Trillium Ridge Condo. Ass'n, Inc. v. Trillium Links & Vill., LLC

• Decision Date: 16 September 2014
• Docket Number: No. COA14–183.,COA14–183.
• Court: North Carolina Court of Appeals
• Parties: TRILLIUM RIDGE CONDOMINIUM ASSOCIATION, INC., Plaintiff v. TRILLIUM LINKS & VILLAGE, LLC; Trillium Construction Company LLC; Shamburger Design Studio, P.C., Shamburger Design, Inc. (fka Shamburger Design Studio, Inc.), S.C. Culbreth Jr., Gregory A. Ward, Defendants.

236 N.C.App. 478

764 S.E.2d 203

TRILLIUM RIDGE CONDOMINIUM ASSOCIATION, INC., Plaintiff

v.TRILLIUM LINKS & VILLAGE, LLC; Trillium Construction Company LLC; Shamburger Design Studio, P.C., Shamburger Design, Inc. (fka Shamburger Design Studio, Inc.), S.C. Culbreth Jr., Gregory A. Ward, Defendants.

No. COA14–183.

Court of Appeals of North Carolina.

Sept. 16, 2014.

Kilpatrick Townsend & Stockton LLP, Winston–Salem, by Dustin T. Greene, David C. Smith, and Richard D. Dietz, for Plaintiff.

Hedrick Gardner Kincheloe & Garofalo, LLP, Charlotte, by Luke Sbarra, for Defendant Trillium Links & Village, LLC.

Marc J. Meister, PLLC, by Marc J. Meister, for Defendant Trillium Construction Company, LLC.

Northup, McConnell & Sizemore, P.L.L.C., Asheville, by Robert E. Allen, for Defendants Ward and Culbreth.

ERVIN, Judge.

Plaintiff Trillium Ridge Condominium Association, Inc., appeals from orders and amended orders granting summary judgment in favor of Defendants Trillium Construction Company, LLC; Trillium Links & Village, LLC; and S.C. Culbreth, Jr., and Gregory A. Ward. On appeal, Plaintiff argues that Defendants' motions for summary judgment should have been denied for the following reasons: (1) Trillium Construction's motion for summary judgment was filed in an untimely manner; (2) Plaintiff's claims are not time-barred; (3) Mr. Culbreth and Mr. Ward breached the fiduciary duty that they owed to Plaintiff; (4) Trillium Links breached the fiduciary duties that it owed to Plaintiff; (5) Trillium Construction and Trillium Links constructed the condominiums in a negligent manner; (6) Trillium Links is liable for breach of warranty; (7) claims based on defects in buildings 100 and 200 are not barred by the applicable statute of repose; (8) summary judgment based on contributory negligence was improper; and (9) Trillium Construction's failure to mitigate its damages does not support an award of summary judgment.¹ After careful consideration of Plaintiff's challenges to the trial court's orders in light of the record and the applicable law, we conclude that the trial court's orders and amended orders should be affirmed in part and reversed in part and that this case should be remanded to the Jackson County Superior Court for further proceedings not inconsistent with this opinion.

I. Factual Background

A. Substantive Facts

The Trillium Development is a private residential, lake, and golf community located in Cashiers. The Trillium Development was founded in 1996 and consists of approximately 270 private residences, including homes, townhouses, and condominiums. Trillium Ridge Condominiums, the subject of this appeal, is one of several condominium complexes located in the Trillium Development. The Trillium Ridge Condominiums consist of 22 individual units contained in six buildings identified as Building Nos. 100, 200, 300, 400, 500, and 600 and multiple common elements. The Trillium Ridge Condominiums were constructed in two phases, with Building Nos. 100 and 200 having been constructed during the first phase and Buildings Nos. 300 through 600 having been constructed during the second phase.

Trillium Links, the developer of Trillium Ridge, filed a Declaration for the Trillium Ridge Condominiums on 12 February 2004. Trillium Links was owned and controlled by Mr. Culbreth and Mr. Ward along with two other individuals, Dan Rice and Morris Hatalsky.² During the period of construction, Mr. Culbreth and Mr. Ward held the principal ownership interests in Trillium Links. The Declaration allowed Trillium Links, as developer-declarant, the right to appoint officers to Plaintiff's executive board. As a result, Trillium Links appointed Mr. Culbreth and Mr. Ward to serve as Plaintiff's sole initial officers and directors, and they continued to act in that capacity until Trillium Links turned control of Plaintiff over to the unit owners on 24 February 2007.

Trillium Construction was solely owned by Mr. Rice, who also owned a minority interest in Trillium Links.³ Trillium Links and Trillium Construction operated out of the same offices and used the same mailing address, phone number, and website. In 2003, Trillium Links hired Trillium Construction to serve as the general contractor for the construction of the Trillium Ridge Condominiums. Although Trillium Links and Trillium Construction executed a contract providing for the construction of each building, the contract documents have not been located and are presumed to have been destroyed as a result of water damage.

