Alexander Murphey v. C.E. Carter and Margaret Carter

Breach of Contract - Real Estate - Breach of Fiduciary Duty - Flood Plain - FEMA - This case arose out of a real estate development that went
bad. The parties attempted to develop 250 acres of land along the
Savannah River in McCormick County, South Carolina. When the
project failed, Alexander Murphey sued C.E. Carter and Margaret
Carter for $208,747.94 on a contract for reimbursement. The
Carters countersued Murphey to recover $500,000 that they had
invested in the project. They alleged that Murphey breached a
separate contract and breached a fiduciary duty he owed to them.

In 1983, Murphey, a physician, learned of an opportunity to
buy property which was known as Furey Plantation. Murphey
approached the Evans brothers about purchasing the property with
him. The Evans brothers had experience in real estate
development. They insisted that C. E. Carter, an electrical
contractor, be allowed to join the group. Murphey agreed on the
condition that he would be a participant in the development of the
property. Eventually, the four purchased the plantation. The
venture was titled Furey Development, Inc. About 1985, the Evans
brothers wanted to quit the venture, and Murphey and Carter bought
them out.

In 1987, Murphey and Carter decided to develop Furey
Plantation as a residential subdivision. Murphey had participated
in the development of a medical care building and, by this time,
had obtained a broker's license and opened a business called
Murphey Real Properties, Inc.

Furey Development, with Murphey acting as President,
contracted with Murphey Properties to develop Furey Plantation.
Murphey Properties was to be paid $100,000 plus additional fees.
Carter transferred his shares in Furey Development to his wife and
continued to act as an officer. Murphey and the Carters obtained
mortgages totaling approximately 1.25 million dollars to finance
the development.

Murphey and Carter learned that a portion of the plantation
was in a flood plain. Murphey contacted the Federal Emergency
Management Authority (FEMA) and submitted a certification that
the development would not affect the flood level in the area.
They continued with plans to develop the property, even though
FEMA did not respond to the certification.

Murphey Properties marketed the development as an exclusive
subdivision and began selling lots along the riverside in 1987.
Brochures detailed plans for a gated entrance, a boat ramp and
dock, a clubhouse, tennis courts, swimming pools, and fitness
trails.

During construction of the clubhouse in 1990, a FEMA
representative inspected the subdivision and declared that all
existing construction, including homes and the clubhouse, violated
federal requirements for building in a flood plain. FEMA banned
further construction in the development until existing
construction was brought into compliance with federal standards or
until no-rise certificates were provided. The ban was in effect
for over two years, until Murphey supplied the requested
certificates.

Only one lot was sold after the ban began. Many of the
promised amenities were never built. The development was unable
to generate money, but the loan obligations continued. The
development stayed alive only because Murphey personally advanced
money to Furey Development.

A jury returned a verdict of $202,814.00 for Murphey. The Carters were awarded nothing on their counterclaim.

Unknown

Unknown

Affirmed by the Court of Appeals of Georgia. See: ___ Ga. App. ___ (1999), ___ S.E.2d ___. Note: The above date reflects the appellate court decision date, not the original trial date. Reported by kkm.