The Riverwalk at Arrowhead Country Club and Magnolia North Horizontal Property Regime developments were constructed between 1997 and 2000. After construction was complete and the units were sold, the purchasers became aware of significant construction problems, including building code violations, structural deficiencies, and significant water-intrusion problems. In 2003, the purchasers filed suit to recover damages for necessary repairs to their homes. Lawsuits were filed by the respective property owners' associations (POAs), which sought actual and punitive damages for the extensive construction defects under theories of negligent construction, breach of fiduciary duty, and breach of warranty. As to the Riverwalk development, individual homeowners also filed a class action to recover damages for the loss of use of their property during the repair period. The defendants in the underlying suits were the related corporate entities that developed and constructed the condominium complexes: Heritage Communities, Inc. (the parent development company), Heritage Magnolia North, Inc. and Heritage Riverwalk, Inc. (the project-specific subsidiary companies for each separate development), and Buildstar Corporation (the general contracting subsidiary that oversaw construction of all Heritage development projects), referred to collectively as "Heritage." The issues presented to the Supreme Court by these cases came from cross-appeals of declaratory judgment actions to determine coverage under Commercial General Liability (CGL) insurance policies issued by Harleysville Group Insurance. The cases arose from separate actions, but were addressed in a single opinion because they involved virtually identical issues regarding insurance coverage for damages. The Special Referee found coverage under the policies was triggered and calculated Harleysville's pro rata portion of the progressive damages based on its time on the risk. After review of the arguments on appeal, the Supreme Court affirmed the findings of the Special Referee in the Magnolia North matter, and affirmed as modified in the Riverwalk matter. View "Harleysville Group Ins. v. Heritage Communities, Inc." on Justia Law
Posted in: Construction Law, Contracts, Insurance Law, Real Estate & Property Law, South Carolina Supreme Court
In August 2005, D.R. Horton, Inc. completed construction of the Smiths' home, and the Smiths closed on the property and received the deed. Thereafter, the Smiths experienced a myriad of problems with the home that resulted in severe water damage to the property. D.R. Horton attempted to repair the alleged construction defects on "numerous occasions" during the next five years, but was ultimately unsuccessful. In 2010, the Smiths filed a construction defect case against D.R. Horton and seven subcontractors. In response, D.R. Horton filed a motion to compel arbitration. The Smiths opposed the motion, arguing, inter alia, that the arbitration agreement was unconscionable and therefore unenforceable. The circuit court denied D.R. Horton's motion to compel arbitration, finding that the arbitration agreement was unconscionable. D.R. Horton appealed, but finding no error in the circuit court's decision, the South Carolina Supreme Court affirmed. View "Smith v. D.R. Horton, Inc" on Justia Law
Posted in: Arbitration & Mediation, Construction Law, Contracts, Real Estate & Property Law, South Carolina Supreme Court
The issue before the Supreme Court centered on the grant of summary judgment in favor of Respondent Action Concrete Contractors, Inc. in a mechanic's lien foreclosure action. Owners Elvira Chappelear, Craig Chappelear, Premier Southern Homes, LLC, Henry G. Beal, Jr. and First Citizens Bank and Trust Co., Inc. argued on appeal there were material issues of fact and that the grant of summary judgment was inappropriate. The Supreme Court disagreed after its review of the trial court record and affirmed. View "Action Concrete v. Chappelear" on Justia Law
The Supreme Court granted certiorari to review the court of appeals decision affirming the circuit court's order that upheld an arbitration award. The underlying dispute arose from a construction contract whereby general contractor respondent C-Sculptures, LLC agreed to build a home for Petitioners Gregory and Kerry Brown. The contract price was in excess of $800,000. However, Respondent only possessed what is referred to as a Group II license, limiting Respondent to construction projects that did not exceed $100,000. A dispute arose between the parties, and Respondent filed an action in circuit court seeking to enforce a mechanic's lien against Petitioners. Upon Petitioners' motion and pursuant to an arbitration clause in the parties' contract, the circuit court matter was stayed pending arbitration. Petitioners sought to have the matter dismissed after