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APRIL 17, 2006 - VOL. 9 NO. 16

CONSTRUCTION DEFECTS

14 TD 9th 4

SETTLEMENT - APARTMENT COMPLEX BUYER SUES GENERAL CONTRACTOR FOR CONSTRUCTION DEFECTS AND RESULTING DAMAGE

Construction Defects
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

Counsel
Plaintiff: Jeffery L. Borsuk, Borsuk & Associates, Walnut Creek. Edward D. Barron, Borsuk & Associates, Walnut Creek.

Defendant 
General Contractor: David Strong, Branson, Brinkop, Griffith & Strong, LLP, Redwood City. Defendant

Intervener
Lexington Insurance Company: R. Gregory Amundson, Wood Smith Henning & Berman LLP, Costa Mesa.

Facts/Contentions
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 insurance carrier.

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.

Claimed Injuries
NA

Claim Damages
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.

Settlement Discussions
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.

Experts
For Plaintiff: Timothy Stokes of Richard Avelar & Associates, Oakland.
For Defendants: Fred Walovich + Associates, Pleasanton.



OCTOBER 15, 2001 - VOL. 4 NO. 42

CONSTRUCTION DEFECTS

42 TD 2

SETTLEMENT-Apartment complex buyers sue sellers for failure to disclose construction defects and resulting damage.

Construction Defects
Defective Workmanship/Latent Defect/Roofing

Contracts
Miscellaneous/Warranty-Implied

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

Counsel
Plaintiff: Jeffery L. Borsuk, Borsuk & Associates, Walnut Creek.
Edward D. Barron, Borsuk & Associates, Walnut Creek.

Defendant: S. Mitchell Kaplan, Gordon & Rees, San Francisco.

Facts/Contentions
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.

Claimed Injuries
NA

Claimed Damages
Not reported.

Settlement Discussions
According to plaintiff: Demand: Not reported. Offer:Initial
offer approximately $1,000,000; $3,600,000 after discovery.

Experts
Not reported.


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