A Charlotte company that tried to withhold a $5,000 insurance payment as leverage in an ongoing dispute over condominium association dues will have to pay out more than $42,000 in damages to the condo owner, the North Carolina Court of Appeals ruled July 21.
6303 Carmel Road LLC owns four adjacent commercial condominium units at that address, one of which shares a common interior wall with a unit owned by dentist Christopher Faucette. In December 2010, a pipe burst above one of the company’s units, and the resulting flood caused extensive damage to both its unit and Faucette’s. Faucette recovered from his insurance policy, but had to pay a $5,000 deductible. The company made a claim on the condominium association’s insurance policy and received a settlement that included $5,000 to reimburse Faucette.
The company refused to hand over the money, however. In a deposition, the company’s manager, Bradley Winer, admitted that he knew the money belonged to Faucette but sat on it because he was “basically pissed off at Dr. Faucette” because of the row over the association dues.
Negotiations to resolve the dispute proved unproductive, and Faucette sued to get his money back. John Buric of James, McElroy & Diehl, one of Faucette’s attorneys, said that shortly before the trial, the company finally handed over the money, but by that point, Faucette had incurred substantial legal fees and needed to continue pursuing his case in order to recoup them.
Mecklenburg County Superior Court Judge Eric Levinson found in a bench trial that the company had illegally converted Faucette’s $5,000. Crucially, Levinson also found that the failure to cough up the money constituted an unfair and deceptive trade practice. As a result, he tripled the damages, to $15,000, and ordered to company to pay Faucette’s legal bills, which came to another $27,000.
The company appealed, arguing that Levinson should have let them introduce into evidence a letter that Winer had sent to Faucette, offering to hand over the money if Faucette would agree to release all potential claims against Winer and the condominium association. The company argued that the letter would have shown that they had not actually refused to pay Faucette the money.
The appeals court rejected that argument, however, ruling that Winer’s offer to Faucette was irrelevant to the case because it came with certain strings attached.
“This [argument] ignores the trial court’s actual finding—that Defendants did not unconditionally offer to pay the disputed $5,000. The settlement letter, which offered to return the $5,000 only if Faucette agreed to certain things in return, does not refute the trial court’s findings that Defendants refused to unconditionally return the money until years after this dispute began,” Judge Richard Dietz wrote for a unanimous appeals court.
The court also noted that, even without the letter, Levinson was quite aware that Winer had made offers to hand over the money in exchange for other concessions.
The company had also argued on appeal that even if it had improperly withheld Faucette’s money, that still wouldn’t qualify as an unfair or deceptive trade practice—a key issue, since it was the legal justification for tripling the damages and sticking the company with Faucette’s legal bills. But here again the court disagreed.
“Defendants abused their positions of power to withhold payment of the money Faucette legally was owed, solely to pressure Faucette to resolve several unrelated disputes between the parties, including an ongoing dispute involving payment of condominium association dues. This wrongful conduct is unfair or deceptive within the meaning of the statute,” Dietz wrote.
The bad news for the company doesn’t stop there. The appeals court granted Faucette’s request to send the case back to superior court to calculate his expenses defending the case on appeal—an expense that 6303 Carmel Road will also be on the hook for. Buric said that he expected the legal fees related to the appeal would exceed the legal fees incurred during trial.
“He who holds the money holds all the power. It was our money and they were holding it and wouldn’t give it to us. They were just entrenched in their position that they weren’t going to give it to us,” Buric said. “I can’t for the life of me figure out why they didn’t just say, here’s your money, but they didn’t.”
Jeremy Stephenson of McNair Law Firm, an attorney for Winer and the company, noted that judges can award attorneys’ fees under the unfair and deceptive trade practices law if “there was an unwarranted refusal [to] fully resolve the matter” and argued that it was Faucette who had been unreasonable in rejecting offers to settle.
“It’s our position that we more than reasonably attempted to resolve the matter,” Stephenson said. “I am more than satisfied that my client did everything he could to reasonably resolve this matter from the outset.”
Follow David Donovan on Twitter @NCLWDonovan