, the purpose of the Declaration is to “provide a flexible and reasonable method for

the administration and maintenance of such property.” (italics added) See Page 1, ¶ 2,

Declaration. In consideration of the foregoing, unnecessarily limiting the authority to amend the

Declaration would violate public policy in that it would subvert the flexibility intended by the

Declaration and would obstruct the community from operating, administering and maintaining

the development in such a manner to adapt to changing circumstances.

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II. Amendment Number Three meets South Carolina covenant law criteria and runs with the land.

For a covenant to run with the land, and thus bind future grantees, it must touch and

concern the land and the covenanting parties must have intended it to run with the land. Queen’s

Grant, 368 S.C. 342. Amendment Number Three undoubtedly touches and concerns the land;

further, there is no dispute that the covenanting parties intended Amendment Number Three to

run with the land.

a. Amendment Number Three is a covenant that touches and concerns the land because the amenities of the DIC are adjacent and appurtenant to the property owners’ lots, the value of the property is affected by the covenant, and the property owners have the right to use the amenities.

“Restrictive covenants differ from contracts in that they “run with the land” meaning that

they are enforceable by and against later grantees. 17 S.C. Jur. Covenants § 18 (2005); Queen’s

Grant, 368 S.C. 342, 361. “Covenants that require property owners to pay to a developer or

homeowners' association assessments that have a beneficial effect on the value of the owners'

properties touch and concern land and therefore ‘run with the land.’” Queen’s Grant, 368 S.C. at

357 (citing Harbison Cmty. Assoc., Inc. v. Mueller, 319 S.C. 99, 102, 459 S.E.2d 860, 862

(Ct.App.1995). “Restrictive covenants will be enforced unless they are indefinite or contravene

public policy.” Queen’s Grant, 368 S.C. at 362 (citing Sea Pines Plantation Co. v. Wells, 294

S.C. 266, 270, 363 S.E.2d 891, 894 (1997)).

Plaintiffs cite to Harbison to support their contention that Amendment Number Three

does not touch and concern the land. The Harbison court mentioned, in dicta, that “covenants to

pay assessments have been held to be merely personal where the assessments were for very

limited purposes, and the assessments had no beneficial effect on the value of the homeowners’

properties.” Harbison, 319 S.C. at 102. (citing Raintree Corp. v. Rowe, 38 N.C.App. 664, 248

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S.E.2d 904 (N.C. 1978). To the contrary, the covenants imposed by Amendment Number Three

were for a critically important purpose, so important that Amendment Number Three was

imposed with more than a three-fourths of the vote cast at the Annual Meeting of the DIOA.

Amendment Number Three also required and garnered the consent of the developer that still had

lots for sale and approval rights over any amendments. (See Exhibit I, Affidavit of Lori

Murdaugh) There is no question whether Amendment Number Three imposed obligations that

affect the value of the homeowners’ properties, which is why the Amendment should be upheld.

The Harbison court mentioned the Raintree case, and Plaintiff further discusses the

Raintree case to attempt to support its contention that Amendment Number Three does not run

with the land; however, contrary to the Plaintiff’s contention, the Raintree case does not present

facts that are “close to the facts” to our present case and, therefore, is not dispositive.

Additionally, the Raintree case has been discussed and distinguished by courts in other

jurisdictions. In Raintree, the court found that the covenant to pay country club dues did not

touch and concern the land because the country club facilities were “not upon, connected with, or

attached to the defendants’ land in any way” due to the location of the amenities separated from

the residential area. Id. at 908. To the contrary, the club facilities at Dataw are connected with

the land of the plaintiffs in many ways. The club facilities and the residences are both situated

behind a restricted access gate on a secluded island. Additionally, the Dataw Island Club pays

assessments to the DIOA to assist the DIOA in the payment of common expenses. (See Exhibit

J, Section 9.03, DIOA_4659-61) Additionally, as stated earlier, the amenities serve as a central

gathering place for this resort-style community.

The Raintree case is distinguished by the later North Carolina case of Four Seasons

Homeowners Association v. Sellers, 62 N.C.App. 205, 302 S.E.2d 848 (1983). The Sellers

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court distinguished its case from Raintree by stating that the covenant in Sellers “runs with each

lot in the entire subdivision of which defendants’ lots are but a small part. The recreational

facilities are located within the gates of the subdivision and on the secluded Island, as well

among and intertwined with the residential lots. It does not matter that the facilities are not

adjacent to each lot, it is sufficient that they touch and concern the entire subdivision.

