Reed et al v. Big Water Resort LLC et al

Filing 280

ORDER adopting Report and Recommendations re 270 Report and Recommendation.; denying 179 Motion for Sanctions; granting 183 Motion for Summary Judgment; denying 228 Motion for Summary Judgment Signed by Honorable David C Norton on 5/20/16.(elim, )

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF SOUTH CAROLINA
CHARLESTON DIVISION
WILLIAM REED, DONNA REED,
BONNIE YOUMANS, JANE YATES,
PHILLIP CAULDER, all individually
and for the benefit and on behalf of all
others similarly situated,
Plaintiffs,
vs.
BIG WATER RESORT, LLC; TLC
HOLDINGS, LLC; RICHARD CLARK;
JAMES THIGPEN; JIMMY “STEVE”
LOVELL; and OCOEE, LLC,
Defendants.
BIG WATER RESORT, LLC; TLC
HOLDINGS, LLC; RICHARD CLARK;
JAMES THIGPEN; JIMMY “STEVE”
LOVELL; OCOEE, LLC,
Third-Party Plaintiffs,
vs.
M.B. HUTSON, a/k/a M.B. HUDSON,
Third-Party Defendant.

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No. 2:14-cv-01583-DCN

ORDER

This matter is before the court on the following three motions: (1) a motion for
sanctions filed by third-party plaintiffs Big Water Resort LLC, Richard Clark, Jimmy
Lovell, James Thigpen, Ocoee LLC, and TLC Holdings LLC (“third-party plaintiffs”)
(ECF No. 179); (2) a motion for summary judgment filed by third-party plaintiffs (ECF
No. 183); and (3) a motion for summary judgment filed by third-party defendant M.B.
Hutson a/k/a M.B. Hudson (“Hutson”) (ECF No. 228). Pursuant to the provisions of
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Title 28 U.S.C. § 636(b)(1) and Local Rule 73.02(B)(2)(e), the court referred all pretrial
matters in this case, involving a pro se litigant, to United States Magistrate Judge Mary
Gordon Baker. The magistrate judge conducted a hearing on the aforementioned motions
on March 16, 2016 and submitted a report and recommendation (“R&R”) to this court
recommending that the court deny third-party plaintiffs’ motion for sanctions, grant thirdparty plaintiffs’ motion for summary judgment, and deny Hutson’s motion for summary
judgment. For the reasons set forth below, the court adopts the R&R, denies third-party
plaintiffs’ motion for sanctions, grants third-party plaintiffs’ motion for summary
judgment, and denies Hutson’s motion for summary judgment.
I. BACKGROUND
The plaintiffs are members of a putative class of over 1,000 individuals who
purchased memberships in defendant Big Water Resort, LLC. Am. Compl. ¶¶ 40, 41.
The Big Water Resort, LLC membership agreements (“membership agreements”) grant
plaintiffs “a right to use all . . . campground facilities and services” at Big Water Resort
(“BWR”), a recreational campground and an accommodation located in Clarendon
County, South Carolina and owned by TLC Holdings LLC. Id. ¶¶ 14, 79. Third-party
plaintiffs Big Water Resort, LLC, TLC Holdings, LLC, Richard Clark (“Clark”), James
Thigpen (“Thigpen”), and Jimmy “Steve” Lovell (“Lovell”) allegedly had an interest in
BWR in various capacities, fully set forth in the court’s order on plaintiffs’ motion to
certify class. Id. ¶¶ 17, 19; see also ECF No. 193. Big Water Resort, LLC sold
memberships from BWR’s opening in 2003 until the it was transferred to third-party
defendant Hutson in December 2010 through a lease-purchase agreement. Am. Compl.
¶¶ 70–72; Hutson Answer and Countercl. ¶ 5.
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Plaintiffs make various allegations regarding this transfer. They allege that:
(1) Big Water Resort, LLC was insolvent at the time of the transfer; (2) Hutson did not
have the financial ability to continue its operations; and (3) there was no long term
contract between defendant TLC Holdings, LLC—the owner of the property on which
BWR is located—and Big Water Resort, LLC to ensure that members would have
continued access to BWR. Am. Compl. ¶¶ 36, 38, 82. Following this transaction, the
BWR became a public facility and Big Water Resort, LLC ceased operations. Id. ¶¶ 28,
82.
Plaintiffs, taking issue with this conversion, filed suit in this court on April 22,
2014. The disputes between plaintiffs and third-party defendants have been settled. The
court entered an order granting preliminary approval of the class settlement. ECF No.
248. The final fairness hearing, during which the court considered whether to finally
approve the class action settlement, was held on May 16, 2016. The issues now before
the court involve ancillary disputes between third-party plaintiffs and Hutson.
In December 2011, TLC Holdings, LLC instituted an action against Hutson in the
Court of Common Pleas for Clarendon County for “breach of the lease-purchase
