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Litchfield Plantation: Developer gets control of POA along with a warning
By Charles Swenson
A year after it was sued by the homeowners association, the developer of Litchfield Plantation is on track to take control of the association board. But a Circuit Court judge warned the developer, Litchfield Plantation Co., he will be watching the fate of a second suit filed earlier this month by the association seeking to recover $734,624 from the development company.
It is the latest twist in a tale of financial collapse and a fight for control of the homeowners association at one of Waccamaw Neck’s oldest planned developments.
Under the covenants of the development, Litchfield Plantation Co. has a one-vote majority in selecting the members of the homeowners association. Until last year, the only members of the association board were two officers of the development company. The homeowners called a special meeting and elected a new board, then asked the court to declare that the company lost its ability to control the association board when it failed to pay its share of the cost of maintaining the amenities.
Judge Larry Hyman ruled in December that the developer’s voting rights were only suspended when it failed to make its payments to the homeowners association. At a hearing last week, he ordered the company to pay $119,148 in past due assessments and $30,833 borrowed from the association in order to get its voting rights restored.
“I’m trying to make sure the homeowners association can continue to operate,” Hyman said. “There are all sorts of other things,” he added. “Things that we are going to have to talk about.”
Robert McMahan, a property owner and attorney for the homeowners association, argued unsuccessfully that there is other money owed to the association that needs to be paid before the developer gets its voting rights back.
Mark Neill, attorney for Litchfield Plantation Co., said those funds aren’t past due, and noted they are the subject of the second suit. “If they get a judgement, we’ll pay it,” he told the court.
Neill disputed the amount of the past due assessments, saying the homeowners association calculated the amount on an accrual basis rather than the cash basis required by the bylaws, resulting in an amount $17,000 greater than what’s due.
McMahan said that created a factual dispute which required testimony, and another appearance before the judge sometime in the future.
“We could spend two years trying to find out what’s in arrears,” Hyman said.
Neill said the company will pay the higher assessment and the loans within 30 days. The company wants to restructure the debt at Litchfield Plantation and the past due amounts are the last hurdle, he told the court.
“It puts us on a solid footing,” Neill said.
McMahan said there are other amounts due.
“Do you want him to send you a ham?” Hyman asked McMahan, noting the company offered to pay what was at issue in the first suit.
McMahan said he fears that when the developer regains control of the homeowners association it will take back the money the judge ordered paid and drop the second lawsuit that seeks to recover a larger loan made to the company.
“You come see me,” Hyman said. “If anything like that happens, I will be extremely upset.”
McMahan suggested the court appoint a receiver, something that the homeowners association asks for in its most recent suit.
“The receiver ends up with all the money,” Hyman said.
Still to be decided from the initial suit is the status of the homeowners association board. The issue was further complicated when control of Litchfield Plantation Co. changed last year from a buyout group set up by Scott Trotter to a group of investors led by John Miller. Members of the homeowners association filed criminal charges against Trotter alleging he stole over $900,000 in promissory notes guaranteeing loans from the homeowners association to the development company.
Trotter has challenged the meeting of the homeowners association in which he was ousted as its president. The current owners of Litchfield Plantation Co. also contend that the meeting violated the bylaws of the homeowners association.
Hyman last week denied motions from each side for a summary judgement on the election noting “a substantial issue of fact” is in dispute.
He did grant a motion from Robert Shelton, the lawyer who represents Trotter in the homeowners suit, asking that the promissory notes that are the subject of the civil and criminal actions be turned over to the clerk of court until the ownership is decided.
“Mr. Trotter is seeking to safeguard them,” Shelton said.
McMahan asked that the notes be turned over to the association. “There’s no dispute. They were taken from our homeowners association,” he said.
“There is a great dispute over who owns them,” Shelton said.
“They’re trying to get an advantage over the solicitor’s office,” McMahan said.
The criminal case has not been presented to the grand jury, Billy Monckton, who represents Trotter in the criminal case, said after the hearing. He told the court Trotter just wants to make sure the notes in question are safe.
McMahan said the homeowners don’t want there to be any implication that Trotter owns the notes.
“It’s just semantics,” Hyman said. “We’re not saying anyone owns it.”
Athough no hearing has been set in the second suit, the issues it raises were brought up in last week’s hearing on other issues.
McMahan said Litchfield Plantation Co. collected money for homeowners association assessments from the buyers of 101 lots, but failed to turn the money over to the association’s capital account as required.
“We believe they collected the money and spent it,” McMahan said.
Hyman asked why the association didn’t try to collect the money from the buyer.
“We can’t get the money from the owners, they’ve already paid it,” McMahan said.
He also said the association took title to the community beach house on Pawleys Island from Litchfield Plantation Co. State law requires amenities deeded to an association to be in good repair, but the beach house was not, McMahan said.
No money was ever paid to put it right.
Neill pointed out that the capital contributions and the beach house are the subject of the second suit.
“It will work out eventually,” Hyman said. “We can revisit that.”
Neill said afterward he was pleased with the ruling. Joe Johnston, the association president, declined to comment.
This week, the association board sent an e-mail to members saying it was “shocked and dismayed” by Hyman’s rulings and may appeal.