Defendants argue that Raintree supports their contention that the facilities do not touch and

concern the land. Their reliance on Raintree is misplaced.” Sellers, 62 N.C.App. 205, 210-211.

The Harbison court, which is cited by the Plaintiff as mentioning Raintree, also mentions the

Sellers case by noting that the Sellers case provided that “a covenant to pay assessments to

finance recreational facilities in a subdivision touches and concerns every homeowner’s lot in the

subdivision even though the facilities are not adjacent to each lot.” Harbison, 319 S.C. 99, 102.

The North Carolina Supreme Court, in a case decided after both Raintree and Sellers,

noted the following:

The touch and concern requirement is not capable of being reduced to an absolute test or precise definition. (citing Neponsit Property Owners Ass'n v. Emigrant Indus. Sav. Bank, 278 N.Y. 248, 256-58, 15 N.E.2d 793, 795-96, reh'g denied, 278 N.Y. 704, 16 N.E.2d 852 (1938))3; Charles E. Clark, Real Covenants and Other Interests Which "Run With Land" 96 (2d ed. 1947) [hereinafter Clark, Real Covenants]. Focusing on the nature of the burdens and benefits created by a covenant, the court must exercise its best judgment to determine whether the covenant is related to the covenanting parties' ownership interests in their land. Clark, Real Covenants 97.

Runyon v. Paley, 416 S.E.2d 177, 300 (N.C. 1992). The Runyon court further stated that “for a

covenant to touch and concern the land, it is not necessary that the covenant have a physical

effect on the land.” (citing Flying Diamond Oil Corp. v. Newton Sheep Co., 776 P.2d 618, 624

(Utah 1989))4. “It is sufficient that the covenant have some economic impact on the parties'

3 (See Exhibit K) 4 (See Exhibit L)

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ownership rights.” Id. A central theme of the litigation currently before this Court is the

contention by the Plaintiffs that the covenants of Amendment Number Three had an economic

impact on property values. This contention further demonstrates that Amendment Number Three

touches and concerns the land.

While South Carolina courts have not ruled on the issue of whether covenants such as

Amendment Number Three are real and run with title to the land, courts in other jurisdictions

have held that similar covenants are real covenants. One case decided by the Illinois Supreme

Court even specifically distinguished and limited Raintree. The Illinois Supreme Court in

Streams Sports Club, Ltd. v. Richmond, 457 N.E.2d 1226, 99 Ill.2d 182 (Ill. 1983) involved a

condominium project with a declaration that mandated each unit owner to become members of

and pay dues and other charges to the club within the condominium complex owned by a

separate entity. (See Exhibit M) The unit owner cited Raintree to argue that it did not to have to

pay dues, but the Richmond court limited Raintree to its particular facts and found that a

covenant to pay dues for recreational facilities held by a private club touches and concerns land.

In particular, the court stated “the second requirement for a covenant running with the land is

also met, because the covenant clearly touches and concerns the land. The recreational facility

that is the subject of this lawsuit is adjacent to the condominium units and is used by the

residents of the condominiums.” Richmond, 99 Ill.2d 182, 189. In the Richmond case, which,

as in the case with Dataw Island, involved a separate club entity as the owner and operator of the

recreational facilities, found that nearly every jurisdiction that has reviewed the question of

assessments for recreational facilities has held them to be binding covenants running with the

land. Id. The Raintree case cited by the Plaintiffs was the one exception, which prompted the

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Richmond court to discuss the Raintree and Sellers cases and determine that the Sellers case was

more applicable to the case before it:

Our research has detected only one decision with sufficient factual similarity to justify defendant's position on appeal. In Raintree Corp. v. Rowe (1978), 38 N.C. App. 664, 248 S.E.2d 904, the court held that a covenant to pay country club dues was a personal covenant and did not meet the common law test for a covenant running with the land. Defendant relies heavily on Raintree because of its alleged factual similarity to the case at bar. Although Raintree has not been reversed, it has been distinguished to the point where it has virtually no precedential value to the case at bar. In Four Seasons Homeowners Association, Inc. v. Sellers (1983), 62 N.C. App. 205, 302 S.E.2d 848, the court held that a covenant to pay monthly assessments for recreational facilities in a subdivision was enforceable.

Id. at 190. The Richmond court concluded its discussion by stating “Raintree was limited to the

specific facts raised in that case and did not disturb the general principle that a covenant to pay

recreational-facility dues touches and concerns the land.” Id.

