A Look at Jury Charges, Directed Verdicts, Single Enterprise Theory, Election of Remedies and Setoff

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Addressing the appeal from a construction defect case tried to a verdict, the South Carolina Court of Appeals took the opportunity to examine a number of issues basic to both trial and appellate practice. Stoneledge at Lake Keowee Owners’ Association, Inc., et al v. IMK Development Co., LLC, 2018 WL 4905983 (October 10, 2018).^[i] While the current opinion offers no groundbreaking theories nor does it address any novel issues of law, it offers important advice to practitioners.

A review of selected facts will assist the reader in understanding the court’s conclusions. IMK Development Company (“IMK”) purchased a townhome community, known as Stoneledge, from an entity that began construction and marketing of the units, but was unable to complete the project. Marick Home Builders, LLC (“Marick”) assumed the building responsibilities for completion of the development. Upon arrival on the project, Marick’s site superintendent observed leaks around porches and decks and water damage inside the unfinished units, not related to porches. The superintendent alerted Marick, and Rick Theonnes (“Theonnes”), one of its principals, and a defendant, to the issues observed. After assuming the project, IMK formed a homeowners’ association (“HOA”) originally comprised of IMK representatives, including Thoennes. The HOA Board was turned over to the homeowners roughly three years later.

A year after the homeowners took control of the board, it began receiving complaints of problems from owners, following which it undertook destructive testing that revealed significant damage. The HOA also discovered hidden rot resulting from water intrusion.

In 2010, the HOA filed an action against the original builder and developer Bostic Brothers Construction, Inc. (“Bostic”), IMK, Marick, Theonnes and others. It settled with some defendants, but the case proceeded against Bostic, IMK, Marick and the original IMK controlled board, on causes of action for negligence, breach of implied warranty of workmanlike service, breach of implied warranty of habitability and breach of fiduciary duty. The cause of action for breach of warranty of habitability was dismissed prior to trial.  

At trial, the HOA asked the jury to return a verdict in the amount of $6,309,197 – the full amount required to repair the buildings. The jury returned a verdict in favor of the HOA in the amount of $5,000,000 - $3,000,000 on the negligence cause of action against Marick and Bostic; $1,000,000 on the breach of implied warranty against Marick and Bostic and $1,000,000 against Thoennes and other directors for breach of fiduciary duty. The Defendants filed this appeal asserting several grounds, a few of which are addressed herein.

In its analysis of certain exceptions to the jury charges, the court revisited a few basic concepts. First, a trial court must charge the current and correct law, confined to the issues included in the pleadings and supported by evidence; a jury charge will be considered in light of the evidence and issues offered at trial. Next, in order to preserve an error based upon jury charges, proposed charges must be given to the court and made part of the record, or they must at least be proffered. Those basics notwithstanding, even if the trial court commits error in its charges, there must be prejudice resulting from that error in order to warrant any reversal on appeal. 

This appeal was also based upon the court’s denial of Defendants’ motions for directed verdict. On these issues, the court reminded if there is sufficient evidence to raise a question of fact for the jury to decide, or if there is evidence to support the jury’s verdict, such overcomes a motion for directed verdict. 

The court also examined closing arguments. Apparently, in the course of the trial, Marick questioned the HOA’s expert concerning his testimony in a different case. The expert admitted the content of the previous testimony, which according to Marick, rendered impeachment unnecessary. When addressing the HOA’s expert in closing, the trial court restricted Marick. Appealing from this restriction, Marick made only conclusory statements, quoting discussion between the court and counsel during the closing argument. Rejecting Marick’s assertion, the court found this purported error was not preserved, upon the basis that short, conclusory statements, without supporting authority are deemed abandoned on appeal.

Stoneledge also afforded the court an opportunity to examine the recently adopted single enterprise theory. Reciting a critical holding of Pertuis, the case pursuant to which the theory was formally adopted, the court acknowledged there is nothing nefarious in forming corporations in an effort to shield shareholders from individual liability. Referring to another important conclusion of Pertuis, the court emphasized that amalgamation requires more than the intertwining of the operations of various entities; amalgamation requires evidence of bad faith, abuse or other wrongdoing or injustice resulting from the overlapping of the entities’ legal distinctions.

While the court found no meaningful analysis supporting amalgamation in the underlying case, it independently found evidence of unified operations between Marick and IMK, as well as self-dealing resulting from the blending of those business enterprises. As a result, the court found sufficient evidence to support single business enterprise.

Marick also asserted error in the trial court’s failure to require the HOA to elect remedies. An election of remedies prevents double recovery for a single wrong by requiring a plaintiff to choose between inconsistent remedies allowed by law based upon the same facts. Upon the return of the jury’s verdict, the HOA questioned whether the award was meant to be cumulative. Upon the trial court’s ruling that the damages were cumulative, Marick failed to object, thereby rendering its election of remedies argument unpreserved. 

Finally, the court examined Marick’s argument based upon setoff. It is axiomatic that a prior settlement compensating for the same injury for which damages are awarded gives rise to a setoff, as a matter of law. When a prior settlement represents compensation for an injury different than the one for which a verdict is returned, there is no setoff. If a prior settlement covers two claims, one involving the same injury as the one on which a verdict is returned and one of which does not, the court must allocate the settlement between the claims.

After the return of the verdict, in the amounts referenced above, there was an additional proceeding in which fault was apportioned, following which the jury was dismissed. Thereafter, setoff was addressed, the result of which was the effective amendment of the verdict to find each cause of action independently supported the total verdict. That amendment constituted an invasion the jury’s province, resulting in the reinstatement of the jury’s allocation to the three causes of action.

Again, Stoneledge breaks no new ground and offers no surprising conclusions. Nevertheless, this opinion provides a well-reasoned, approachable analysis of significant trial and appellate issues that practitioners should heed.