COA sends $3.7M homeowners case back to jury

A group of condo owners in western North Carolina will be able to sue the companies that built and developed their condos after the North Carolina Court of Appeals overturned a superior court ruling dismissing the suit on procedural grounds.

The case, which was selected by Lawyers Weekly as one of the top five defense verdicts for 2013, now heads back to the lower court for a potential jury trial. The members of the Trillium Ridge Condominium Association, the owners of the condos, are seeking damages in excess of $3.7 million.

Trillium Ridge, located in Cashiers, near North Carolina’s border with Georgia, was built by Trillium Construction, which operated out of the same office as the condos’ developer, Trillium Links. The homeowners’ association is suing the two companies and their owners for allegedly constructing the condos in a negligent manner.

All of the plaintiffs’ claims were initially dismissed in August 2013. Although the trial judge, Marvin Pope, did not explain the basis for his ruling, the defendants had argued that the lawsuit was filed too late for the courts to hear it. But on Sept. 16, the Court of Appeals unanimously reversed and ruled that a jury should be allowed to decide whether the condo owners brought their suit in a timely enough manner.

A flashing bind

As is typical in condo developments, the developers served as directors of the homeowners’ association until enough of the units had been sold to let the new owners to take over as directors. That occurred in February 2007, and a few months later, the new directors authorized an assessment. The assessor reported that the buildings had defective flashing, which directs water way from seams and joints.

The defendant argued that this report should have put the homeowners on notice, back in 2007, that there were potential problems with the building. But Dustin Greene of Kilpatrick Townsend & Stockton in Winston-Salem, an attorney for the homeowners, said there was no evidence that the assessor suggested to anyone that the flashing problems constituted a construction defect, and that the report provided no notice of problems that had anything to do with the flashing.

As such, the appeals court said that the defendants were entitled to argue a statute of limitations defense before a jury, but that the trial court had been wrong to grant the defendants a dismissal on summary judgment.

The defendants had also argued that the homeowners’ lawsuit was untimely for another reason. In addition to the statute of limitations, which runs for three years and begins once the owners should have been on notice that there was a problem, the defendants argued that the lawsuit was brought outside the state’s six-year statute of repose for negligent construction. (A statute of repose is like a statute of limitation, but is generally enforced more strictly, and begins as soon as construction is completed.)

But the homeowners argued that the defendants shouldn’t be able to rely on that defense because they had “possession or control” over the condo buildings when the damage occurred and retained it until the association was handed over to the new owners in 2007. The Court of Appeals said that a jury should also be allowed to decide when the developer gave up possession and control of the condos.

“The policy behind that exception is that if you are controlling the building, it is essentially your responsibility to fix it,” Greene said. “You can’t sit on it and run the clock out on the statue.”

A money pit

The appeals court found yet another issue for the jury on the question of whether the construction company could, as a matter of fairness, raise either the statute of limitations or the statute of repose as a defense. The homeowners alleged that the construction company actively concealed its defective work, deprived them of the opportunity to discover the defects in a timelier manner and thus delaying their lawsuit. A jury will now be asked to decide whether that was the case, or whether the assessor’s report gave the homeowners enough notice of the problems.

Greene said that the homeowners’ jury demand reflects the amount of money that it took to repair all the problems with the buildings. He said the buildings are now entirely fixed and the plaintiffs are trying to recover the money that’s already been spent. When asked, Greene conceded that the situation bore some likeness to the Tom Hanks movie “The Money Pit,” about a couple who buys a house that quickly begins to fall apart.

“To have these kinds of problems, the extent of this damage that they’ve now discovered, just a few years after buying them, I think many of [the plaintiffs] would compare it to ‘The Money Pit’,” Greene said. “So far as I know, no one has tried to argue that the construction was done properly. What we have seen are a lot of procedural defenses and the defendants essentially blaming each other for their defects.”

Besides Greene, David Smith, also of Kilpatrick Stockton, represented the homeowners. Marc Meister of Asheville represented the construction company. Luke Sbarra of Hedrick Gardner Kincheloe & Garofalo in Charlotte represented the development company and Robert Allen of Northup, McConnell & Sizemore represented the individual developers.

Allen complimented the plaintiffs’ attorneys for their work on the appeal, but said he could not comment further since the defendants planned to file a petition for discretionary review with the state’s Supreme Court.

The 47-page decision is Trillium Ridge Condominium Association, Inc. v. Trillium Links & Village, LLC (Lawyers Weekly No. 14-07-0889). The full text of the opinion is available online at nclawyersweekly.com.

Follow David Donovan on Twitter @NCLWDonovan