agreement, seeking damages and ejectment.” Third-Party Pls.’ Mot. Ex. 4. Hutson filed
a third-party complaint against Clark, Lovell, and Thigpen. Id. at Ex. 5. The parties
entered into a settlement agreement resolving the dispute on March 30, 2012. In this
action, third-party plaintiffs allege that:
In March 2012, the parties to the lease-purchase agreement entered into a
Settlement Agreement. The terms of the Settlement Agreement imposed
many duties on [Hutson], including the duty to make certain
improvements to the campground property and the duty to make certain
payments to [TLC Holdings, LLC]. The Settlement Agreement was
approved by consent order in April 2012.
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Third-Party Defs.’ Answer ¶ 138; see also Ex. 6. Judge James approved the Settlement
Agreement and incorporated it into a Consent Order in April 2012. Third-Party Pls.’
Mot. Ex. 7. Hutson defaulted on the March 2012 Settlement Agreement, and despite
third-party plaintiffs notifying him of such default on numerous occasions, he did not
cure the default. Third-Party Defs.’ Answer ¶¶ 139–40; see also Ex. 9. Third-party
plaintiffs filed an affidavit of default in December 2013, and Hutson filed a “motion to
set aside the affidavit of default and a motion for a temporary restraining order” in
response. Id. ¶ 141; see also Third-Party Pls.’ Mot. Exs. 11–13. On March 23, 2013,
Judge James declined to set aside the affidavit of default or issue a preliminary injunction
and ruled that the March 2012 Settlement Agreement and April 2012 Consent Order
should be enforced. Id. ¶ 144; see also Ex. 8. Judge James deemed the lease-purchase
agreement terminated and ordered Hutson to vacate the property pursuant to the terms of
the settlement agreement. Id. In April 2014, Hutson vacated the property, at which time
Clark, Lovell, and Thigpen resumed operation of BWR. Id. ¶ 145.
After plaintiffs filed suit in this court, third-party plaintiffs filed a third-party
complaint against Hutson alleging that Hutson failed to operate BWR in a manner
beneficial to the members. Defs.’ Answer, ECF No. 72, ¶ 133. Third-party plaintiffs
allege that in December 2010, they sold their membership interests in Big Water Resort,
LLC to Hutson pursuant to a lease-purchase agreement, making Hutson the sole member
of the LLC. Id. ¶ 134. According to third-party plaintiffs’ complaint, the sale price was
$500,000.00, $499,990.00 of which was payable under a promissory note executed by
Hutson in favor of Clark, Lovell, and Thigpen. Id.; see also Defs.’ Mot. Summ. J., Ex. 2.
They further allege that they “entered into a lease-purchase agreement with . . . Hutson,”
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under which third-party plaintiffs agreed to sell certain property to Hutson, including the
land on which BWR was located. Id. ¶ 135; see also Ex. 3. Third-party plaintiffs
contend that Hutson defaulted on both the promissory note and the lease-purchase
agreement. Id. ¶ 136. Third-party plaintiffs bring a cause of action for equitable
indemnity, alleging that Hutson’s actions during his control of the BWR exposed them to
potential liability. Id. ¶¶ 146–50. Third-party plaintiffs further allege that they “have
incurred, and may continue to incur, expenses necessary to protect their interest in
defending the claims brought by the members of the [BWR] campground.” Id. ¶¶ 147,
150. According to the allegations in the complaint, “an obligation in equity exists on . . .
Hutson to indemnify [third-party plaintiffs].” Id. ¶ 148.
Hutson answered the third-party complaint and filed counterclaims against thirdparty plaintiffs. ECF No. 75. In his pleadings, Hutson explains how BWR came to be
open to the public. He alleges that in early 2011, he contacted Clark “asking permission
to convert the beautiful recreational building, known as the Clubhouse, into a public
restaurant.” Hutson Answer ¶ 8. As a result of this conversion, members “would no
longer have open, free access to that former recreational building as presented in their
membership agreement. The restaurant was to be open to the public and all incoming
business was required to pay for their meals.” Id.
Hutson alleges that after learning about the property from a real estate agent, he
met with Clark and Lovell, who told Hutson that if he purchased three tracts of land, he
“would also be required to purchase the rights to approximately 700 existing club
memberships.” Id. ¶¶ 51–54. Hutson alleges that when he asked Clark and Lovell how
much the campground lost and profited, “[t]heir response was that it was not making a
5

