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Litchfield Plantation: After 45 years, owners want control of POA
By Charles Swenson
The next time Judge James Lockemy drives through Litchfield Plantation, perhaps for a wedding reception, and someone tells him “this is so serene and calm” he will object. “No it’s not. It’s chaos,” the Appeals Court judge will say.
The attorney for a group of residents this week asked a three-judge Appeals Court panel to end the chaos by sending their lawsuit against the development company back to Circuit Court for trial. The panel will issue a written ruling.
Litchfield Plantation is the oldest property development of its kind in the state, said Michael Seekings, attorney for the residents. Over 45 years it has “a fairly long and tortuous legal history,” he told the court. But in that time “a homeowner has never sat on the board and never had a vote.”
The five residents filed suit in 2011 after they were elected to the board of the Litchfield Plantation Association at a special meeting of property owners. They asked the court to declare that they were the lawful members of the board and that the Litchfield Plantation Co. had lost its right to control the makeup of the association because it failed to live up to its financial obligations. The issue was further complicated by the sale of the undeveloped property to a new owner and by the arrest of the former owner of the development company, Scott Trotter, on charges that he misappropriated promissory notes. (The charges were later dropped, but Trotter filed a libel suit against the association members who brought the charges. That was settled.)
Circuit Court Judge Larry Hyman issued a summary judgement in the case in May 2012, saying the development company could restore its majority voting rights by paying about $150,000 in delinquent obligations to the association. He did not rule on the status of the association board, but he issued a temporary injunction that the plaintiffs not interfere with the developer’s voting rights.
The plaintiffs – Joseph E. Johnston, Thomas Eckard, Carol E. Kirby, Robert F. McMahon Jr. and Thomas M. Phillips – fear that if the developer takes control of the association he will drop another suit that seeks to recover about $800,000 in funds paid from the association to the development company and guaranteed with promissory notes.
The property owners say Hyman was wrong in issuing a summary judgement rather than letting the suit go to trial. At issue are what are known as Class B voting shares. They give the development company 50 percent plus 1 of the votes as long as it sells at least 100 lots in a five-year period. The current period runs out Dec. 21.
“That has created, over the course of 45 years, from Day One, nothing but business for this court. It’s got to end,” Seekings said. Under Hyman’s ruling, the developer can fail to make payments to the association, but then catch up on the past due amounts in order to retain control, he said.
The plaintiffs want the chance to prove at trial that the development company, whose current principal is John Miller, breached its fiduciary responsibilities and no longer has Class B voting rights, Seekings said. Miller and his partners acquired the property after the election of the new association board.
“The judge acted on an interim basis,” Chief Appeals Court Judge James C. Few said. “The rest is disputed.”
But Seekings said the lower court ruled on control of the association. “We have no ability. None,” he said.
Mark Neill, attorney for the Litchfield Plantation Co., said the five plaintiffs want to rewrite the covenants of Litchfield Plantation. “We’re not missing one owner, we’re missing hundreds of owners,” he said.
But the current situation “is chaotic, isn’t it?” Lockemy said. “No one knows who’s going to be in charge.”
The property owners agreed to the covenants, Neill said.
“They agreed to chaos?” Lockemy asked.
The current rules were approved by 100 percent of the property owners, Neill said. “Now they don’t like it,” he said. But the state law doesn’t allow the courts to change a contract, he added.
If the property owners get a ruling that keeps their remedies open in the lower court, “you go home happy?” Few asked.
“Very happy,” Seekings said.
Appeals Court: Judges question county development regulations
If Georgetown County passed an ordinance to provide lifeguards, could it avoid responsibility if they failed to save lives by careful wording of the ordinance? The question was raised by Chief Judge John C. Few of the S.C. Court of Appeals at a hearing this week over the county’s development ordinance.
David Repko, a property owner in the Harmony development outside Georgetown, sued the county in 2012 claiming it was negligent in managing the financial guarantees the developer provided in order to sell lots before starting construction. Circuit Court judge Ben Culbertson issued a directed verdict for the county at a jury trial in 2013 because the ordinance states that accepting a financial guarantee from the developer does not create an obligation on the part of the county.
Infrastructure improvements at Harmony were estimated at $1.3 million. After allowing the developer to draw down letters of credit, there is now $140,000 available. The infrastructure was never completed. The developer went bankrupt and the last lot in the development sold for $500. Repko paid $155,000 for two lots in 2003
State Rep. Stephen Goldfinch, who represented other Harmony property owners with similar claims, represented Repko in appealing Culbertson’s ruling. He said the trial judge erred in deciding that the county ordinance took precedence over state law that governs claims against the government.
“The county has failed miserably,” Goldfinch told a three-judge panel at the Appeals Court.
Few asked him to explain. “Pick your favorite act of negligence,” he said.
The ordinance requires letters of credit equal to 125 percent of the infrastructure cost. The county made several reductions to the letters of credit at Harmony. One was made two days after an engineer submitted an estimate that infrastructure costs had gone up since the start of development, Goldfinch said.
Judges Aphrodite Konduros and James Lockemy focused on who is intended to benefit from the rule. Goldfinch said it is the person who buys property in a development. Robert Widener, an attorney with the McNair Law Firm in Columbia, argued for the county that the rule benefits the general public, not any individual.
Few said if the county placed a responsibility on its employees, they had a duty of “due care” and state law would determine whether that was followed. He questioned how the county could change that through the wording of its ordinance. “To me that’s a troublesome point,” Few said. “County ordinance has pre-empted state law.”
“I disagree,” Widener said.
But even if the standards of the state Tort Claims Act were applied to the Harmony letters of credit, Widener said Repko’s claim wouldn’t stand up. He also argued that issues raised by Goldfinch in the appeal – particularly claims of “gross negligence” – had not been argued at trial, where Repko was represented by Bill Moody. They shouldn’t be considered in the appeal, he said.
“The county clearly didn’t enforce its own ordinance,” Few said. If Goldfinch’s claim about reducing the letters of credit in the face of rising infrastructure costs is true, “that’s just stupid,” he said. “Is that the correct way of looking at it?”
Widener said he wasn’t there to defend the county’s actions. “The ordinance specifically says there’s no obligation” to the property owner, he said.
Goldfinch disputed the claim that gross negligence wasn’t argued at the trial. “I really don’t know where any of this is coming from,” he said. And he believes the county is liable under the Tort Claims Act. “This should have gone to a jury because of the Tort Claims Act,” he said.
The Appeals Court will issue a written ruling.