Twenty years after the Richmond holding, an appellate court in California reviewed a

challenge to a mandatory club membership provision, conducted a similar analysis as the

Richmond court did, and arrived at the same result. In the unpublished case of OSCA

Development v. Blehm, 2003 WL 22333475 (Cal. App. 4 Dist.), the appellate court held that the

covenants for a residential development that require the payment of a mandatory assessment for

a country club located adjacent to or within the development create a mutual relationship of

corresponding benefits and burdens, and, therefore, is a covenant that touches and concerns the

land. (See Exhibit N) The court recited the citation from the Richmond opinion about nearly

every jurisdiction upholding assessments for recreational facilities within developments and

added, “a survey of the cases addressing this issue reveals the same result. While a minority of

courts have held that the payment of recreational fees burdens the land without any

corresponding benefit, such an approach completely disregards the social and economic benefits

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of having recreational facilities located within or adjacent to one's residential community.”

OSCA Development v. Blehm, 2003 WL 22333475 (Cal. App. 4 Dist.)

The Blehm court cited the case of Anthony v. Brea Glenbrook Club, 58 Cal. App.3d 506,

130 Cal. Rptr. 32 (1976), which stated the following, which is central to the importance of

amenities within a community such as Dataw Island:

"Manifestly, the maintenance of a well-kept clubhouse, recreational area and swimming pool in this tract enhanced the value of each home therein. In the Southern California area it would be reasonable for a court to take judicial notice of the obvious fact that there are a great many swimming pools attached to private residences. The availability of such a facility at the Brea Glenbrook Club would make it unnecessary for any homeowner to invest a considerable amount of money in a swimming pool for the use of his family. Also, it would be a fair deduction from the agreed statement of facts that the availability of the clubhouse and grounds provided opportunities for playground activities and other forms of family and community recreation within the Glenbrook Hills project. Thus, it would seem that the so-called “burden” of maintaining membership in this association would in reality be an asset to each and every property owner in the use of his land."

Anthony, 58 Cal. App.3d at 511. (See Exhibit O) This demonstrates the important inter-

relationship between a residential community and the amenities that are integrated with the

project, regardless of whether a homeowners association or a private club administers the

amenities.

In the Texas case of Homsey v. University Gardens Racquet Club, 730 S.W.2d 763 (Tx.

App. 1987), the covenants required lot owners to pay dues and assessments to the University

Gardens Racquet Club. (See Exhibit P) The Homsey court upheld the mandatory membership

requirement by holding that the covenant for lot owners to maintain a mandatory membership in

the Racquet Club touched and concerned the land. The Homsey court’s analysis centered upon

whether the covenant was “so related to the land as to enhance its value and confer benefit upon

it.” Homsey, 730 S.W.2d at 764. The court found, based on the facts in that case, that value was

conferred. The lot owner in this case tried to argue that the non-exclusivity of the Racquet Club

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was a factor in whether a covenant touched and concerned the land, but the court stated that “the

nonexclusivity of the club is not a material factor since the question is whether landowners are

benefited, not if others are also benefited.” Id. at 765. This case further demonstrates the

importance of recreational amenities to a subdivision and their ability to confer value upon the

surrounding residential property.

Amendment Number Three clearly touches and concerns the property owners’ lots

because of the inseparable nature of the amenities from the residential areas. (See Exhibit

A, Plat of the Community) The amenities are intertwined throughout the community; a

substantial number of lots are placed along the two golf courses, the bike paths that the property

owners are entitled to use meander through the golf courses, and other amenities, and the

clubhouse, pool, and tennis facilities are within the residential area and are available for the use

and benefit of all property owners, whether or not all property owners exercise their right to

utilize them. The Declarations state that “every Owner and his family, tenants, and guests shall

have the non-exclusive right, privilege, and easement of access to and the use and enjoyment of

the Recreational Amenities.” (See Exhibit Q Section 3.03 of the Original Declarations,

DIOA_4623-4639) Dataw Island would not offer the gated community lifestyle that appeals to

its property owners without the existence of amenities within and among the residential

community.

The Plaintiffs claim that there is an effect on the value of the property due to the covenant

requiring new property owners to pay club fees. Clearly, both based on the Plaintiffs’ own

claims and because of the covenant’s effects on the property itself, the covenants do have an

effect on the value of the property. Further, the covenant was supported by most DIOA members

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due to the positive effects on the value of the residential lots and the community as a whole that

stems from the adoption of the covenant.

