APRIL 17, 2006 - VOL. 9 NO. 16
14 TD 9th 4
SETTLEMENT - APARTMENT COMPLEX BUYER SUES GENERAL CONTRACTOR FOR
CONSTRUCTION DEFECTS AND RESULTING DAMAGE
Defective Workmanship/Latent Defects
Contra Costa County Superior Court
Cedar Grove Apartments v. Crow Canyon Developers, Ltd., et al. Contra Costa
County Superior Court Action No. MSC04-00712 Trial Judge: Terence Bruiniers Jury
Trial Date/Settlement Date: April 3, 2006
SETTLEMENT RESULT ON FIRST DAY OF TRIAL: $12,500,000.00
Plaintiff: Jeffery L. Borsuk, Borsuk & Associates, Walnut Creek. Edward
D. Barron, Borsuk & Associates, Walnut Creek.
General Contractor: David Strong, Branson, Brinkop, Griffith & Strong,
LLP, Redwood City. Defendant
Lexington Insurance Company: R. Gregory Amundson, Wood Smith Henning &
Berman LLP, Costa Mesa.
According to Plaintiff: The buyers of an apartment complex, who at the time
of sale took an assignment of all contractual indemnity rights, warranties and
guarantees from the seller/developer as to the general contracting entities,
claimed that the general contracting entities failed to properly construct the
project pursuant to the project plans and specifications, and applicable
building codes, resulting in substantial construction defects and resulting
damages. The plaintiff was Cedar Grove Apartments, a California Limited
Partnership, dba Promontory View. The defendants were Birtcher Construction,
Limited, the general contracting entity, and Lexington in Intervention, its
Plaintiff alleged that the construction defects resulted in deterioration of key
building components, and permitted substantial water intrusion to occur at the
306 unit apartment complex, requiring removal of all tenants during repairs from
each of the 12 buildings in order to effectuate all necessary repairs, over an
estimated 2 year remediation schedule. Repairs included but were not limited to,
removal of all exterior siding, removal and reflashing of all windows, removal
and reconstruction of all exterior balconies and decks, complete removal and
replacement of all exterior walkways and breezeways, and re-siding of each
building following completion of repairs to assure a watertight assembly.
Plaintiff sued defendants for breach of contract, breach of warranty,
negligence, and promissory estoppel. Following extensive destructive testing by
both the plaintiff and the defendants, plaintiff produced a repair scope and
estimate in excess of $10.3 million dollars, along with a projected business
interruption loss for the removal of tenants during the remediation process, in
an amount in excess of $5,000,000.00. The damage analysis and repair proposal
was prepared by plaintiff's expert, Timothy Stokes, of Richard Avelar &
Associates. Plaintiff established that the various general contractor and
subcontracting entities were responsible for improper flashing and waterproofing
of exterior walkways and breezeways, exterior balconies and decks, and all
window assemblies, which resulted in deteriorated siding, walkways, decks and
balconies, all of which permitted water intrusion into the apartment's wall
cavities. The defense produced a scope of repair and estimate in the approximate
amount of $5.4 million, along with an estimated business interruption loss of
under $400,000.00, based on the contention that all repairs could be effectuated
without removal of any tenants. The general contracting defendants then pursued
cross-complaints against the potentially responsible subcontractors. The
underlying litigation was overseen and under the supervision of Special Master
Tom Castle, and after numerous mediations, the defense only jointly offered $2.3
million dollars in settlement of the case. Thereafter, depositions of all
parties and expert witnesses were undertaken for in excess of 7 months in
preparation for jury trial. Prior to trial, plaintiff settled with the design
professionals for the total sum of $500,000.00. On the day before trial was to
commence, the general contracting defendants and Lexington in Intervention
settled for the total sum of $11 million. On the first day of trial, immediately
prior to selection of a jury, the remaining defendant settled for an additional
$1 million, for a cumulative recovery of $12.5 million dollars.
According to plaintiff, in excess of $10.3 million dollars in remediation
costs, and estimated business interruption losses in excess of $5 million.
According to the defense, approximately $5.4 million dollars in remediation
costs, and less than $400,000.00 in estimated business interruption losses.
According to Plaintiff: The defense offered $2.3 million dollars
cumulatively prior to trial preparation. Plaintiff demanded $12.5 million
dollars. Plaintiff accepted $500,000.00 from the design professionals prior to
trial. Plaintiff accepted $11 million from the general contracting entities the
day before trial, and an additional $1 million from the remaining defendant on
the first day of trial, for a total recovery of $12.5 million dollars.
For Plaintiff: Timothy Stokes of Richard Avelar & Associates, Oakland.
For Defendants: Fred Walovich + Associates, Pleasanton.
OCTOBER 15, 2001 - VOL. 4 NO. 42
42 TD 2
SETTLEMENT-Apartment complex buyers sue sellers for failure to disclose construction defects and resulting damage.
Defective Workmanship/Latent Defect/Roofing
Alameda County Superior Court
Quail Hill Apartments v. SummerHill Castro Valley Associates,
No. H2084426, Hayward. Settlement date: 3/19/2001.
Settlement Result: $3,600,000
Plaintiff: Jeffery L. Borsuk, Borsuk & Associates, Walnut Creek.
Edward D. Barron, Borsuk & Associates, Walnut Creek.
Defendant: S. Mitchell Kaplan, Gordon & Rees, San Francisco.
According to plaintiff: The buyers of an apartment complex claimed that the sellers of the property failed to disclose known constructions defects and damage. The plaintiff was Quail Hill Apartments L.L.C. in Castro Valley. The defendants were SummerHill Castro Valley Associates, developer of the complex, and numerous subcontractors. Plaintiff alleged that the construction defects resulted in deterioration of key building components and permitted substantial mold, dry rot and water intrusion to occur at the 96-unit apartment complex. Plaintiff purchased the property from defendant in 1991. However, defendant failed to disclose the construction defects and significant water intrusion issues, and the damage from the water intrusion was not discovered until 1999. As a result, the plaintiff sued defendants for negligence, strict liability, negligent misrepresentation, breach of contract, breach of implied warranty, concealment, misrepresentation and damages.
After an initial settlement offer by the defense of approximately $1 million and, following intensive destructive testing and inspection of the property, in addition to numerous mediations under the supervision of Special Master John Griffiths, defendant developer ultimately accepted plaintiff's long-standing offer to settle for $3.6 million immediately before the trial was scheduled to commence. The settlement offer was based, in part, on a damage analysis and repair proposal prepared by plaintiff's expert, Richard Avelar. Plaintiff had previously established that various subcontractors and general contractor/developer were responsible for improper flashing and waterproofing of exterior walkways and entryways that deteriorated the walkways and permitted water intrusion into the apartments' wall cavities. The significant water intrusion permitted substantial mold growth and dry rot in both the walkways and apartments, as a result of which several tenants were evacuated. Mold testing, including air samples and tape lifts, verified several types of mold in the buildings, most of which were harmful to residents, and required substantial remediation of the apartments and walkways, including over $750,000 in mold abatement procedures following correction of the construction deficiencies. Plaintiff is currently in the process of repairing the property.
According to plaintiff: Demand: Not reported. Offer:Initial
offer approximately $1,000,000; $3,600,000 after discovery.
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