profit yet but had much potential.” Id. ¶ 55. Hutson further alleges that prior to
purchasing the rights to club memberships and the option to purchase the real property,
he told third-party plaintiffs that he intended to develop the property for sale to the
public. Id. ¶ 56. Hutson alleges that third-party plaintiffs understood his desire to
develop the property and never indicated that he would be prohibited from doing so by
the terms of the membership agreements or otherwise. Id. Hutson alleges that after he
moved onto the property, he discovered that there was only approximately $5,000.00 in
the club’s existing checking account. Id. ¶ 57. According to Hutson, he soon realized
that there was not enough income to properly operate and maintain the campground. Id.
Hutson alleges that he had no choice but to let go approximately 90% of the employees,
cut back on the telephone lines, change insurance companies, and use part-time
employees. Id. ¶ 58. Clark suggested that Hutson raise the membership fees drastically,
which would encourage members to drop their memberships and allow Hutson to seek
business from the general public. Id. ¶¶ 60–65. Thereafter, Hutson raised member fees,
and members began to drop their memberships and threatened to file a class-action
lawsuit. Id. ¶ 66.
Hutson alleges that prior to his involvement with BWR, third-party plaintiffs
allowed the public to access the campground. Id. ¶ 70. Hutson alleges that he eventually
realized that third-party plaintiffs intended to use him as a scapegoat after collecting
millions of dollars from lifetime club members. Id. ¶ 71. Hutson claims that third-party
plaintiffs intentionally misled him and failed to disclose pertinent information, putting
him in an impossible situation that prevented him from developing the property. Id. ¶ 72.
Hutson alleges that third-party plaintiffs failed to disclose the exclusive nature of the
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memberships, BWR’s yearly losses of $250,000.00, the lack of sufficient reserves or
income for proper maintenance of the resort club, the fact that local authorities imposed a
sewer moratorium on the property, and the fact that BWR was subject to large charges by
the utility company. Id. ¶ 73. Hutson claims that third-party plaintiffs’ actions caused
him to become financially destitute and forced him to file for bankruptcy. Id. ¶ 76.
Hutson also alleges that third-party plaintiffs defamed him and caused him duress and
mental anguish. Id. ¶ 76–77. Hutson brings the following counterclaims: (1) breach of
contract; (2) breach of contract accompanied by fraud; (3) fraud and fraud in the
inducement; (4) negligent misrepresentation; (5) constructive fraud; (6) breach of the
covenant of good faith and fair dealing; (7) negligence, recklessness, willfulness, and
wantonness; and (8) defamation.
On September 3, 2015, third-party plaintiffs filed a motion for sanctions against
Hutson. On September 9, 2015, third-party plaintiffs filed a motion for summary
judgment. Hutson filed a response in opposition to the motion for sanctions on
September 11, 2015, and an amended response that same day. On September 14, 2015,
Hutson filed another response in opposition to the motion for sanctions and a response in
opposition to the motion for summary judgment. Hutson filed an additional response to
both motions on September 29, 2015. Third-party plaintiffs replied on October 8, 2015,
and Hutson filed a sur-reply on October 13, 2015. Hutson filed a motion for summary
judgment on third-party plaintiffs’ equitable indemnity claim on January 6, 2016. Thirdparty plaintiffs filed a response in opposition on January 25, 2016, and Hutson replied on
February 5, 2016. Hutson filed a second reply on February 10, 2016. The magistrate
judge held a hearing on all pending motions on March 16, 2015. On April 5, 2016, the
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magistrate judge issued an R&R, recommending that the court deny third-party plaintiffs’
motion for sanctions, grant third-party plaintiffs’ motion for summary judgment, and
deny Hutson’s motion for summary judgment. Hutson and his counsel—representing
him on the equitable indemnity claim only—filed objections to the R&R. Third-party
plaintiffs did not file objections to the R&R, but they filed a reply to Hutson’s objections
on May 9, 2016. The motions have been fully briefed and are ripe for the court’s
review.1
II. STANDARD
This court is charged with conducting a de novo review of any portion of the
magistrate judge’s report to which specific, written objections are made, and may accept,
reject, or modify, in whole or in part, the recommendations contained in that report. 28
U.S.C. § 636(b)(1). The magistrate judge’s recommendation does not carry presumptive
weight, and it is the responsibility of this court to make a final determination. Mathews
v. Weber, 423 U.S. 261, 270–71 (1976). A party’s failure to object may be treated as
agreement with the conclusions of the magistrate judge. See Thomas v. Arn, 474 U.S.
140, 150 (1985).
Summary judgment shall be granted “if the pleadings, the discovery and
disclosure materials on file, and any affidavits show that there is no genuine dispute as to
any material fact and that the movant is entitled to judgment as a matter of law.” Fed. R.
Civ. P. 56(c). “By its very terms, this standard provides that the mere existence of some
1