There is no question that the property owners have rights to use the bike paths and other

parts of the amenities that are intertwined throughout the residential community. Additionally,

residents’ use of the amenities includes the view of the maintained golf course, the attractive

appearance of the clubhouse and other amenities, fishing in the golf course ponds, and other use

of the various attractions emanating from the amenities. Value of the residential lots is greatly

affected by the presence of these amenities and the covenant to pay dues towards these

amenities. Because the interspersed amenities and the need to financially support them are

inseparable from the property owners’ lots, the covenant touches and concerns the land.

b. The covenanting parties intended this covenant to run with the land, as conceded by the Plaintiffs.

Plaintiffs have indicated in their Memorandum in Support that they do not dispute that it

was the intention of the covenanting parties for the benefits and burdens of the covenant to run

with the land. (See Plaintiffs’ Memorandum of Support, Entry Number 176, Page 15) Further,

intent to have Amendment Number Three run with the land is evident in the language of the

covenant itself. (See Exhibit B, Amendment Number Three, DIOA_9477-8) Thus, there is no

issue as to whether the covenanting parties intended the covenant to run with the land.

III. Plaintiffs’ Claims are Barred by the Doctrines of Laches and Waiver

Based upon the foregoing, the DIOA had the authority to amend the covenants, and

Amendment Number Three is a covenant that touches and concerns the land. Even if the court

were to find that the DIOA did not have the authority to amend the Declaration or if Amendment

Number Three is found to be invalid, Plaintiffs should be prevented from seeking to void

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Amendment Number Three because of the equitable doctrine of laches. Furthermore, Plaintiffs

have waived their rights to challenge the validity of Amendment Number Three.

a. Plaintiffs’ claims that Amendment Number Three is invalid are barred by the doctrine of laches.

“Laches” is defined as neglect for an unreasonable and unexplained length of time, under

circumstances affording opportunity for diligence, to do what in law should have been done.

Queen's Grant II Horizontal Property Regime v. Greenwood Development Corp., 368 S.C. 342,

359, 628 S.E.2d 902, 912 (Ct.App. 2006) (quoting Gordon v. Drews, 358 S.C. 598, 612, 595

S.E.2d 864, 871 (Ct.App. 2004).) Generally, the question of whether the elements of laches have

been established is one of fact and its determination rests largely within the discretion of the

court. Grossman v. Grossman, 242 S.C. 298, 130 S.E.2d 850, 855 (1963). Each case must

depend upon the particular circumstances present, taking into consideration among other things

whether the delay has w[or]ked injury, prejudice or disadvantage to one of the parties.” Id.

To establish the defense of laches, the party must show “(1) a delay (2) that is unreasonable

and (3) that causes prejudice.” Twelfth RMA Partners, L.P. v. National Safe Corp., 335 S.C.

635, 641, 518 S.E.2d 44, 47 (Ct.App. 1999). In the instant case, the membership of the DIOA

voted at the annual meeting on February 20, 2001 to approve and adopt Amendment Number

Three. More than six years passed from the approval of Amendment Number Three by the

membership until the institution of this case by the Plaintiffs. Without a doubt, there has been a

long delay in commencing the instant suit and the length of Plantiffs’ delay in asserting its rights

is unreasonable. See also Arceneaux v. Arrington, 284 S.C. 500, 503, 327 S.E.2d 357, 358-9

(Ct. App. 1985) (holding that a delay of two years was unreasonable); see also Gibbs v.

Kimbrell, 311 S.C. 261, 269, 428 S.E.2d 725, 730 (Ct.App. 1993) (holding that filing suit within

five months was reasonable). As evidence of the Plaintiff’s unreasonable delay, we note that the

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Uniform Common Interest Ownership Act provides that no action to challenge the validity of an

amendment adopted by the association may be brought more than one year after the amendment

is recorded. See U.C.I.O.A, § 2-117 (1994). (See Exhibit R, Uniform Common Interest

Ownership Act, § 2-117) Similarly, among the twenty states that have enacted legislation

governing common-interest communities, about half of those states require that any action to

challenge amendments to covenants be made within one year. See O.C.G.A § 44-3-226 (f)

(2008) (“[T]he adoption of the amendment shall be presumed valid if the suit is commenced

more than one year after the recording of the amendment on the public record.”) (See Exhibit S,

O.C.G.A § 44-3-226(f)); see also Alaska Stat. § 34.08.250(b) (2007) (See Exhibit T, Alaska Stat.