In October 2004, a report from Structural Integrity Engineering, P.A., was delivered to Trillium Construction and to Mr. Culbreth and Mr. Ward individually. According to the Structural Integrity report, a failure to install two foundation piers in Building No. 100 had resulted in a sagging floor. Although Structural Integrity confirmed that these piers were replaced in 2005, it noted that its report "should not be construed as an implication that there are no deficiencies or defects at other locations in this structure."

On 24 February 2007, Trillium Links turned over control of Plaintiff to the unit owners. No information regarding the foundation problems in Building No. 100 or the Structural Integrity report was disclosed to the new board. After control had been transferred to the unit owners, Plaintiff decided to study future maintenance requirements and commissioned Miller+Dodson to perform a reserve study for the condominiums. According to the Miller+Dodson report, the condominiums' wooden siding had a shorter remaining economic life than Plaintiff had anticipated given the type of siding that had been installed.

After receiving the Miller+Dodson report, Plaintiff asked Freddie Boan, the Association's secretary and a Trillium Links employee, to retain an expert for the purpose of providing a second opinion concerning the expected useful life of the wooden siding. As a result, Mr. Boan hired Andy Lee, a professor of forest products at Clemson University, to inspect the siding. On 5 November 2007, Professor Lee delivered a report to Plaintiff in which he discussed certain siding-related issues, including the fact that "some metal flashings are either too narrow or missing, which require immediate corrections." In addition, Professor Lee noted that, at many locations, the bottoms of the siding pieces either touched or were too close to the ground and recommended that this problem be corrected. Finally, Professor Lee concluded that, if the problems were corrected, the wood sidings should last "thirty (30) years or longer."

According to Mr. Boan, all of the members of Plaintiff's board received the Lee Report and were made aware of the flashing defects. Upon receiving the Lee Report, James Tenney, who had been elected to the board after control of the development had been transferred to Plaintiff, talked about the situation with Mr. Boan. After discussing the available options with Professor Lee, Mr. Boan decided that the existing problems could be remedied by continuously caulking over the problematic flashings. In addition, Mr. Boan reached the conclusion that Plaintiff did not need to procure additional inspections of the buildings. As a result, Plaintiff had the problematic flashings caulked over "either prior to or at the time we did the painting in March of 2008."

In approximately October 2010, leaks were discovered in Building Nos. 100 and 300. Upon further investigation, extensive water damage and rotting was discovered. The similarity between the leaks in the two buildings led Mr. Boan to advise Mr. Tenney that the problem might not be a localized one. As a result, Mr. Tenney hired an engineer to inspect the property. On 19 October 2010, Sydney E. Chipman, P.E., submitted a report detailing his findings concerning the condition of Building No. 100. In his report, Mr. Chipman indicated that "[i]mproper flashing details at the doors, windows, and horizontal transitions" had caused serious water damage and that these defects were "probably endemic throughout the community." Subsequent inspections disclosed the existence of numerous defects in the original construction of the condominium buildings.

B. Procedural History

On 3 August 2011, Plaintiff filed a complaint against Trillium Links; Trillium Construction; Mr. Culbreth; Mr. Ward; Shamburger Design Studio, P.C.; and Shamburger Design, Inc.⁴ In its complaint, Plaintiff asserted claims for breach of warranty against Trillium Links; negligent construction against Trillium Links, Trillium Construction, and the Shamburger Defendants; gross negligence against Trillium Links; and breach of fiduciary duty against Mr. Culbreth, Mr. Ward, and Trillium Links. On 6 October 2011, 10 October 2011, and 12 December 2011, respectively, Mr. Culbreth and Mr. Ward, Trillium Links, and Trillium Construction filed answers in which they denied the material allegations of Plaintiff's complaint and asserted various affirmative defenses.

On 9 October 2012, Trillium Construction filed a motion seeking partial summary judgment in its favor with respect to all negligent construction claims relating to Building Nos. 100 and 200. On 18 January 2013, Trillium Construction withdrew its partial summary judgment motion based upon the expectation that the Chief Justice would designate this case as exceptional pursuant to Rule 2.1 of the General Rules of Practice. On 8 March 2013, the Chief Justice designated this case as exceptional and transferred responsibility for it to the trial court.

On 1 July 2013, Mr. Culbreth and Mr. Ward filed motions for summary judgment, or in the alternative, partial summary judgment. On 22 July 2013, Trillium Links filed a motion for summary judgment. On 9 August 2013, Trillium Construction filed a revised motion for summary judgment. On 14 August 2013, Plaintiff filed materials in opposition to these summary judgment motions. On 16 August 2013, Plaintiff filed a response to Trillium Construction's summary judgment motion.

The pending ...