Hutson did not object to the magistrate judge’s recommendation that the court
grant third-party plaintiffs’ motion as it pertains to the defamation claim. Further, thirdparty plaintiffs did not file objections. After reviewing the record de novo, the court
adopts the R&R as it pertains to third-party plaintiffs’ motion for sanctions and motion
for summary judgment as to Hutson’s defamation claim. Accordingly, the court denies
the motion for sanctions and dismisses Hutson’s defamation claim.
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alleged factual dispute between the parties will not defeat an otherwise properly
supported motion for summary judgment; the requirement is that there be no genuine
issue of material fact.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247–48 (1986).
“Only disputes over facts that might affect the outcome of the suit under the governing
law will properly preclude the entry of summary judgment.” Id. at 248. “[S]ummary
judgment will not lie if the dispute about a material fact is ‘genuine,’ that is, if the
evidence is such that a reasonable jury could return a verdict for the nonmoving party.”
Id.
“[A]t the summary judgment stage the judge’s function is not himself to weigh
the evidence and determine the truth of the matter but to determine whether there is a
genuine issue for trial.” Id. at 249. When the party moving for summary judgment does
not bear the ultimate burden of persuasion at trial, it may discharge its burden by
demonstrating to the court that there is an absence of evidence to support the non-moving
party’s case. Celotex Corp. v. Catrett, 477 U.S. 317, 325 (1986). The non-movant must
then “make a showing sufficient to establish the existence of an element essential to that
party’s case, and on which that party will bear the burden of proof at trial.” Id. at 322.
The court should view the evidence in the light most favorable to the non-moving party
and draw all inferences in its favor. Anderson, 477 U.S. at 255.
III. DISCUSSION
A.

Third-Party Plaintiffs’ Motion for Summary Judgment

Third-party plaintiffs argue that the court should grant their motion for summary
judgment because Hutson’s counterclaims are barred by the doctrine of res judicata in
light of the Settlement Agreement incorporated into Judge James’s 2012 Consent Order
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in the state court action. Third-Party Pls.’ Mot. 7. The R&R recommends that the court
grant third-party plaintiffs’ motion and hold that Hutson’s claims for breach of contract,
breach of contract accompanied by fraud, fraud and fraud in the inducement, negligent
misrepresentation, constructive fraud, breach of the covenant of good faith and fair
dealing, and negligence, recklessness, willfulness, and wantonness are barred by the
release Hutson executed in settling the state court action. R&R 14–15. Hutson objects to
the magistrate judge’s recommendation, arguing that an exception to the doctrine of res
judicata applies because the release was procured by fraud. Third-Party Def.’s Obj. 17–
20.
“‘The doctrine of res adjudicata (or res judicata) in the strict sense of that timehonored Latin phrase had its origin in the principle that it is in the public interest that
there should be an end of litigation and that no one should be twice sued for the same
cause of action.’” S.C. Dep’t of Soc. Servs. v. Basnight, 551 S.E.2d 274, 278 (S.C. Ct.
App. 2001) (quoting First Nat’l Bank of Greenville v. U.S. Fid. & Guar. Co., 35 S.E.2d
47, 56 (S.C. 1945)). Res judicata, or claim preclusion, bars litigation of claims that were
litigated or could have been litigated in an earlier suit. Nevada v. United States, 463 U.S.
110, 130 (1983); Hilton Head Ctr. of S.C., Inc. v. Pub. Serv. Comm’n of S.C., 362 S.E.2d
176, 177 (S.C. 1987). To determine the preclusive effect of a state court judgment,
federal courts look to state law. Allen v. McCurry, 449 U.S. 90, 95–96 (1980); Laurel
Sand & Gravel, Inc. v. Wilson, 519 F.3d 156, 161–62 (4th Cir. 2008). In South Carolina,
res judicata requires proof of three elements: (1) “a final, valid judgment was entered on
the merits of the first suit”; (2) “the parties to both suits are the same”; and (3) “the

