One of S.C.’s largest construction verdicts in local condo conversion trial

  • Friday, June 20, 2014

Attorneys at Young Clement Rivers LLP, led by Edward D. Buckley Jr., chair of the firm's Construction Law Practice Group, along with lead counsel Justin O'Toole Lucey from Justin O'Toole Lucey, P.A., together represented the Plaintiff, East Bridge Lofts Property Owners Association, Inc., in a week-and-a-half-long trial that ended in what is perhaps the largest residential construction verdict ever in South Carolina. The case involved a condo conversion project in Mount Pleasant, South Carolina by local developers who teamed with a Texas development company to convert 200 existing apartments to condominiums. The jury found that the Plaintiff was entitled to compensation for actual damages in the amount of $22,000,000. The jury also found that the three defendants further owed $33,000,000 each in punitive damages. The jury determined that the plaintiff suffered a loss of money or property as a result of unfair or deceptive acts or practices of the defendants in violation of the South Carolina Unfair Trade Practices Act. The plaintiff's attorneys' fees, recoverable under the South Carolina Unfair Trade Practices Act, will be determined by the trial judge at a later date.

The evidence at trial established that the developer, its contractor and subcontractors ignored numerous issues during the conversion process, including widespread roof leaks, draft stopping and fire blocking, deteriorated wood on the buildings' exteriors, and major structural issues related to the decks, balconies and walkways. Testimony from several subcontractors during the trial established that the developer and general contractor actually used “Bondo” to conceal damage to the structural wooden columns.

The defendants' experts reported structural life-safety issues to the developer more than a year prior to the filing of this lawsuit, but that life-safety warning, issued by a licensed South Carolina engineer, was not provided to the East Bridge Property Owners Association until nearly a year later.

The Texas developer and its general contractor were owned and controlled by the same persons, and in a transparent effort to shield the assets of their existing companies, they formed a shell corporation in South Carolina to serve as the general contractor for the conversion renovations. They represented to the State of South Carolina Department of Labor, Licensing and Regulation that the newly formed company had $250,000 in assets, the minimum required to obtain an “unlimited” general contracting license. In reality, the $250,000 in the shell company's bank account was actually a loan from another of the developer's companies. Thus, the shell corporation had a $250,000 liability, and a negative net worth, while it represented to the State of South Carolina that it had a requisite $250,000 net worth needed to obtain the unlimited license it utilized to perform more than $6,000,000 in repairs and renovations during the conversion process.

The developers also violated the South Carolina Condominium Conversion statute pertaining to conversion of rental units to condominium ownership. State law requires a condominium converter to provide each prospective purchaser a written evaluation of the physical condition of the property. That report must be prepared by a licensed South Carolina architect or engineer. The developers at East Bridge used a property condition report prepared by an unlicensed inspector from Georgia.

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