Complex Construction Litigation (Part I)
Updated: Dec 13, 2018
Construction cases can be extremely complex and lengthy. Construction involves multiple parties, ranging from developers to contractors to architects, and the actual construction of the project can take months if not years. And on top of this, it can often take years for a latent problem to begin showing itself. The S.C. Court of Appeals just last week released two opinions regarding a construction case that lasted for years and went into the millions of dollars worth of damages.
In 2002 Bostic construction company began construction on a development project of homes called Stoneledge. Stoneledge at Lake Keowee Owners' Assoc., Inc. v. IMK Dev. Co., LLC, No. 2015-000392, 2018 WL 4905983, at *1 (S.C. Ct. App. Oct. 10, 2018). Bostic had issues completing the property and quit in 2004, leaving many problems. Id. In 2005 IMK, a development company, bought the property from Bostic, and Marick Home Builders began building responsibilities for Stoneledge. Id. IMK created a homeowners association (HOA) for Stoneledge in 2005 consisting of IMK representatives. Id. at 2. The HOA was turned over to residents in 2008, and in 2009 the HOA began receiving complaints of leak damage. Id.
The HOA brought suit against Bostic, IMK, and Marick in 2010 for negligence, breach of implied warranty of workmanlike service, breach of implied warranty of habitability, and breach of fiduciary duty. Id. The HOA requested $6.3 million at trial. The jury returned total of $5,000,000: $3,000,000 on negligence claim against Marick and Bostic, $1,000,000 on implied warranty against Marick and Bostic, and $1,000,000 against Marick for breach of implied warranty Id.
Marick and Bostic both appealed:
1. Jury charge problems
2. Directed verdict
3. Limiting closing argument
5. Remedy election issues
6. Set off settlements
Marick argued that the trial court erred on three jury charges: liability, breach of implied warranty, and breach of fiduciary duty. Liability On liability, the jury was charged with a general negligence instruction: plaintiff must prove by preponderance of the evidence that they suffered damages as a result of defendant’s breach of duty, that those damages were proximately caused by the breach, and those damages would not have occurred but for defendant’s negligence. Id. at 4. The court also instructed the jury that:
a plaintiff must prove a builder negligently constructed a building and “the negligence or carelessness of the defendants in performing the construction work was a proximate cause of the damages sustained by the plaintiff.”1 Finally, the court instructed, “If [two] acts happened one after the other, but not related to each other, they would not be concurring causes. In that case, only one person whose negligence actually caused the injury would be responsible.”
Id. at 4.
Marick took issue with this jury instruction because it did not include language from the S.C. Supreme Court case Roundtree Villas Ass'n, Inc. v. 4701 Kings Corp. 282 S.C. 415 (1984). In that case, “the court found the lender could only be held responsible for its acts of negligence in repairing any issues.” Stoneledge, No. 2015-000392, 2018 WL 4905983 at 3. Marick wanted the judge to instruct the jury based on Roundtree Villas:
One who undertakes to make repairs [sic], the defective components of a construction project is not liable for the negligence of the prior builder or contractor. The entity who assumes to make repairs to defective components is only liable for damages proximately caused by alleged negligent repair but not for any original damages proximately caused by the negligence of a builder or contractor. Id. at 4.
The Court of Appeals held that both parties were correct. While the trial court could have instructed on the requested charge by Marick because it would have been helpful to the jury, the trial judge’s instructions essentially explained the same language. Id. (“Taken as a whole, these charges adequately instructed the jury on the law of South Carolina. Marick's requested charge is certainly appropriate here, but the court's charge as given instructed the jury that only the person or entity whose negligence caused the injury would be responsible.”).
Based on this holding, it doesn’t appear to matter if the subsequent owner of a property is a lender or a builder. They “may only be held liable for any damages proximately caused by the alleged negligent repair, but not for any original damages proximately caused by the negligence of the Builder, Architect or Contractor.” Roundtree Villas, 282 S.C. at 423.
Breach of Implied Warranty The court held that it was an error for the trial judge to include this instruction (which the trial judge noted himself), however, it was harmless error. Stoneledge, No. 2015-000392, 2018 WL 4905983 at 6.
Fiduciary Duty The trial court instructed the jury that Marick “owes a fiduciary duty to ensure that the common areas of the development are in good proper repair at the time the developer relinquished control of the homeowners association over to the homeowners.” Id. (quotations omitted).
Marick took issue with this charge because it essentially creates strict liability for the developer for all known and unknown defects. However, the Court of Appeals held that “the trial court properly instructed the jury regarding the fiduciary duty a developer owes to an HOA when it controls the HOA. The HOA presented evidence that Marick knew about water infiltration issues, and even attempted to fix them prior to turning the HOA over to the homeowners.” Id. at 7.
There many more parts to discuss with this case, including statute of limitations, amalgamation, set off settlements, remedy elections, and more.