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subsequent action involves matters properly included in the first action.” Judy v. Judy,
677 S.E.2d 213, 217 (S.C. Ct. App. 2009).
As stated above, in December 2011, third-party plaintiffs instituted an action
against Hutson in the Court of Common Pleas for Clarendon County for “breach of the
lease-purchase agreement, seeking damages and ejectment.” Third-Party Pls.’ Mot. Ex.
4; TLC Holdings, LLC v. M.B. Hudson, a/k/a M.B. Hutson, Civ. A. 2011-co-14-602
(hereafter “state court case”). Hutson filed counterclaims against TLC Holdings, LLC
and a third-party complaint against Clark, Lovell, and Thigpen. Third-Party Pls.’ Mot.
Ex. 5, Hutson Answer. Hutson alleged that third-party plaintiffs “knew that defects
existed in regard to the premises,” including that a moratorium was imposed on the
property for sewer installation and of the large utility bills. Id. Ex. 5 at 7, 14. Hutson
further alleged that third-party plaintiffs “made misrepresentations to [Hutson] or
otherwise concealed relevant and material statements of facts regarding the condition,
usefulness, and ability to develop the property.” Id. at 12. According to Hutson’s thirdparty complaint, third-party plaintiffs interfered with his development of the property by
notifying Clarendon County of the pending litigation in an attempt to hinder and delay
Hutson’s performance under the lease-purchase agreement. Id. ¶ 85. Hutson further
alleged that he should be given an equitable interest in the property because of the
improvements made thereon. Id.
On March 30, 2012, Hutson and TLC Holdings, LLC signed a settlement
agreement (“Settlement Agreement”) resolving the dispute. Third-Party Pls.’ Mot. Ex. 6.
Although the other third-party plaintiffs did not sign the Settlement Agreement, its
provisions provide:
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This Settlement Agreement shall be incorporated into a Consent Order
(the “Consent Order”) entered in the above-referenced case (the
“Litigation”). Although Richard U. Clark, Jimmy S. Lovell and James C.
Thigpen are parties to this Settlement Agreement by virtue of being parties
to the [Lease Purchase] Agreement, and are named as Third Party
Defendants in the Litigation, they have not been served with the pleadings
in the Litigation and shall not be deemed to have appeared in the
Litigation by their execution of this Settlement Agreement. This
Settlement Agreement shall be binding upon all of the undersigned parties
even though Richard U. Clark, Jimmy S. Lovell and James C. Thigpen
have not appeared in the Litigation and are not parties to the Consent
Order.
Id. The Settlement Agreement further provides:
Pursuant to the Consent Order, in the event that Mr. Hudson fails to
comply with the terms of the Settlement Agreement, unless such failure is
a direct and proximate result of TLC’s failure to perform an action
expressly required of it in this Settlement Agreement, time being of the
essence, then the Plaintiff is entitled to the following immediate relief,
without further notice of the court or notice to Defendant or his attorney:
(a) termination of the [Lease Purchase] Agreement, (b) cancelation [sic] of
the lis pendens filed by Hudson in this action, (c) immediate vacation of
the Property by Mr. Hudson except for his personal residence, which shall
be vacated within 15 days, enforceable by the Clarendon County Sheriff;
and (d) the provisions of Section 23 shall be effective. Prior to any such
default by Hudson hereunder, the parties acknowledge that the Lease
remains in full force and effect in accordance with its terms, as modified
by this Settlement Agreement, and during the Primary Term (as may be
extended as provided herein), Hutson shall have full possession of the
Property in accordance with, and subject to, the terms of the Lease as
modified by this Settlement Agreement.
Id. at 2 (emphasis added).
Section 23 of the Settlement Agreement, titled “Release,” provides as follows:
As a material consideration of this Settlement Agreement, in the event of
the termination of the [Lease Purchase] Agreement pursuant to Section 4
above as a result of Hudson[’s] breach hereof, then automatically and
without further action of the parties, as of the date of such termination (the
“Termination Date”), Hudson shall be deemed to have released, forever
discharged and promised never to sue TLC, Richard U. Clark, Jimmy S.
Lovell, and James C. Thigpen, and their respective agents, attorneys,
insurance companies, parent companies, subsidiaries, affiliates,
predecessors, successors, or assigns (together, the “TLC Parties”), from
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any and all injuries, personal or property, known or unknown, causes of
action, demands, warranty claims, damages, suits at law or in equity, of
whatsoever kind and nature, or because of any matter or thing done,
omitted or suffered to be done, by the TLC Parties, prior to and including
the Termination Date, on account of all injuries and damages, including
attorneys’ fees and litigation expenses, arising from the Lease or the
relationship between Hudson, on the one hand, and TLC, Richard U.
Clark, Jimmy S. Lovell, and James C. Thigpen, on the other hand, and any
causes of action, known or unknown, relating to the Lease, including any
and all claims alleged, or which could have been alleged, in the Litigation.
Id. at 6–7 (emphasis added).
Judge James entered a Consent Order on April 12, 2012 approving the Settlement
Agreement and incorporating it into the Consent Order by reference. Third-Party Pls.’
Mot. Ex. 7. By December 31, 2012, Hutson was in default of the provisions of the
Settlement Agreement. Id. at Ex. 8, 4. After sending numerous default letters to Hutson,
TLC Holdings, LLC filed an affidavit of default, signed by Clark. Id. at Ex. 11. In
response, Hutson filed a motion to set aside the affidavit of default and a motion for a
restraining order against TLC Holdings, LLC. Id. at Exs. 12, 13. Judge James held a
hearing on these motions on January 8, 2014.
On March 20, 2014, Judge James entered an order in which he found that Hutson
had breached several provisions of the Settlement Agreement. Id. at Ex. 8, at 6. Judge
James’s order further stated that pursuant to the express terms of the Consent Order,
Hutson defaulted as of the filing date of the affidavit of default on December 11, 2013,
resulting in a termination of the lease-purchase agreement and his immediate vacation of
the property, except his personal residence thereon, which he was required to vacate
within fifteen days. Id. at 9. In light of Hutson’s default and the terms of the Settlement
Agreement, Judge James’s order deemed Hutson to have granted “the TLC Release to the