§ 34.08.250(b)); Colo. Rev. Stat. § 38-33.3-217 (2) (2008) (See Exhibit U, Colo. Rev. Stat. § 38-

33.3-217 (2)); Conn. Gen. Stat. Ann. § 47-236 (b) (See Exhibit V, Conn. Gen. Stat. Ann. § 47-

236 (b)); Nev. Rev. Stat. Ann. § 116.2117 (2) (See Exhibit W, Nev. Rev. Stat. Ann. § 116.2117

(2)); N.C. Stat. Ann. § 47F-2-117(b) (2008); (See Exhibit X, N.C. Stat. Ann. § 47F-2-117(b));

Or. Rev. Stat. § 94.590 (4) (2007) (See Exhibit Y, Or. Rev. Stat. § 94.590(4)); Vt. Stat. Ann. 27-

A § 2-117 (1994) (See Exhibit Z, Vt. Stat. Ann. 27-A § 2-117); Va. Code Ann. § 55-515.1(E)

(2008) (See Exhibit AA, Va. Code Ann. § 55-515.1(E)); W.Va. Code § 36B-2-117 (2008) (See

Exhibit BB, W.Va. Code § 36B-2-117); but see Minn. Stat. § 515B.2-118 (b) (2008) (“No action

to challenge the validity of an amendment adopted by the association pursuant to this section

may be brought more than two years after the amendment is recorded.”); (See Exhibit CC, Minn.

Stat. § 515B.2-118 (b))

Generally, delay alone in the assertion of a right does not constitute laches. Gibbs at 269

(citing to Grossman at 309). In order to constitute laches, the delay in bringing suit must have

caused some injury, prejudice or disadvantage to the party claiming laches. Id.; see also

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Arceneaux at 503; Privette v. Garrison, 235 S.C. 119, 128, 110 S.E.2d 17 (1959). The Plaintiffs,

among all other members of the DIOA, had the opportunity to reject Amendment Number Three

at the annual meeting by not voting in favor of such amendment. It is undisputed that

Amendment Number Three was approved by the vote of the membership. In addition, the

Plaintiffs could have pursued other measures and have raised objections when Amendment

Number Three was first adopted or shortly thereafter when the DIOA could have been in a better

position to address such concerns. Over six years have passed, however, and based upon the

owners’ approval of Amendment Number Three, the DIOA has since then conducted business,

taken steps and acted in accordance with Amendment Number Three. It would cause significant

injury, prejudice and disadvantage to void Amendment Number Three over six years later when

the Defendants have taken actions, made expenditures, and collected fees in furtherance of

Amendment Number Three and the Plaintiffs have been entitled to exercise all rights and

privileges of Social Membership pursuant to Amendment Number Three for over six years.

b. Plaintiffs have waived their rights to challenge the validity of Amendment Number Three.

In the alternative, Plaintiffs have waived their rights to challenge the validity of

Amendment Number Three. A waiver is a voluntary and intentional abandonment or

relinquishment of a known right. Generally, the party claiming waiver must show that the party

against whom waiver is asserted, possessed, at the time, actual or constructive knowledge of his

rights or of all the material facts upon which they depended. Janasik v. Fairway Oaks Villas, 307

S.C. 339, 344, 415 S.E.2d 384, 387-8 (1992). The doctrine of waiver does not necessarily imply

that the party asserting waiver has been misled to his prejudice or into an altered position. Id. In

Janasik, the court held that the association waived their rights to insist upon the condominium

unit owners to restore the landscape in the common areas when over the course of two years the

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association made gradual and numerous changes to the landscape of the common areas, without

objection from the association. Janasik, supra. Similar to Janasik, the Plaintiffs have waived

their rights to seek to void Amendment Number Three, when over the course of six years since

the adoption of Amendment Number Three, the DIOA continued to operate in accordance with

Amendment Number Three without any objection or challenge. Moreover, Plaintiff Davenport

bought his Dataw Island property in 2003 with at least constructive knowledge of the

amendment. (See Exhibit DD, Transcript of Davenport Deposition, Pages 50-51)

