A multimillion-dollar jury verdict over construction defects must be reduced due to an offset error, the South Carolina Court of Appeals has ruled.
The ruling means that Marick Home Builders will pay $1,179,249 instead of the $5,145,812 that the trial court initially ordered, in addition to a settlement amount worth about $1.86 million and a $1 million verdict awarded against Marick’s owner.
The homeowners’ association for Stoneledge at Lake Keowee in Oconee County sued the construction companies that built their townhomes over defects which they say caused serious water damage. The jury ruled in its favor, awarding a $5 million jury award.
The money was awarded cumulatively for three different causes of action: $3 million for negligence, $1 million for a breach of implied warranty, and $1 million for breach of fiduciary duty. The court found that Marick, Bostic Brothers Construction, and Rick Thoennes, who founded Marick, were all responsible for paying the damages due to their roles in creating and not fixing the defects.
Bostic Brothers did the initial work on the development, including most of the work on the exterior of the buildings, starting in 2002, but pulled out due to financial difficulties in 2004. In 2005, Thoennes’ company took over building responsibilities. At that time, a superintendent for Marick noted existing water damage, which led the company to pay a third-party contractor to fix the issue. They said at trial that they believed the issue had been resolved.
Marick eventually sold all of the homes in the development, but in the spring of 2009, the HOA began receiving complaints of leaks and other water damage issues.
As part of the verdict, the jury apportioned 40 percent of fault on the negligence claim and 70 percent of fault on the breach of implied warranty claim to Marick, with Bostic deemed responsible for the remaining portions.
But in a post-trial hearing after the jury had been dismissed, Oconee County Circuit Court Judge Alexander Macaulay ruled that each cause of action merited its own $5 million verdict. Macaulay eventually entered judgment against Marick for $857,635 worth of negligence and $2,144,088 for breach of implied warranty, and against Thoennes for $2,144,088 for breach of fiduciary duty.
Marick argued on appeal that the order was in error because its final entry of judgment didn’t correlate with the jury’s verdict.
Court of Appeals Chief Judge James Lockemy, writing for a unanimous panel, sided with Marick.
“It appears the trial court amended the jury’s verdict to find that each cause of action independently supported a $5 million verdict,” Lockemy said. “In doing so, the trial court invaded the province of the jury … Therefore, we find the jury’s verdict, and its allocation of damages to the three separate causes of action should be reinstated.”
Because entities subcontracting under and working with Marick settled with the HOA prior to trial on the same claims, Lockemy said they were entitled to a setoff.
However, because Thoennes’ fiduciary duty to the HOA resulted from his previous role on the Board of the HOA, and not in his role as founder of Marick, the court refused to set off his liability “because none of the settlement proceeds would have included any amount for damages resulting from a breach of fiduciary duty.”
Thoennes is therefore responsible for a $1 million jury award, subject to claims he might have for contribution from other defendants and HOA board members.
The court then reduced the remaining $4 million verdict to $2,144,088, subtracting the value of the settlements, and allocated three-fourths of this to the negligence cause of action and one-fourth to the breach of implied warranty cause of action.
Under South Carolina law, any defendant whose fault is assessed at less than 50 percent pays the percentage that they are assigned. However, if their fault is deemed to be more than 50 percent, they are on the hook for the entire amount said Stoneledge’s attorney, Robert Lyles Jr. of Charleston.
Marick will therefore be responsible for $643,226 (40 percent of the $1,608,066 apportioned for negligence) and all of the remaining $536,022 for the breach of implied warranty, unless it pursues action for contribution from other defendants.
Lyles said despite the reduction, he’s fairly happy with the court’s decision.
“Obviously, I think the appeal went well. The Court of Appeals made the right decisions about other issues,” he said, referencing a number of issues which the court rejected. “While I take exception to the reapportionment of the jury’s verdict, I’m filing a petition for reconsideration with the court.”
Lyles said he believes Macaulay got it right at trial, citing the judge’s extensive knowledge of the case and its parties, resulting from three years of preparation. Ultimately, he said the appeals court’s decision to separate the damages is disappointing.
“The plaintiffs only had one damage, their damage was the cost to repair the buildings,” he said. “If we establish negligence, the measure of damages is the cost of repair, if we establish breach of warranty, the damage should be the cost of the repair … no matter how we got there, there was only one damage per claim and Macaulay understood that.”
Marick’s attorney, Jason Imhoff of The Ward Law Firm in Spartanburg, did not respond to requests for comment.
In a separate opinion, the court also affirmed that the trial court did not err in denying Bostic’s motion for a directed verdict based on the statute of limitations and in denying its motion for a new trial. However, the Court of Appeals also reversed the trial court’s set-off order for Bostic, making them responsible for $3 million in negligence and $300,000 for its portion of the breach of implied warranty claim.
Follow Matthew Chaney on Twitter @SCLWChaney