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TLC Parties, as set forth more fully in Section 23 of the Settlement Agreement.” Id. at
11–12.
Judge James’s order is plainly a final judgment on the merits of the state court
case. Further, it is clear that Hutson’s counterclaims for breach of contract, breach of
contract accompanied by fraud, fraud and fraud in the inducement, negligent
misrepresentation, constructive fraud, breach of the covenant of good faith and fair
dealing, and negligence, recklessness, willfulness, and wantonness fall within the broad,
express language of the Settlement Agreement and its Release provision. The state court
action involved the same parties currently before the court, although not named in the
caption, and the Settlement Agreement was binding on all of the parties. Lastly, the state
court action involves matters that are now before the court that were, or could have been,
brought by Hutson.
Hutson’s objections, construed broadly, do not appear to object to the magistrate
judge’s finding that the Settlement Agreement and the Release, incorporated into the state
court order, encompass his present counterclaims against third-party plaintiffs. Nor does
Hutson object to the magistrate judge’s finding that the principles of res judicata apply.
Rather, Hutson argues that the Release is unenforceable. Specifically, Hutson argues that
he could not have pursued a claim for fraud in the state court action because he did not
have knowledge upon which to raise the claim until after he signed the Settlement
Agreement. Third-Party Def.’s Obj. 20–21. Hutson specifically points to Lovell’s
deposition and meeting minutes from a January 2009 meeting to support his claims that
he did not have knowledge of the alleged fraudulent conduct. Id. Hutson additionally

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argues that the Release and Settlement Agreement should be set aside for public policy
reasons. Id. at 21–30.
Although Hutson contends that the alleged fraud was ongoing, he does not point
to any alleged fraudulent conduct that took place after December 11, 2013.2 There is no
dispute that Hutson knew about the “life time” membership agreements when he
purchased BWR. See Third-Party Def.’s Obj. 20; see also Third-Party Pls.’ Reply, Ex. 3
(email from Hutson’s real estate agent expressing his concerns about the effect of the life
time membership agreements).3 The Release clearly releases all claims against thirdparty plaintiffs that arose on or prior to December 11, 2013, the date on which third-party
plaintiffs filed the Affidavit of Default.
Further, all of Hutson’s claims of fraud relate to the original transaction and not
the procurement of the Release. Hutson was represented by an attorney in the underlying
state court action and was therefore presumably advised of the application and effect of