they learned Respondent held only a Group II license. The arbitrator was apprised of the applicable law, but nevertheless denied Petitioners' motion to dismiss "after due consideration of all the evidence and authorities presented by the parties in this Arbitration." Respondent prevailed at arbitration, receiving an award of damages and an award of attorney's fees as the prevailing party pursuant to S.C. Code Ann. section 29-5-10(b) (Supp. 2012). Petitioners challenged the arbitration award, contending the arbitrator's denial of their motion to dismiss amounted to a manifest disregard of the law. Following adverse decisions in the circuit court and the court of appeals, the Supreme Court granted a writ of certiorari. Petitioners argue the court of appeals erred in refusing to find the arbitrator manifestly disregarded the law in declining to dismiss the action. Upon review, the Court agreed, and reversed the appellate court and directed that judgment be entered for Petitioners. View "C-Sculptures v. Brown" on Justia Law
This case presented a "novel" question of whether a member of a limited liability company could be held personally liable for torts committed while acting in furtherance of the company's business. Carl R. Aten, Jr., and his wife are the only members of R. Design Construction Co., LLC. In this particular case, R. Design selected a lot in Beaufort, South Carolina, on which it planned to build a four-unit condominium project. When Aten could not secure the necessary financing, he approached Dennis Green about entering into a contract for R. Design to construct the building. Green ultimately formed 16 Jade Street, LLC for this purpose, and R. Design entered into an agreement with Jade Street for the construction of the condominium. One of the subcontractors selected by R. Design was Catterson & Sons Construction. Michael Catterson is the sole shareholder of Catterson & Sons, and he is a specialty subcontractor with a special license for framing in addition to holding his general contractor's license. As the general contractor, it was Aten's job to supervise the project. A couple months into construction, problems arose concerning the AAC block construction and the framing. Following a progress payment dispute, Catterson & Sons left the job site and did not return. In the ensuing months, Aten's relationship with Green deteriorated as Aten tarried in fixing the defects, and the construction eventually ground to a halt. R. Design subsequently left the project, never replacing Catterson & Sons nor adequately addressing the defects. The day after R. Design left the project, Kern-Coleman conducted another inspection of the property. This time, it identified thirty-four defects in addition to the original four, which had not yet been remedied, for a total of thirty-eight. Anchor Construction was retained as the new general contractor, and its own inspection revealed sixty defects in the original construction. After Anchor began working on the project, more defects surfaced. Jade Street subsequently sued R. Design, Aten, Catterson & Sons, and Catterson for negligence and breach of implied warranties. As to Aten personally, the circuit court concluded that despite the fact he was a member of an LLC, he was personally liable because he held a residential home builder's license. In particular, the court concluded the statutes pertaining to the license create civil liability for the licensee. The court imposed no liability against Catterson himself. The court ultimately awarded Jade Street damages for its claims. Upon review, the Supreme Court concluded that the General Assembly did not intend the LLC act to shield a member from liability for his own torts. Accordingly, the Court affirmed the circuit court's holding that Aten was personally liable for his negligence, and that Catterson was not personally liable for the acts of Catterson & Sons. View "16 Jade Street v. R. Design Construction" on Justia Law
Appellant/Respondent Harleysville Mutual Insurance Company ("Harleysville") issued a series of standard CGL policies to the Respondent developers or their predecessors (collectively "Crossmann") for a series of condominium projects in the Myrtle Beach area of South Carolina. The exterior components of the condominium projects were negligently constructed, which resulted in water penetration and progressive damage to otherwise nondefective components of the projects. The homeowners settled their lawsuits against Respondents. Crossmann then filed this declaratory judgment action to determine coverage under Harleysville's policies. Upon review of the lower court’s order, the Supreme Court reversed a finding of joint and several liability against the developers and its insurer, and found the scope of Harleysville's liability was limited to damages accrued during its "time on the risk." In so ruling, the Court adhered to its holding in “Joe Harden Builders, Inc. v. Aetna Casualty & Surety Co.”: “[u]sing our ‘time on risk’ framework, the allocation of the damage award against Crossmann must conform to the actual distribution of property damage across the progressive damage period. Where proof of the actual property damage distribution is not available, the allocation formula adopted herein will serve as an appropriate default method for dividing the loss among Crossmann's insurers.’ The Court remanded the case to the trial court for further consideration of the "time on risk" allocation. View "Crossmann Communities v. Harleysville Mutual" on Justia Law
