Roundtree Villas Ass'n, Inc. v. 4701 Kings Corp.
| Citation | 282 S.C. 415,321 S.E.2d 46 |
| Decision Date | 04 April 1984 |
| Docket Number | No. 22153,22153 |
| Court | South Carolina Supreme Court |
| Parties | ROUNDTREE VILLAS ASSOCIATION, INC., Plaintiff-Respondent, v. 4701 KINGS CORPORATION, Roundtree Corporation, Inc., Miles and Teal Builders, Inc., J.B. Miles, James B. Teal, Republic Mortgage Investors, Mortgage Investments Services, Inc., and Fred B. Hallmark, Defendants, Of Whom Republic Mortgage Investors and Mortgage Investment Services, Inc., are Defendants-Appellants. Appeal of REPUBLIC MORTGAGE INVESTORS and Mortgage Investment Services, Inc. . Heard |
John R. Clarke, North Myrtle Beach, for plaintiff-respondent.
Larry D. Estridge, Greenville, for defendants-appellants Republic Mortgage Investors and Mortgage Investment Services, Inc.
William A. Bryan, Lake City, for defendant James R. Teal.
J. Frank Looper, Florence, for defendants Miles and Teal Builders, Inc. and J.B. Miles.
The Plaintiff-Respondent, Roundtree Villas Association, Inc., brought this action to recover damages against six Defendants, all of whom were involved in various ways in the construction, development, and sale of a condominium complex in Horry County. It is not a class action. A jury rendered a general verdict against two of the Defendants and they appeal. We reverse and remand for a new trial.
Identification of the parties Plaintiff and Defendants is necessary to an understanding of the issues.
Plaintiff-Respondent, Roundtree Villas Association, Inc., is a nonprofit South Carolina Corporation whose primary function is to own and administer the common elements of the condominium project called "Roundtree Villas." We will refer to this litigant as the Regime.
Defendant, Roundtree Corporation, Inc., was the original owner of a parcel of real estate which filed a deed under the Horizontal Property Act Chapter 31, Section 27-31-10 et seq. of the South Carolina Code. We will refer to it as the Builder.
Defendant-Appellant, Republic Mortgage Investment Services, Inc., was the financier of the project. It made a construction loan to the Builder. We will refer to it as the Lender.
Defendant-Appellant, Mortgage Investment Services, Inc., is an advisory service employed by the Lender. We will refer to it as the Lender's Advisor.
Defendant, Fred B. Hallmark, was an architect employed by the Builder with the approval of the Lender. We will refer to him as the Architect.
Defendants, Miles and Teal Builders, J.B. Miles and James R. Teal, were general contractors for the project. We will refer to them as the Contractors.
Defendant, 4701 Kings Corporation, was a company created at the instigation of the Lender to accept title to the mortgaged property in lieu of foreclosure. It undertook to sell twenty-five (of the thirty-seven) units which had not been sold when the Builder defaulted. We will refer to it as the Seller.
The Regime alleged four causes of action in its amended complaint:
(1) That the several Defendants including the Lender and the Lender's Advisor "... negligently, carelessly, recklessly and in a manner which fails to meet the minimum standard of care of developers, general contractors, architect, sellers and financial institutions performing services such as were required of them concerning the agreement as referred to hereinabove ..." committed several specified acts in the construction of the project;
(2) That the Lender, Lender's Advisor, and the Seller were negligent and reckless in certain particulars when they undertook to correct deficiencies in the construction to promote sales of the remaining units;
(3) That the Lender and the Seller breached implied and express warranties that the condominium units were fit and habitable for the purpose intended; and
(4) That the Lender and the Contractor breached an express warranty.
The defective construction for which recovery is sought as stated in the complaint is for "... repairs and/or replacement regarding the roofs and the balconies, and in regard to repairs and/or replacements which have already been made or which will in the future be made regarding interior damage to said units." The Regime sought a general verdict for actual and punitive damages.
The Builder and Architect defaulted. The Contractors were exonerated by the judge as a matter of law. The jury exonerated the Seller. The jury rendered a general verdict for actual damages only without any indication as to which cause or causes of action were proved. This verdict was against only the Lender and the Lender's Advisor in the amount of $300,000 actual damages. These two defending parties are the Appellants.
The litigation is typical of many actions growing out of the depressed economy of the mid 1970's. In recent years, it has not been unusual for substantial construction undertakings to meet with financial disaster. Traditionally, as here, those parties most responsible for substantial loses cannot respond to a judgment and, accordingly, aggrieved parties seek a "deep pocket." Attempting to solve the complex issues of fact and of law is somewhat like attempting to unscramble an egg. The court strives to do justice which oftentimes must be only approximate. When justice cannot be meted out exactly, we do that which is next best--try to bring an end to the dispute.
In early 1973, the Lender, in keeping with its note and mortgage, periodically supplied funds to the Builder for construction of four separate buildings housing a total of thirty-seven condominium units. The project was completed in 1974.
The transaction involved a typical construction loan. The Lender monitored the construction project to protect its loan investment and to be assured that it was built according to plans and specifications. The Lender required the Builder to employ an engineer to inspect the project periodically and submit a written certification confirming that it had reached certain stages of completion so that the Builder could qualify for advances of proceeds from the construction loan.
Unfortunately, the project was completed at a time when money was short and real estate simply was not moving. The Builder rented some of the units but did not sell any for almost two and one-half years. In late 1976, the Lender and the Lender's Advisor became involved in trying to market the units. It was then that they learned of structural defaults in the roofs.
In early 1977, the Builder sold twelve of the thirty-seven units. As each was sold, the Lender received payment on the mortgage and in turn released the sold units from its lien. The Builder, to prevent foreclosure, deeded the remaining twenty- five units to the Seller, 4701 Kings Corporation, which had been incorporated by the Lender. This new entity took title to not only the twenty-five units but also to the rights and common elements of the condominium project. In addition, it assumed the obligation owed by the Builder to the Lender.
At the same time, the Lender, holding a note and mortgage for almost $1,000,000, needed to do whatever it could to salvage a bad investment. 4701 Kings Corporation, Seller, was formed with nominal assets to accept title to the property subject to the mortgage and to sell the remaining units. As sales were closed, the purchase money was delivered to the Lender which in turn released the property from its mortgage lien.
The Lender about this time began to receive numerous complaints from owners of units concerning the roofs and balconies. It was to the advantage of the Lender to pacify the persons who then owned the units to create a good image and promote sales of the remaining units. Only the Lender had money of consequence tied up in this project and it was obviously calling the signals for all persons involved. To make the units more sellable, the Lender sent agents to the project to inspect the premises and employed various companies and individuals to make repairs to the roofs, to some of the balconies, and, perhaps, other items. One roofing expert recommended a plan calling for what amounted to the replacement of the four roofs. The Lender and the Lender's Advisor refused to adopt this plan because of excessive cost, approximately $110,000 to $120,000. Instead, they developed an alternate program of...
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