2

Section 23 of the Settlement Agreement provides that in the event of Hutson’s
default, as of the date of the termination of the lease-purchase agreement, “Hutson shall
be deemed to have released, forever discharged, and promised never to sue” third-party
plaintiffs. Third-Party Pls.’ Mot. Ex. 6, at 7. Judge James’s order provided that, effective
upon the filing of the Affidavit of Default on December 11, 2013, third-party plaintiffs
remained entitled to the relief set forth in the Settlement Agreement. See Judge James’s
Order, Third-Party Pls.’ Mot. Ex. 8, at 9; see also Consent Order, Ex. 7, at 2–3. The
order also states that Hutson is deemed to have granted the Release as set forth in the
Settlement Agreement. Id. at 10. Therefore, the court uses the date of the filing of the
Affidavit of Default as the date of termination to trigger the Release provision.
3
The R&R extensively outlines Hutson’s allegations as set forth in his many
filings with this court. See R&R 22–25. The R&R also provides the lengthy basis of
Hutson’s knowledge of the underlying allegations of fraud prior to signing the Release, as
set forth in his own filings and representations made to the court during various hearings.
Id. The court has reviewed the magistrate judge’s representations of the allegations and
Hutson’s respective knowledge thereof and finds no error. Because the R&R provides a
comprehensive outline of Hutson’s allegations and his knowledge of the alleged fraud,
the court does not find it necessary to regurgitate that information in this order and will
refer the parties to the R&R for further discussion thereof.
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the Release. See House v. Aiken Cty. Nat. Bank, 956 F. Supp. 1284, 1291 (D.S.C.)
(“[T]hey have failed to produce an affidavit or statement from the attorney who
represented them in the former litigation, any documents to show they were not fully
informed or advised as to the content of the settlement of that previous litigation, or any
other evidence sufficient to raise a genuine factual dispute as to this issue. Plaintiff’s
conclusory allegations, without more, are insufficient to provide evidence of fraud or to
defeat a properly supported motion for summary judgment.”). Hutson has failed to
provide any evidence whatsoever of fraud in the procurement of the Release. Therefore,
there is no basis to set aside the Release. See House, 956 F. Supp. at 1292 (“Plaintiffs
have failed to provide any evidence, other than their own conclusory allegations, that
they were induced to enter into this release because of fraud or misrepresentation.”).
Hutson also makes various public policy arguments for his assertion that the
Release should be set aside, including that public policy disfavors releases procured by
fraudulent conduct, there was a disparity in bargaining power, and there was no meeting
of the minds between the parties. Third-Party Def.’s Obj. 21–28. Again, all of Hutson’s
allegations of fraud relate to the original transaction and not the procurement of the
Release. Further, as stated above, Hutson was represented by counsel in the state court
action. The Settlement Agreement and Release were reviewed by an impartial judge and
incorporated into his order. There is absolutely no indication that Hutson held an unfair
bargaining position. Further, although Hutson continues to argue that he did not have
sufficient knowledge to form a binding contract, all of the evidence on the record points
to the contrary. Hutson made the same allegations of third-party plaintiffs’ fraudulent
misrepresentations in the state court action that were thereafter released by the Settlement
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Agreement. See Third-Party Pls.’ Mot. Ex. 8 at 2. Therefore, Hutson’s public policy
arguments also fail.
Thus, the court grants third-party plaintiffs’ motion for summary judgment as to
Hutson’s claims for breach of contract, breach of contract accompanied by fraud, fraud
and fraud in the inducement, negligent misrepresentation, constructive fraud, breach of
the covenant of good faith and fair dealing, and negligence, recklessness, willfulness, and
wantonness.4
B.

Third-Party Defendant’s Motion for Summary Judgment

Hutson seeks summary judgment as to third-party plaintiffs’ equitable indemnity
claim. ECF No. 228. The magistrate judge recommends that the court deny Hutson’s
motion for summary judgment because the third-party plaintiffs’ alleged failure to record
the membership agreements did not cause the damage of which plaintiffs complain.
R&R 30–35. Hutson objects to the magistrate judge’s recommendation, arguing that the
magistrate judge defines plaintiffs’ damages too narrowly.5 Third-Party Def.’s Obj. 7.