In May 2002, Respondent Eagle Windows & Doors, Inc.’s predecessor purchased Eagle & Taylor Company’s assets (Eagle I) from Eagle I's bankruptcy estate. In 2000, homeowners constructed a residence using defective windows manufactured by Eagle I. In 2006, homeowners settled their construction claims against the Appellant contractor. The contractor and its insurer (Appellants) then brought this contribution suit against Respondent as successor to Eagle I. The circuit court granted respondent's motion to dismiss, holding (1) dismissal was required under Rule 12(b)(6) because a bankruptcy order expressly precluded any state law successor liability actions since the sale was "free and clear" under 11 U.S.C. 363(f) of the Bankruptcy Code; and (2) that dismissal was proper under Rule 12(b)(1) of the state rules of civil procedure because the bankruptcy court in Ohio which issued the Eagle I order retained jurisdiction over any claims against respondent for successor liability. Upon review, the Supreme Court found that Appellants' claim did not arise under either the settlement agreement or the order, nor did their claim relate to Eagle I. Rather, it was predicated upon Respondent's post-sale conduct which, Appellants contended, exposed it to successor liability under South Carolina state law. The Supreme Court concluded the court erred in dismissing this suit, and remanded the case for further proceedings. View "Nationwide Mutual v. Eagle Windows" on Justia Law
Appellant Don Phillips was the sole shareholder and officer in Crystal Lake Land Developers, Inc.(CLLD). In 1979, CLLD began developing Crystal Pines, and deeded all the roads in Crystal Pines to the Crystal Lake Road Company. In the mid 1980s, the Road Company operated as a simple homeowners association, but eventually changed its name to Crystal Pines Homeowners Association (HOA). CLLD attempted to execute a second deed to reflect the change of the Road Companyâs name to the HOA. The second deed stated that the HOA would be responsible for fixing the roads in Crystal Pines. In 1980, CLLD constructed a boat ramp that many of the homeowners used regularly. In 2004, CLLD gated and locked the boat ramp, and later conveyed title of the ramp to his son. The son then transferred title of the ramp to the Crystal Pines Yacht Club, which continued to keep the ramp locked from the residents. The HOA filed suit against Phillips, CLLD and the Yacht Club over who was responsible for maintaining Crystal Pinesâ roads, and for access to the boat ramp. The master-in-equity ruled in favor of the HOA, and Phillips, CLLD and the Yacht Club appealed. The Supreme Court found the deed in question unambiguous pertaining to who was responsible for fixing the roads. The Court found that CLLD and Phillips are not responsible for maintaining all of Crystal Pinesâ roads, only those roads they damage as a result of their development efforts. However, the Court found the mater did not err in finding that the HOA had established a prescriptive easement in its use of the boat ramp. The Court affirmed part and reversed part of the lower courtâs decision, and remanded the case for further proceedings on that which it reversed.
Gregory and Kerry Brown appealed the circuit court's confirmation of an arbitration award that was granted to their former general contractor C-Sculptures. C-Sculptures built the Browns' house. The Browns claimed C-Sculptures was precluded from enforcing a contract between them because the contractor's license limited the contractor to work totaling $100,000. C-Sculptures' final invoice totaled over $800,000, and when the Browns refused to pay, the contractor placed a lien on their property for the unpaid amount. The arbitrator awarded C-Sculptures the money it was owed, and the Browns appealed the arbitrator's award to the circuit court, arguing that the statutory limit on the contractor's license limited payment to $100,000. On review, the Supreme Court found that the arbitrator followed the statutory scheme to make his determination in favor of the contractor. Accordingly, the Court affirmed the lower court's confirmation of the arbitrator's award.