Section 13.02 of the Declaration establishes amendment procedures and provides for

approval of amendments upon notice to the members of the DIOA and vote of the DIOA. As

described above, Amendment Number Three was validly approved by three-fourths of the total

vote cast at the meeting of the DIOA. In addition, any purchaser, who purchased a lot

subsequent to the recording of Amendment Number Three, had record notice of such amendment

and elected to purchase within the development nonetheless. Based upon the initial approval of

Amendment Number Three and the actions of owners who elected to purchase lots subject to

Amendment Number Three, the Defendants have continued to operate the community, without

objection, in accordance with Amendment Number Three. In Janasik, the condominium

association and management company were barred by waiver from insisting that condominium

unit owners later adhere to the requirement in the restrictive covenants to remove certain

improvements installed in the common elements when such improvements to the landscaping

were made over a period of several years, the association was aware of the changes over that

time period, and the owners expended in excess of $10,000 in making the improvements.

Janasik at 339. Similar to Janasik, there is no reason to suggest that Defendants should have

expected six years later that Plaintiffs would now object to Amendment Number Three and seek

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to have such amendment rescinded when such amendment was proposed and passed pursuant to

the Declaration, the Plaintiffs were aware of such amendment and the DIOA continued the

operation of the community for six years in accordance with Amendment Number Three without

objection. Based on the foregoing, it is evident that the Plaintiffs have waived their rights to

object to the validity of Amendment Number Three.

IV. Plaintiffs’ Claims are Barred by the Governing Statute of Limitations.

Even if the court were to find that Amendment Number Three is not a covenant that

touches and concerns the land, Plaintiffs’ declaratory judgment claim is nonetheless barred as a

matter of law by the governing statute of limitations. South Carolina provides a three year

statute of limitations for an “action upon a contract.” See S.C. Code Ann. § 15-3-530(1) (2008).

The limitations period begins to run when a party knows or should know, through the exercise of

due diligence, that a cause of action might exist. Epstein v. Brown, 363 S.C. 372, 376, 610

S.E.2d 816, 818 (2005) ("Under the discovery rule, the statute of limitations begins to run from

the date the injured party either knows or should know, by the exercise of reasonable diligence,

that a cause of action exists for the wrongful conduct.") As set forth above, the membership

approved Amendment Number Three on February 20, 2001. Amendment Number Three was

subsequently filed of record on May 18, 2001. Plaintiffs had the opportunity to bring these

declaratory judgment claims in 2001, 2002, 2003, and early 2004. Plaintiffs’ did not commence

this lawsuit until October 20, 2007, which is over three years since the expiration of the statute of

limitations in 2004. In light of the foregoing, Plaintiffs are barred by the governing statute of

limitations.

CONCLUSION

Dataw Island was developed by Alcoa SC around golf courses, a clubhouse, tennis

courts, swimming pools, and other amenities. The amenities are as much a part of the

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26

community as the homes built adjacent to those amenities. Moreover, the Declarations drafted

by Alcoa of South Carolina preserved by its terms the right in the Association to amend the

Declaration without limitations as long as they complied with the law. Amendment Number

Three is not restrictive on the use of the property. Rather, the Amendment is a covenant that

requires membership in the community club and by its terms and effect, touches and concerns

the properties of Dataw Island. For the above reason, the Plaintiffs’ Motion should be denied

and the Amendment upheld.

PRITCHARD & ELLIOTT, LLC

By:___ s/James H. Elliott, Jr. __

James H. Elliott, Jr., Fed. Id. No. 7043 Thomas B. Pritchard, Fed. Id. No. 5964 Arthur C. Pelzer, Fed. Id. No. 9231 Samia H. Hanafi, Fed. Id. No. 10278 P. O. Box 630

Charleston, SC 29402 129 Broad Street (29401)

843-722-3300 FAX 843-722-3379

ATTORNEYS FOR DATAW ISLAND OWNERS’ ASSOCIATION, INC. AND BRUCE “SKIP” ADAMS, GEORGE BECK, VICTOR BRINKMAN, COLIN COLLINS, EARL DIETZ, HERB JARVIS, JOHN MAHONEY, COLIN MCARTHUR, MERWIN “MER” GRAYSON, PETER PAYNE, JOHN PAYNE, BOB SANDERSON, LEE SCHER, DEIDRE SMITH, BOB SPENGLER, PHIL SUTPHIN, RAY HOGE, PAM WEIGAND, JIM SMITHSON PETER POST, GABRIEL NAGY, ROGER RITTENGER, JOHN DOES 1-3

Date: March 31, 2009 Charleston, South Carolina