4

The magistrate judge did not find that the Settlement Agreement and Release
applied to Hutson’s defamation claim because his allegations of defamation occurred
after December 11, 2013. R&R 27. However, the R&R recommends that the court grant
third-party plaintiffs’ motion for summary judgment as to Hutson’s defamation claim
because “the undisputed evidence reveals that the statements of which Hutson complains
were, in fact, true . . . .” R&R 30. In his objections, Hutson states that he “would not
object to a dismissal without prejudice on the defamation claim as he will pursue it in
state court.” Third-Party Def.’s Obj. 30. After reviewing the R&R de novo, the court
agrees with the magistrate judge that third-party plaintiffs are entitled to summary
judgment as to Hutson’s defamation claim because the alleged defamatory statements are
true. Therefore, the court also grants third-party plaintiffs’ motion for summary
judgment as to Hutson’s defamation claim.
5
Hutson has an attorney who represents him only on the equitable
indemnification claim. His attorney submitted objections on his behalf that relate only to
the magistrate judge’s recommendation as to the equitable indemnity claim. However,
Hutson’s objections to the magistrate judge’s other recommendations were filed pro se.
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“The law of equitable indemnification allows recovery of expenses when the act
of the wrongdoer involves the innocent defendant in litigation or places him in such
relation with others as makes it necessary to incur expenses to protect his interest.”
Vermeer Carolina’s, Inc. v. Wood/Chuck Chipper Corp., 518 S.E.2d 301, 305 (S.C. Ct.
App. 1999). Third-party plaintiffs must prove the following three things to recover
against Hutson for equitable indemnification: (1) Hutson was liable for causing
plaintiffs’ damages; (2) third-party plaintiffs were exonerated from any liability for those
damages; and (3) third-party plaintiffs suffered damages as a result of the plaintiffs’
claims against it which were eventually proven to be Hutson’s fault. Id. at 307.
Hutson argues that third-party plaintiffs’ “failure to record the membership
agreements and the alleged lease between TLC and BWR is negligence per se which is
fault and, as a matter of law, TLC cannot prevail on its claim for equitable indemnity.”
Third-Party Def.’s Obj. 6. Hutson argues that the plaintiffs’ damages all arise out of
third-party plaintiffs’ failure to record the membership agreements. However, not all of
plaintiffs’ alleged damages relate to third-party plaintiffs’ failure to record the
membership agreements. Most notably, plaintiffs allege that the public was allowed to
access BWR in violation of the membership agreements. There is evidence on the record
the BWR was opened to the public prior to Hutson’s involvement. See Youmans Dep.
14:11–15:11, ECF No. 91, Ex. 9. On the other hand, there is also evidence that Hutson
opened the resort to the public. See Mot. to Certify Class, Ex. 23 Hutson letter to
members; see also Hutson Dep. 320:18–32:25, ECF No. 126 (“QUESTION: And about
six months later, sometime in 2012, because of the financial condition that – that you
inherited this – this club in, you opened it up to the general public as an at-large; isn’t that
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right? ANSWER: We always took the members. But we would take every person that
we could coming in from the public. We didn’t have no [sic] choice.”).
Third-party plaintiffs cannot recover for equitable indemnity if they had any fault
in causing plaintiffs’ damages. See Walterboro Cmty. Hosp. v. Meacher, 709 S.E.2d 71,
74 (S.C. Ct. App. 2011) (“The most important requirement for . . . equitable indemnity is
that the party seeking to be indemnified is adjudged without fault and the indemnifying
party is the one at fault.” (citation omitted)); Vermeer, 518 S.E.2d at 307 (“[T]here can be
no [equitable] indemnity among mere joint tortfeasors.”). The court cannot say as a
matter of law who is at fault, and there is evidence in the record—when viewed in the
light most favorable to the third-party plaintiffs as the nonmoving parties—from which a
jury could determine that Hutson caused the plaintiffs’ damages. There is a genuine issue
of material fact as to who opened BWR to the public, thereby causing plaintiffs’ alleged
damages. The court agrees with the magistrate judge that this dispute cannot be resolved
at the summary judgment stage. Because there is conflicting evidence of who is at fault
in causing plaintiffs’ damage, Hutson’s motion for summary judgment is denied. See
Stoneledge at Lake Keowee Owners’ Ass’n, Inc. v. Clear View Const., LLC, 776 S.E.2d
426, 432 (S.C. Ct. App. 2015) (“[W]e find the evidence is conflicting, and viewing the
evidence in the light most favorable to [the nonmoving party], the record contains
evidence a factfinder could reasonably find supports the conclusion [the nonmoving
party] was not at fault. Because of this conflicting evidence, the equitable indemnity
cause of action must be remanded for a trial.”).

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IV. CONCLUSION
For the foregoing reasons, the court ADOPTS the R&R, DENIES third-party
plaintiffs’ motion for sanctions, GRANTS third-party plaintiffs’ motion for summary
judgment, and DENIES third-party defendant’s motion for summary judgment.
AND IT IS SO ORDERED.

DAVID C. NORTON
UNITED STATES DISTRICT JUDGE
May 20, 2016
Charleston, South Carolina

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